Social Security Payments Going Down in Value
Steven Yates | John Birch Society
25 August 2009
Social Security payments are going down next year according to news reports. Well, actually, they aren’t going down numerically — by law they can’t do that. But seniors likely will not be able to buy as much because of what's happening to the value of the dollar, and some recipients may also see a numerical drop because of their participation in Medicare.
How far will the value of Social Security payments fall? The average monthly Social Security benefit for retirees is $1,153. This past January, the Cost of Living Adjustment (COLA) went up 5.8 percent based on the governmnent's measure of price increases for 2008, the largest increase in COLA since 1982.
The Social Security Administration has reported that for the first time since 1975, there won’t be an increase in COLA for the next two years. Monthly payments will drop slightly for millions of senior citizens in the Medicare prescription drug program because the premiums, often deducted from Social Security payments, are scheduled to increase slightly.
Over 32 million seniors are in the Medicare prescription drug program. Around 6 million have premiums deducted from monthly Social Security payments. Monthly premiums are scheduled to go from $28 this year to $30 next year — a figure that will be small but noticeable if not compensated for with a COLA.
COLAs are pegged to the official inflation rate which has been negative — because energy prices have returned to below 2008 levels. (The official inflation rate differs from the actual rate, of course, as a measure of the actual quantity of dollars in circulation in the world. This quantity has exploded over several years. Inflation does not always manifest itself as higher prices of consumer goods.)
Advocates for senior citizens are unhappy. Seniors will face higher prices because they spend more on healthcare where costs have risen. Many seniors, however, have seen the value of their homes and stock portfolios decline with the economy. They have also been relying on these assets as sources of income.
David Certner, legislative policy director for American Association of Retired Persons (AARP), said, “For many elderly, they don’t feel that inflation is low because their expenses are going up.” He added, “Anyone who has savings and investments has seen some serious losses.”
A group called the National Committee to Preserve Social Security and Medicare, led by Barbara Kennelly, a former Democratic congresswoman from Connecticut, maintains that Congress should increase Social Security benefits next year—or make a onetime payment of $150 to all beneficiaries.
Such a payment would cost taxpayers $8 billion, covered by increasing the amount of income subject to Social Security taxes.
It has been clear for many years that Social Security faces long-term financial problems. According to the Social Security trustees’ annual report this year, other things remaining equal, with an avalanche of newly retired baby boomers, the program will begin paying out more money than it receives in 2016. Assuming no changes, the fund will be depleted in 2037.
President Barack Obama says he would like to address the situation with Social Security. With the effort to “reform” the health care system, though, Social Security has been pushed to the back burner, at least until next year.
Medicare, too, is now also known to be unsustainable in the long run. Even President Barack Obama recently admitted as much when pressed on the subject. The cost of multigenerational federal entitlement programs is adding up rapidly.
Clearly it is time to look at what can be done to fix the problems with these entitlements programs. The answer, simply, is to work for measures that will bring these costly to an end, and provide much needed relief to increasingly beleagured taxpayers.
SOURCE:
http://www.jbs.org/jbs-news-feed/5264
Site Information
About Us
- RonPaulForums.com is an independent grassroots outfit not officially connected to Ron Paul but dedicated to his mission. For more information see our Mission Statement.
Connect With Us