Should Seniors Receive $250 Checks?

When the Social Security Administration announced yesterday that benefits would not increase in 2010 for the first time since 1975, the reaction was swift: Stories about financially-strained seniors filled the evening airwaves and newspaper stories, and President Obama urged Congress to give an additional $250 to each Social Security recipient. Less often mentioned was the fact that in 2009, benefits went up by a whopping 5.8 percent based on the inflation index, even though most working adults—the ones paying into the Social Security system—received no such equivalent pay raise.

The debate raises the question: Given the financial stress so many Americans feel right now, what is the fairest way to decide the size of retirees' benefits? The Consumer Price Index, a cost-of-living measure published by the Bureau of Labor Statistics, has long been the answer. That's why benefits rose so much for 2009.

But now that the CPI shows that prices have fallen, the same people who supported the 5.8 percent increase for 2009 are claiming that the CPI is not a good way to determine retirees' costs. The AARP, for example, has argued that because the cost of medical care went up by 3.3 percent between August 2008 and August 2009, seniors need to be compensated for that. (The cost of other goods and services fell by 1.8 percent over the same time period.)

While seniors deserve Social Security benefits that reflect the cost of the times, it's unfair to current workers to change the rules when they don't generate the outcome most desirable for current beneficiaries. Perhaps there is another measurement that should be used in place of the CPI; one that considers medical costs, for example. But if the rules change year by year in response to political pressure, current workers will be left with a drained Social Security program that's already scheduled to be able to pay only three-quarters of scheduled benefits by 2037.

For more, read: "Is Social Security Fair to Young People?"

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