Social Security Decrease?

Social Security recipients saw almost a 6% increase in their monthly checks in 2009.

The Consumer Price Index (CPI) is calculated from October to September every year. In 2008, the spike in gas prices during the summer overinflated the CPI. If the Social Security Administration had calculated the CPI on a calendar basis in 2008, the swift decline in gas prices in the fall and winter would have resulted in a truer CPI index and a lesser increase in monthly check amounts to retirees.

Because of the overinflation in the preceeding period, the current period Oct 2008 to Sept 2009 will probably show a decrease in the CPI. So, will SS recipients see their monthly checks decrease? No. By law, the SS benefit portion can not decrease from year to year.

In her weekly WSJ “Ask Encore” feature, Kelly Greene notes that “the Bureau of Labor Statistics has developed an experimental consumer-price index for Americans age 62 and older, referred to as the CPI-E.” This is weighted more heavily toward medical care and housing than the currently used CPI-W index for urban consumers. In the 25 years ending 2007, this CPI-E index has risen faster than the CPI-W.

Estimates are that Social Security recipients, including children and the disabled, will increase from 51 million today to 89 million by 2035. At the end of 2004, it was about 48 million. For the next 20 years, 10,000 people a day will become eligible for SS benefits as the baby boomers retire. According the U.S. census clock, there are an estimated 306 million people living in the U.S. The population rose by 8 while I wrote this paragraph.

In Jan. 2009, the Bureau of Labor Statistics counts a bit over 140 million working. That’s a ratio of a little under 3 contributing workers to 1 SS recipient, who also may be working at least part time.

It is a ratio of approximately one worker to one non-worker in this country. If someone, a hundred years ago, had predicted that over half of the population would not be working, everyone would have laughed. The productivity gains of the past century have been a remarkable synthesis of individual and community ingenuity and spirit.

Robert Ball was commissioner of Social Security under Presidents Kennedy, Johnson and Nixon. In a 2005 brief he made the case for returning the Social Security “cap” to the original design of 90% of the maximum annual earnings base: “over the past twenty years the earnings of the higher paid have been rising much more than average wages—so an increasing proportion of earnings exceeds the maximum earnings base and thus escapes Social Security taxation. Today [2005], only about 83 percent of earnings is being taxed.”

Ball recommended that the cap be raised slightly more than inflation, gradually getting back to the 90% target goal.

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