The tax deal reached between President Obama and Republican leaders is great for wealthy Americans (no tax increases and reduced estate taxes). Businesses would get some nice investment tax breaks to encourage them to expand and hire more people. Working people get a year-long, $120 billion benefit through lower Social Security taxes. Millions of people who have been out of work for a long time would continue to receive long-term unemployment benefits. Parents would receive education and tax breaks. Low-income citizens would enjoy an expanded earned income tax credit.
Indeed, there seems to be something for everyone in the $900 billion package. Except retirees. I see no breaks for them.
Now, even if the Bush tax cuts had been allowed to expire, higher tax rates would not have mattered to most retirees. They don't earn enough to be affected. Well, maybe a little. Their olive loaf sandwiches would have to come without pimentos.
We already know that seniors will face in 2011 their second straight year without a cost-of-living adjustment in their Social Security benefits. While the lack of a COLA reflects the absence of inflation, common sense and lots of research say that's not true for seniors. Medical expenses are a big hunk of their budgets, and those expenses are going up. In fact, they get hit twice. Medical prices have been rising, by roughly six to eight percent a year. And the amount of medical care needed by a typical retiree increases as they get older. This is a big, double-hit for millions of seniors.
Retirees will be helped a bit next year by the health reform law. It will provide a bigger Medicare subsidy for prescription drugs. But it also is setting in motion changes by private insurers that will pare covered benefits in many Medicare policies.
Meanwhile, the Federal Reserve has redoubled its efforts to keep interest rates near zero. This is supposed to encourage businesses to invest and create jobs. But so far, what it's mostly done is let banks rebuild their balance sheets, make big profits, and continue not loaning money. Oh, and it's also just hammered investors who rely on interest-rate holdings such as bonds. Of course, that would describe most retirees—at least those fortunate enough to have any nest eggs left after the 2008-09 market collapse.
I have called out AARP and other senior special-interest groups for refusing to accept their fair share of pain in the recent proposals to reduce the horrendous federal budget deficits. But this tax compromise is not a fair proposal for seniors. They, and their advocates, should be screaming for a piece of this $900 billion program.