Sticky Benefits

| Thu Oct. 15, 2009 2:10 PM EDT

As this CBPP chart points out, there was no net inflation in 2009, which means that Social Security recipients won't receive a benefit increase in January.  Sacre bleu!  That can hardly be allowed, so naturally politicians are taking swift action:

President Obama on Wednesday attempted to preempt the announcement that Social Security recipients will not get an increase in their benefit checks for the first time in three decades, encouraging Congress to provide a one-time payment of $250 to help seniors and disabled Americans weather the recession.

....An increase in benefit checks each January has been a yearly ritual since the mid-1970s, when the government moved to ensure that its subsidies to retirees, pension recipients and others who receive Social Security benefits kept pace with inflation. Thursday's announcement by the Labor Department will mark the first time that the federal formula used since then, which is tied to the consumer price index, will translate into no increase at all.

Now, I don't really have any objection to giving seniors an extra little bonus this year. Their 401(k)s and whatnot are sucking pretty bad, so why not?  A little extra stimulus is a good idea even if this isn't the most defensible use of federal money I can think of.

Still, this does go to show the power that sustained inflation holds on our imaginations.  Technical arguments about CPI calculations aside, the fact is that seniors haven't gotten a benefit increase for decades.  It's just not the way the program works.  But the fact that their checks keep going up makes it seem like they have.  So now, despite the fact that the huge benefit increase of last January combined with the deflation of the past 12 months means seniors really are getting higher benefits for the first time in recent memory, it doesn't seem like it.  So adjustments must be made and appearances kept up.  Sticky wages indeed.

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