Surprise: Obama Isn't the Enemy of Seniors After All

The Social Security Administration has made it official: no cost-of-living increase for seniors in 2010. Federal law calls for an automatic COLA tied to an average of the Consumer Price Index in the third quarter each year, and there's no inflation to speak of in the economy right now. So, it's tough luck for seniors--and good luck with those depressed retirement accounts, home values and soaring health care expenses.

President Obama jumped on the COLA issue the day before the announcement, endorsing a plan already bouncing around Congress to make one-time $250 payments to seniors next year in lieu of an inflation adjustment. He noted that the broader CPI doesn't account for the costs that disproportionately affect older Americans, and framed the payment as a necessary economic stimulus.

But the President's endorsement also helps position Obama on the side of seniors at a time when many already are angry with him about health care reform. They think reform will hurt their Medicare benefits--even though it won't. The endorsement also puts Obama out in front of a rising wave of anger among seniors about Social Security that starts with the COLA, but can easily roll right into the nasty battle still to come over broader Social Security reform.

Social Security is under strain due to the recession and the soaring number of early retirement benefit claims. The Congressional Budget Office says the program will start paying out more in benefits than it collects in taxes next year; earlier projections had Social Security running in the red somewhere around 2016. There's still money in the Social Security trust fund to pay benefits for many years to come, but the accelerating problems underscore the need for reforms to get the program back on track for the long haul.

Current projections show that the trust fund will be depleted in 2037. The fundamental problem is rising American longevity, which requires funding a longer period of retirement. The looming retirement of the baby boomer generation also has created a temporary phenomenon due to its size; boomers generated high levels of payroll tax while in the workforce, and will draw more benefits in retirement than earlier generations.

Washington will turn to Social Security reform sometime after health care reform wraps up. The debate has the potential to become Round Two of the fighting at last summer's health care town hall meetings. The need for Social Security's safety net has never been greater, but reforms inevitably must involve trimmed benefits or higher taxes. The likely solution will involve both, which will spark plenty of heat and too little light.

Any changes probably would be phased in over a period of years, with current beneficiaries grandfathered. But any of these changes has the potential to set off firestorms of angry reaction from older Americans. While seniors' concerns about economic security are legitimate, here's hoping the debate is balanced with the importance of keeping the program sound for younger generations.

 

 

Follow Mark Miller on Twitter: www.twitter.com/RetireRevised

Comments

[S1m0n]

Was there any expectation that he would be?

Seniors vote at higher rates than any other demographic. No successful politician crosses them.

[MacQ]

Think $250 bucks is enough to get them to keep quiet about medicare cuts?

[MrMaus]

This is a reallocation of funds from working aged folks to retired folks to buy goodwill in that it “… helps position Obama on the side of seniors …” at the expense of goodwill by those who pay income tax. The COLA adjustment last year was over 5%, this year it is zero, the average is probably pretty close to the actual change over the last two years, hey, guess what, the system works like it is supposed to. Stop fiddling to buy votes.
As for Social Security reform, the “… firestorms of angry reactions …” will come from my generation, generation X. We will be asked to fund the retirement of the current retirees and the baby boomers only to find that there is nothing left when we would like something in return for 15% of our lifetime income (plus accrued interest).
Lastly, the “Social Security trust fund” is a fiction. It holds only US Treasury Bonds. Imagine you had income, put it in the bank and then took it out, replaced it with an IOU to yourself and spent it. When you went to retire you would be holding worthless paper unless you could print more money. If it were not the US government it would be a Ponzi scheme.