Okay. This hits close to home. It isn’t that hard of a hit, so far, but it is aimed at me. No. I’m not that special. It’s also aimed at you.
Did you get the word? There will be no adjustment for inflation on Social Security this year. There is also the expectation that there will be no increases for the next two years.
This announcement caused me to dredge up from what is left of my memory bank a pertinent piece of legislative legerdemain. I don’t recall the exact year but it was during the Reagan reign. It was likely early in his regime.
I shouldn’t be too hard on Reagan and Congressmen on both sides of the aisle. The reason for the change was that increases in Social Security and other entitlements based on the Consumer Price Index were unsustainable. Union contacts and other payments were also tied to the CPI.
Changes in the CPI made politicians look better and eased the pressure on them to restructure Social Security and other programs. It also relieved corporations by reducing automatic pay increases for their workers.
A noted economist, John Williams, specializes in the history of economic reports and analyzing the impact of those reports and changes to them. It is instructive to see his results.
While the recently reported inflation rate has hewed close to 3% for a number of years, Mr. Williams, using the older methodology, reports significantly higher rates. Would you believe that the the inflation rate in December of 2007, when the present recession/depression officially began, was just under 13%.
If we agree that the older formula overstated inflation, we should also agree that the present formula understates it. I am going to see a movie this afternoon. Having at one time been in theater management, and no longer getting in for free, I am fairly aware of price increases, particularly for seniors. Prices at theaters have increased dramatically these past few years.
When my wife retired from teaching, she also retired from the kitchen. Eating out as much as we do we are very sensitive to how often the eateries are printing up new menus. In restaurants and theaters the price increases are definitely in the double digits.
The numbers from the Wall Street Casino are factored into the CPI. Personally, I don’t gamble and refuse to own any of what are quaintly called ‘equities.’ The recent nosedive of those numbers in the bottom right-hand corner of the “news” programs drives down the CPI. It has also eliminated my usual cost of living increase on my Social Security check.
My financial situation is at a comfortable distance from dire. It is, however, such that these consideration make themselves obvious. There are millions of retirees with a much smaller comfort zone than mine.
At least I don’t have to be concerned, as are those poor Wall Street traders and hedge fund managers, about losing a few million dollars of bonus money.
Comments on this entry are closed.