Friday, October 16, 2009

The Geezer Squeezer

Back in the Spring, we wrote about the announcement that Social Security would, for the first time in thirty-seven years, NOT have a COLA increase in the regular stipend delivered monthly to recipients. Coming on the heels of 5.8% increase the previous year, those who were aware were also quite shocked. The program (congressionally mandated) which had made an attempt to keep those payments at a pace equivalent to the rising prices in the economy was suddenly not going to happen.

With the economy in total disarray, the sensible oldsters were disappointed but not really surprised. The media for the most part managed to suppress any general reaction and as a consequence, public outrage over this slight was stifled. The objections to the decision were observed at many of the protest marches, Tea Parties, town halls, etc., but no singular objections were seen. Evidently, there were more hackles raised than were known because now the administration has proposed a one time payment to each participant of a flat $250 one time payment to compensate.

On average, that would amount to roughly a 1.8% increase paid in a lump sum. This is wrong-headed in a number of ways:

One of the villains lies in the miracle of compound interest. Using the lump sum method deprives the receiver of an increased base line for further COLA payments. This means that any further increases are percentages of a lower number than the legal entitlement. For example: With a $1000 monthly payment and an average of a future COLA of 2% over the succeeding 5 years would result in $271.00 less total payment in that interval than if it were included in the baseline. Ergo—a net loss of $21.00, which over years becomes exponentially greater each succeeding year. It seems a small amount but as it accrues it becomes huge.

The immediate outlay would be in the neighborhood of $20 billion dollars, not paid as a monthly increase, which then places an immediate demand on the treasury as an immediate advance. Currently there are so many demands against that money (the war, foreign debts, bailouts, ACORN maintenance etc.) the budget hardly needs to be exposed to unnecessary outlay.

It is unnecessary because of the nature of recipient thinking. I know my contemporaries and how they view these monthly increases in their checks. The proposed lump sum payment spread over the year would amount to what would seem a paltry amount to most working people--$21.00 a month. To the pensioner receiving $1000 a month, an extra $21.00, raising it to $1021 looks considerably more valuable. That device screams at them monthly that the government understands and is making a positive effort to bring an equivalent bonus to ameliorate rising prices. In the geezer mind, the $250 in one shot takes on the appearance of throwing a dog a bone. Same amount but an entirely different psychology. Fully understanding this concept requires that you live in the penury imposed by having Social Security as your only income.

Not least of the negative factors in the decision to send a lump sum payment is the inequity of sending identical amounts to all persons regardless of their entitlement. If your social security check is $2000 a month, you get $250. If your social security is $400 a month, you get $250. The government has decided to take your proportionate share and equalize it with those who have not contributed nearly as much over the years. Therefore you are then involuntarily sharing the fruits of your labor with others who made no equal contribution. It is yet another boon for those who do not produce at the levels of others. This is unfair if it is part of social security. If not tied to FICA then it is unfair to those who have not attained seniority. It is just one more scheme of redistribution of wealth. At our house, I get a lesser percentage and my wife gets a larger percentage. One might argue that she’s worth it.

By misunderstanding the mind set, needs, and emotional make-up of this huge demographic, our Democrat leadership is making a terrible mistake. I love it because seniors are also the most absolutely dependable group going to the polls. Why would they risk the most populous and reliable source of votes among all the citizens? Keep in mind that our largest populations of citizens are not old enough to vote and from 18 to 45, families, higher education and jobs occupy their thoughts, which elevates the importance of the aged at the polls.

Their own dependence on falsely thinking they know the “mind” of the people and their head long instincts to want to herd and not lead will bring about their eventual downfall. One can get by not going to see Granny or one’s aged Uncle every month or so but don’t mess with either check each month. What seems paltry has to be understood in the frame of reference that the recipient has. With a narcissist president and a congress barely less so, continued failure to understand the electorate is a disaster. The truly sweet justice is that the Democrat Party was largely responsible for Social Security in the first place. Thanks, FDR.

In His abiding love,

Cecil Moon

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