Saturday, October 16, 2010

Heads They Win, Tails We Lose.

For the second consecutive year, Social Security payments will not increase. Federal rules require that COLA increases occur when the Consumer Price Index is higher than the previous year. However, when the CPI is constant or falls, SSI payments are fixed at the previous year's level' and increases do not resume until the CPI exceeds that level.

Until 2009 this prudent rule for Social Security had resulted a string of unbroken payment increases: the average SSI COLA from 2000 through 2009 has been 2.8%, while the CPI has increased on average by 2.6% over the same period. And everyone, particularly the AARP, was quite happy.

Then in the first full year of the Great Comeuppance the CPI fell, and SSI payments were frozen. Uncle Sugar Daddy has broken the bad news that 2010's CPI also fell 0.6% below the 2008 level, so that next year's SSI payments will remain unchanged. Now all Hell has broken loose in The Dismal Swamp.

The White House and Democrats want to ignore the COLA rule, and toss an extra $250 toward each senior, if not to buy their love, then at least to secure their vote. That's an additional $14B on the fiscal bonfire. But that's our kids' problem, right?

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