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Until 1973, senior citizens on Social Security received no automatic cost of living (COLA) increase. Prior to the creation of a COLA, Congress would decide whether (or not) to increase Social Security payments. Because Congress tended to get overly generous with increases (especially during election years), double-digit percentage increases were not uncommon. So, in some respects, offering an annual COLA – pegged to the inflation rate – was deemed to be better, fairer and cheaper.
Last year, due to the recession, the cost of living went down by 4 percent. Accordingly, seniors are slated to get no COLA increase this coming year. And, in fairness, they should not get one. Yet, President Obama and members of Congress seem intent on giving retired seniors a pay raise anyway. Congress is currently considering a flat $250 payment to every retiree (rich or poor). That payment will cost the federal government $13 billion (money the government does not have given our huge deficit).
Bear in mind that seniors did get a 5.8 percent increase last year – one of the largest COLAs ever paid. Social Security beneficiaries also received a tax rebate under the stimulus bill passed before President Bush left office. And, they were recipients of extra payments under the stimulus plan passed by Congress and signed into law by President Obama last February.
Compared to most workers in America, seniors are faring pretty well in this recession. Ten percent of working age Americans are presently unemployed with another roughly ten percent are underemployed. Few, if any, workers received a pay raise last year and prospects for pay raises this year are doubtful. Yet, these workers will be required to foot the $13 billion bill for this payment to retirees – through taxes in the future to repay today’s deficit spending.
This should not be a complicated decision for Congress. First, American workers are getting no pay raise. In fairness, neither should retirees. Second, the budget is already heavily in the red. We should not unnecessarily add to that debt. Third, the COLA was created to protect seniors from inflationary costs and this year the cost of living decreased. As a result, no Social Security increase is warranted.
Still, I predict Congress will heed President Obama’s call for a $250 payment to seniors – with money we do not have – because it is the popular thing to do.
That is my two cents. Tim
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