I’ve got a contribution to the “Topic A” opinion feature in today’s Washington Post; the question: Should Congress fulfill President Obama’s request for a one-time $250 payment to Social Security recipients to offset the absence of a cost-of-living adjustment this year? I wrote about this here a couple days ago along with my observation about another odd display of not-quite fiscal responsibility. I basically repeated the same for today’s Post, but my response isn’t anything that hadn’t been pointed out earlier in the Post–for example in Neil Irwin’s article and in the Post’s own editorial a couple days ago. (This online version is slightly longer than the one that appears in print today.)
DIANE LIM ROGERS
Chief economist at the Concord Coalition and blogger at EconomistMom.com
Congress and the administration are calling for a $250 payment to seniors to make up for the lack of a cost-of-living adjustment (COLA) to Social Security benefits in the coming year. But the purpose of a COLA is to help incomes keep pace with inflation, which means when there’s no inflation, there’s no adjustment in benefits needed. President Obama claims that this “emergency” aid is justified because seniors’ wealth has declined in this recession. But, of course, all kinds of Americans have suffered.
This is not about making seniors “whole.” Because seniors are guaranteed to receive Social Security benefits regardless of the strength or weakness of the economy, they more than others have had a significant part of their income protected in this recession, and they received special aid in the last stimulus package, too. This is about taking from one generation and giving to another. By choosing to finance the provision by borrowing, our politicians hope the beneficiaries (seniors) will notice — while those most heavily penalized (our kids and grandkids) are thankfully not old enough to vote. This seems to be a purely political strategy to pander to seniors (once again) over other groups.
I do recognize the extra stimulus argument that’s being made, but that’s a totally different policy question that shouldn’t have to refer to the absence of a Social Security COLA as justification for any answer to it. But on this issue one of my economist friends pointed out to me that if we’re going to hand out more checks as stimulus, handing them to seniors is probably pretty effective because seniors have a higher “marginal propensity to consume” (”MPC”) than the average household–that is, they tend to spend larger fractions of their income because they are retired and thus have low income relative to their spending needs. (They also have shorter time horizons and so don’t have to plan and save for as long of a future–sorry to rub it in…) I quipped back to my friend that (Hah!) this proposal isn’t about maximizing the “MPC” out of stimulus dollars, because if it were, they should be giving checks to families with teenage daughters. And those that have THREE teenage daughters, as I do, should get three times the amount. It would all be spent, because teenage daughters are very helpful advisers when it comes to the family budget and ways to spend new-found money. He said that was a very “EconomistMom” thing to say, so I’m saying it here.