Social Security's Cost of Living Conundrum

As anyone who receives Social Security benefits probably knows by now, the trustees who oversee that vast entitlement program have forecast that there will be zero cost of living allowance (COLA) over the next two years. COLA's are calculated by the government every year, and are meant to provide Social Security recipients - many of whose incomes are fixed in nature - with a small "raise" if you will, in order to cover the rising cost of living. The government uses the consumer price index (CPI) as it's preferred measure for determining the acceptable COLA amount for each year. Anyways, this latest news concerning a lack of cost of living allowance for the next two years has obviously aggravated seniors. Although headline CPI is in negative territory, nothing about the cost of living actually feels like it has decreased. Furthermore, prescription drug prices are on the rise, and since many Social Security recipients have their drug premiums deducted straight from their benefits, it's pretty certain that next year's checks will be smaller than today's.

As we all know however, senior citizens are especially fond of the voting booth; in turn, politician's tend to cater towards issues that seniors care about. The National Committee to Preserve Social Security and Medicare (NCPSSM) understands this reality, and has already begun lobbying Congress for a one-time cash payment to social security recipients. This bailout of sorts would, in theory, bridge the gap between what the NCPSSM believes SS recipients should be earning next year, and what the CPI has dictated they shall earn. My research does show that cost of living allowances have been particularly generous in the past; for instance, the 2009 COLA will boost payouts to seniors by 5.8%. As you can see from the 10-year chart below, cost of living allowances have historically been consistent and fair.

As a nation, we frequently and vaguely lament the fact that "tough decisions" will need to be made if we are to ever get our budget balanced and our finances generally in order. Well, this is one of those tough decisions. I completely understand the difficulties that seniors face, particularly with regards to the seemingly parabolic rise in health care costs. However, I would assert the following:

1. Social Security benefits need to be based in some sort of reality, that is, based in some way upon the ability of the government to tax the wages of those who are currently paying for SS. We all know that current recipients have paid into the "fund" for most of their lives, however, that money is gone. Social Security is a Ponzi-scheme that I am paying for right now. Private sector wages are quite depressed right now, therefore less is available to pay for this program. Continuing to borrow with the hope that the problem will fix itself isn't an option.
2. This is what a difficult decision looks like. It is difficult because specific examples of hardship can be legitimately cited by opponents of the difficult decision. This is a shortcoming of democracy (the worst form of government, except for all the others of course).

We all know that Social Security is on a ridiculously unsustainable path; let's not destroy it beyond recognition (I'm assuming we're not there yet) because annual CPI didn't go beneficiary's way this year. I'd hate to see such a precedent established. Sphere: Related Content