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About the Author

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Helga Hayse

Helga Hayse educates people on the role that money plays in family relationships. Her latest book Money, Love & Legacy: Conversations That Matter Between Generations is about the urgency for adult children and their parents to open the intergenerational dialogue they need to have about financial, legal, emotional, medical and end-of-life issues before it’s too late. She recounts her personal experience with transforming the pain of her own unfinished business into regenerative legacy between herself and her parents.

Her previous book “Don’t Worry about a Thing, Dear” - Why Women Need Financial Intimacy helps women understand why education about marital finances is vital for their protection if marriage ends.

More information at :
http://www.moneyloveandlegacy.com
http://www.financialintimacy.com

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The Author's web site

Best Boomer Towns Columns

Fighting for the Spoils

You're in line at the DMV, and decide to pass the time by watching all the clerks. Gradually, you come to realize that one of them appears to be handing out $10 bills from the till.

Do you: a) report him to his boss, or b) maneuver your way into his line when it's your turn?

The past year of economic hardship - coupled with selective government bailouts and selective economic stimuli from both Republican and Democratic administrations - have helped turn us into a nation of individuals and interest groups clamoring not for a fairer system, but for our share of the handouts.

What has set me off is the president's recent proposal, to which leaders of both parties appear to have agreed, to give 57 million Social Security recipients an extra $250 next year to compensate them for the fact that there will be no upward cost-of-living adjustment (COLA) in 2010.

The proposal has been endorsed by AARP and by the current Social Security Commissioner, and appears headed for passage. Just to make sure, three other bills (so far) are pending in the House of Representatives providing for a one-time "fix" to the lack of a COLA in 2010.

It's not the amount of the benefit that riles me. What's $250 in the face of the clunker rebates, new home tax credits, and multi-billion dollar financial institution bailouts?

And it's certainly not the recipient group that offends me. I'm a long-time advocate for government programs that assist older Americans living on fixed (or declining) incomes.

It's the expressed rationale for the payment (and its unexpressed subtext) that stick in my craw.

First, why will there be no cost-of-living increase in Social Security checks next year?

The Social Security COLA is determined by a Consumer Price Index (CPI) formula that has never been an accurate indicator of seniors' real cost of living. It is based on the varying cost of a "basket of goods" that the typical working American is believed to buy each year.

Not the typical retiree, mind you, so it includes things like clothing for and transportation to work, and doesn't account for the significantly higher medical and drug costs older adults typically incur.

Then, the cost of this somewhat unrealistic basket is compared from the third quarter of one year to the third quarter of the next, and the increase, if any, is added to the following year's Social Security checks.

This year, that formula added a whopping 5.8 percent to Social Security checks - the largest COLA increase since the early 1980's, when annual inflation exceeded 10 percent a year.

Why? In fall 2008, the cost for that basket (heavily influenced by gasoline prices, which were above $4/gallon that summer) was 5.8 percent higher than its cost in fall 2007. So that percent was added to Social Security checks starting this past January.

No one argued the increase was unwarranted at the time, though it certainly seemed out of place at the height of the recession, when millions of Americans were losing their jobs and few received raises of any sort.

For 2010, the same formula produced another unrealistic and out-of-date result, but in the opposite way. When the basket from overpriced 2008 was compared to the basket this fall (with gasoline prices down nearly a third from last year), the formula found its cost had actually declined 2.1 percent. Since Social Security payments cannot be cut by law, there is simply no increase next year.

I will agree it's herky-jerky to lavish a large COLA on people one year and none the next. It doesn't truly reflect the reality of rising costs and makes it difficult to budget.

I might even argue that we should consider substituting a version of the CPI that would produce a more accurate and timely measure of seniors' true living costs. (Such a version exists: Because it's higher than the regular CPI, Congress has never seen fit to adopt it.)

But we are not hearing calls to improve the system (or, for that matter, to address the serious long-term problems facing Social Security).

Instead, we are being offered a one-time $250 "fix" - one that is expected, by the way, to add at least $13 billion to next year's federal deficit.

What exactly are we fixing here? The COLA formula isn't perfect, but applied in the same fashion year after year, its inequities average out.

Offering people extra money when the formula doesn't justify it - in fact, when the formula would call for reducing payments if it could - strikes me as undermining the whole rationale.

Perhaps what we're fixing is a political problem. A majority of seniors feel their future medical care will be adversely affected by the plan to partially pay for national healthcare reform by cutting $500 billion from the anticipated growth in the Medicare budget over the coming decade.

In particular, there are the 25 percent or so of seniors who currently enjoy the added benefits of Medicare Advantage programs, which are targeted to bear the brunt of these reductions.

Could the recent proposal to use federal funds for an across-the-board handout be meant to pacify these disgruntled voters? And if cutting Social Security is the "third rail" of politics, then offering extra money to seniors is something no politician of any stripe can refuse to support.

While I would understand such a political motivation, crass though it is, it does not strike me as responsible government. Nor does our society's eagerness for a handout strike me as responsible citizenship.

If some seniors with limited income and assets need additional relief from higher costs, let's say so and help them. If the COLA system needs reform, let's improve it.

But let's not send one-time checks to all Social Security recipients when the formula says not to and call it a "fix." Of course, it looks like the fix is already in, so checks are likely to be on their way shortly after the start of the year.

I certainly wouldn't tell you to send yours back. Wanting one's fair share is a natural response to all the stimuli.
But it's a cycle I wish we, as a nation, could stop.
I look forward to hearing your comments. Please e-mail me at .(JavaScript must be enabled to view this email address), or write Letters to the Editor, The Beacon, P.O. Box 2227, Silver Spring, MD 20915-2227.

 

 

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