For decades, politicians have obliged senior citizens who pleaded for help because fixed incomes were not keeping up with the rising cost of living.
Retirees should be in pretty good shape now that the cost of living is falling, but lawmakers are still eager to hand out goodies to this influential voting bloc. Which is why Washington is likely to soon send checks to Social Security recipients to make up for the cost of living raise they are not getting next year.
Congress authorized annual Cost of Living Adjustments, or COLA, for Social Security in the mid-1970s, when inflation began to surge through the American economy. There has been a COLA adjustment every year since, but, in 2010, seniors won’t be getting their annual raise.
Not that they should worry. Hours before the Social Security Administration made the expected announcement about COLA, President Obama endorsed a plan to send each retiree a $250 check anyway.
This might be sweet news for seniors, but it is a pretty bitter pill for the working-age population. Workers are dealing with unemployment rates near 10 percent, reduced wages, and cuts in overtime hours and benefits. They also confront spiraling health-care costs, from which retirees, with their heavily subsidized Medicare benefits, are largely shielded.
Last year’s COLA adjustment was an unusually large 5.8 percent, largely due to the mid-2008 spike in fuel prices. Those prices have since eased, meaning seniors, who continue to receive the higher benefit, can afford to fill up more frequently. Prices of other goods and services also have fallen or stagnated since last year’s adjustment.
But, in order to make seniors feel better about being passed over for a raise, Obama and congressional Democrats want to hand out $250 checks without any real justification.
Sen. Bernard Sanders, I-Vt., and Rep. Peter DeFazio, D-Ore., have proposed that the estimated $14 billion cost of the handouts be covered through extra Social Security payroll taxes on higher-income Americans—specifically, on income between $250,000 and $359,000.
Others just want to put the payments on our national credit card. This would add one more reason for global investors to keep selling the dollar before this country's finances smash headlong into the wall that is in front of us.
Sanders said in an interview, "In the midst of a recession, when we are appropriately worried about unemployment and underemployment, we can't forget about seniors who are also hurting.” Translation: As long as Washington can tax, borrow or just print the money for Social Security, layoff-proof retirees deserve something for feeling everyone else’s pain.
With a mid-term election coming up next year, no one wants to forget about seniors. In 2008, 70 percent of those over 65 went to the polls, compared to only 49 percent of those between 18 and 24. Seniors tend to be especially important in mid-term elections.
A lot of seniors are skeptical about Obama's health care reforms, since they already like the coverage they get through Medicare. Democrats are probably hoping that a little cash will bring them back into the fold.
Republicans, so vocal in opposing the health care changes, are thunderously silent about this remarkably callous and misguided proposal. The GOP doesn't want to get on Grandma's bad side, either. Republicans also probably see no point in falling on this political sword by opposing a proposal that will almost certainly pass anyway.
Andrew Biggs, former deputy commissioner of the Social Security Administration and a resident scholar at the American Enterprise Institute said, “There is essentially no substantive case for this on policy grounds.”
But who needs policy grounds when you have politics to worry about? Send Grandma that check, and let the kids and grandkids deal with the bills.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book
Looking Ahead: Life, Family, Wealth and Business After 55.
Posted by Larry M. Elkin, CPA, CFP®
For decades, politicians have obliged senior citizens who pleaded for help because fixed incomes were not keeping up with the rising cost of living.
Retirees should be in pretty good shape now that the cost of living is falling, but lawmakers are still eager to hand out goodies to this influential voting bloc. Which is why Washington is likely to soon send checks to Social Security recipients to make up for the cost of living raise they are not getting next year.
Congress authorized annual Cost of Living Adjustments, or COLA, for Social Security in the mid-1970s, when inflation began to surge through the American economy. There has been a COLA adjustment every year since, but, in 2010, seniors won’t be getting their annual raise.
Not that they should worry. Hours before the Social Security Administration made the expected announcement about COLA, President Obama endorsed a plan to send each retiree a $250 check anyway.
This might be sweet news for seniors, but it is a pretty bitter pill for the working-age population. Workers are dealing with unemployment rates near 10 percent, reduced wages, and cuts in overtime hours and benefits. They also confront spiraling health-care costs, from which retirees, with their heavily subsidized Medicare benefits, are largely shielded.
Last year’s COLA adjustment was an unusually large 5.8 percent, largely due to the mid-2008 spike in fuel prices. Those prices have since eased, meaning seniors, who continue to receive the higher benefit, can afford to fill up more frequently. Prices of other goods and services also have fallen or stagnated since last year’s adjustment.
But, in order to make seniors feel better about being passed over for a raise, Obama and congressional Democrats want to hand out $250 checks without any real justification.
Sen. Bernard Sanders, I-Vt., and Rep. Peter DeFazio, D-Ore., have proposed that the estimated $14 billion cost of the handouts be covered through extra Social Security payroll taxes on higher-income Americans—specifically, on income between $250,000 and $359,000.
Others just want to put the payments on our national credit card. This would add one more reason for global investors to keep selling the dollar before this country's finances smash headlong into the wall that is in front of us.
Sanders said in an interview, "In the midst of a recession, when we are appropriately worried about unemployment and underemployment, we can't forget about seniors who are also hurting.” Translation: As long as Washington can tax, borrow or just print the money for Social Security, layoff-proof retirees deserve something for feeling everyone else’s pain.
With a mid-term election coming up next year, no one wants to forget about seniors. In 2008, 70 percent of those over 65 went to the polls, compared to only 49 percent of those between 18 and 24. Seniors tend to be especially important in mid-term elections.
A lot of seniors are skeptical about Obama's health care reforms, since they already like the coverage they get through Medicare. Democrats are probably hoping that a little cash will bring them back into the fold.
Republicans, so vocal in opposing the health care changes, are thunderously silent about this remarkably callous and misguided proposal. The GOP doesn't want to get on Grandma's bad side, either. Republicans also probably see no point in falling on this political sword by opposing a proposal that will almost certainly pass anyway.
Andrew Biggs, former deputy commissioner of the Social Security Administration and a resident scholar at the American Enterprise Institute said, “There is essentially no substantive case for this on policy grounds.”
But who needs policy grounds when you have politics to worry about? Send Grandma that check, and let the kids and grandkids deal with the bills.
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