Social Security and Inflation

We “Greedy Geezers” will not be getting an increase in our monthly Social Security benefit payments in January, because the CPI is still below what it was in 2008. Stories on the Web are talking about how unhappy recipients will be to not get an increase, especially because the CPI rose about 1 percent over the past 12 months. Of course, I didn’t hear any complaints from recipients in 2009, when their benefits remained unchanged while the CPI dropped; nor was there any complaint when benefits were “over-indexed” between 2007 and 2008. This is a classic illustration of asymmetry in perception-”what’s mine is mine, what’s yours is negotiable.” Proposals to give a special $250 increase this year to recipients are politicians’ sop to this perception bias.

Wouldn’t the country be better off if politicians explained why the current system makes sense rather than catering to people’s mis-perceptions? Or if they were honest and modified the system to allow for benefit cuts when the CPI drops? (Fat chance of that!)

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  1. JMP says:

    Just out of curiosity, what percentage of those complaining about not getting increases in their Social Security payments have participated in Tea Party rallies? Moreover, what percentage of Tea Party participants that receive Social Security are upset about the lack of increase?

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  2. Bill Pruett says:

    Since I am a “greedy geezer” the issue of the COLA is of interest. The problem is one of perception. Members of Congress, staffs and other Government employees will enjoy salary increases, but not Social Security recipients. That’s bad PR. Regardless of the statistics, we know that the cost of the things we buy are increasing yearly. We also believe that politicians have contrived to adopt a system of COLA which keeps us away from more monthly benefits. True or not, that’s the perception and most any politician will tell you that politics is in perception not statistics

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  3. Dr. Abdullah A. siddiqui says:

    Indices and averages provide convenient guidelines for business and commerce, but they do not always tell the whole story. When the income of the rich goes up and the income of the toiling masses go down as happened during the Dubya era, the average gives you misleading info.
    In the current bad economic times, there are asymmetrical changes in prices of commodities. Prices of medicines which retired folks use have gone up in prices, while some other commodities which retired folks use sparingly, have gone down in prices. , For such folks CPI becomes meaningless.A Government of the people, for the people and by the people should consider asymmetry of price changes, before making such bif decisions as the social security benefits.

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  4. Jeff says:

    1) Yes we would be better off explaining things instead of catering to mis-perceptions.

    2) Social Security is currently indexed on average wages, not the CPI.

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  5. Jake says:

    Confusion, as usual. Social Security benefits are “indexed” to average wages, meaning an adjustment over a very long time that accounts for changes in average standard of living during a person’s working life. Aberage wages are NOT used to determine annual COLAs. Annual COLAs are based on the CPI. As Dr. Siddiqui correctly notes, the CPI is a lousy proxy for the cost of living to a retiree.

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  6. Stephen Tolbert says:

    The posts on this blog so far demonstrate the degree to which it will be politically difficult to address the long-run solvency of Social Security.

    Yes, there are instances where the goods that matter to many seniors rise in price when prices are falling, in general. For instance, the price of drugs may be rising while the price of housing (many seniors live in paid off homes) is falling. However, is the solution to provide additional payments to seniors when the program is already on a path to insolvency? Not if the intent is to preserve the program.

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  7. Ian Kemmish says:

    Up until June of this year we in the UK had a Prime Minister who favoured technical explanations of why the public were wrong over sops to public opinion. I believe that opinion polls showed him to be the most unpopular PM since polls began.

    The country doesn’t want to be better off. Especially if that means having to listen to lectures.

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  8. J. Gravelle says:

    Using their own reasoning, the Democrats have actually CUT Social Security:
    http://gravelle.us/content/democrats-cut-social-security-2011
    …for the SECOND year in a row.

    The good news is, that they DID manage to find over $20 million to “spread around” to their voter base, namely the dead and incarcerated felons:
    http://www.dailyscoff.com/?p=2722

    Hey, if I thought my career was dying and I was probably going to prison, I might do the same thing…

    -jjg

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