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Stimulus by $250 check

The government wants retirees and others to get another $250. Why?

October 17, 2009

As part of the $787-billion economic stimulus package enacted in February, Washington sent a $250 check to every adult on Social Security. every adult on Social Security. The same amount went to those enrolled in Veterans Administration, Railroad Retirement and Supplemental Security Income benefit programs. The purpose of the one-time payments was to boost consumer spending and help revive the economy. But in President Obama's view, once was not enough. On Wednesday, he urged Congress to spend $13 billion on a second round of $250 checks, saying, "Even as we seek to bring about recovery, we must act on behalf of those hardest hit by this recession."

The next morning, the government announced that Social Security benefits would not go up automatically next year. For the first time since Congress tied benefits to the consumer price index in 1975, there was no increase in the cost of living. In a masterful bit of spin, the head of the Social Security Administration said that the lack of a cost-of-living adjustment made it all the more important for Congress to approve another $250 bonus. But that's looking at the situation through the wrong end of the telescope. The decline in prices means that seniors will be able to buy more with the dollars they're already receiving. Some advocates for seniors argue that the government's yardstick for inflation underestimates the effect of rapid increases in the cost of prescription drugs. But even an experimental version of the consumer price index that's focused on the elderly found that the cost of living went down over the last year, not up.

The president's proposal might have more of a Robin Hood quality -- after all, his "pay czar" just persuaded departing Bank of America Chief Executive Ken Lewis to give up $2.5 million in salary -- if the new checks were aimed only at the poor. But they aren't. Everyone collecting Social Security would be included, regardless of wealth. Perhaps Obama's real goal here is to win points with seniors and their advocacy groups, quelling some of the anger simmering over proposals to cut the Medicare Advantage program to help finance the healthcare reform effort.

Living on a fixed income is tough for many Americans. But so is being unemployed, or maintaining a business when sales are slow and credit is hard to come by. And although the average Social Security payment isn't much -- it's less than $1,200 a month -- there's no cost-of-living justification for increasing it. If the president wants to try again to stimulate the economy, all options should be on the table. He should explain why paying $250 to this group of beneficiaries would do more for the economy than other uses of the money. And if lawmakers agree, they should find a way to pay for the next round of checks out of the $787 billion already approved but not yet spent.

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