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Tuesday, October 12, 2021

Bigger Social Security checks mean trouble ahead

Social Security checks are set to rise 6% in January, the largest increase in 40 years.

That is bad news because it is a COLA, a cost-of-living adjustment. And COLAs historically understate inflation.

Zero Hedge reported last week, "Global food prices are outrageously high, and things don't look to be changing anytime soon. Early Thursday, Rome-based Food and Agriculture Organization (FAO) released monthly data on the state of food prices that showed global food prices rose for a second consecutive month in September to reach a new decade high, driven by gains for cereals and vegetable oils.

"The FAO Food Price Index (FFPI), a measure of the monthly change in international prices of a basket of food commodities (including cereals, vegetable oils, dairy, meat, and sugar), rose 1.2% in September to 130 points and 32.8% higher than in September 2020."

In a follow-up story, ZH said, "Global food prices are at fresh decade highs leading to even higher grocery bills for the working poor, and the supply chain chaos plus the emerging energy crisis are making things worse. 

"Food producers, such as Kraft Heinz Company, have struggled with shortages, supply chain woes, labor issues, higher energy costs, and rising ag commodity prices, all of which support higher food inflation. "

Zero Hedge is notoriously pessimistic. The Motley Fool is historically optimistic.

MF reported, "Social Security Checks Will Be Much Bigger in 2022. That's Bad News for Retirees. A large raise won't leave seniors with more money."

The story said, "This inflation is expected to continue into next year -- and it will have consequences. Retirees will see much higher Medicare Part B premiums in 2022, with the Congressional Research Service estimating a 6.2% premium increase and monthly costs jumping from $148.50 to $157.70. Most retirees pay premiums out of their Social Security checks, so they'll find that some of their raise disappears even before it hits their bank accounts. 

"Costs are also expected to rise dramatically on other purchases seniors make frequently, including food, housing, and electricity. And, while the COLA should theoretically ensure seniors don't lose buying power despite some of the highest inflation in decades, past research has shown these adjustments aren't very good at that."

Ah yes, electric bills. I keep overlooking that because my electricity comes from that big coal-fired power plant across the river. The costs are pretty low, as is the setting on my thermostat in the summer. YOLO when it comes to AC.

But for most of the rest of the country, electric bills are hitting nightmare territory as governments shut down cheap electricity in favor of whatever doo-dad catches the eyes of liberals. And that affects me because many of the products I buy rely on this expensive electricity.

The rise in Social Security checks will hasten the end of Social Security as a self-sufficient pension plan. When the trust fund runs out of money in 10 years, Congress will take over and turn it into one giant welfare program. Zounds. We will be at the mercy of AOC and the It Takes A Village People.

The problem for retirees goes beyond Social Security.

MF pointed out, "It's also important to remember that seniors only get around 40% of pre-retirement income from Social Security. Most need much more to live on, and supplementary income likely comes from savings. The problem is, retirees tend to need to invest conservatively because they don't have time to wait out market downturns -- which means their savings could rapidly lose buying power during times of high inflation."

Then there are taxes. There is no COLA on income tax. As wages and salaries inflate, so will income taxes.

Look, a 6% COLA is better than no COLA at all. But the problem is needing a COLA at all. This raise is not the solution. It is the red flag of trouble ahead.

17 comments:

  1. Back c. 2010, an acquaintance of mine observed that "Leftists are, among other things, economically-illiterate children."

    That seems to still fit.

    None of these clowns, despite their enormous egos, have EVER done anything real or consequential in their entire lives. They were gifted enormous margins, don't understand that, and have run them down to the point where even minor fluctuations will be catastrophic.

    That might happen - cold - this winter...

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  2. It shouldn't be this easy to change the direction of a country so fast unless it has systemic Democrat rot.

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  3. Big D, you RIDE these crumbs and you ride em HARD. ALLES HEIL SIEG HEIL!

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  4. As mentioned the Medicaid increase will cancel the COLA SS increase as in the past. But people who refuse to work on welfare get a 25% increase in food stamps, including all the illegals. Amazing how the idiots who vote for communists and are still working or have a spouse who works cant figure out their governments both local, state and federal could give a rats ass about you.

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  5. Supply, demand. Real easy to figure.

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    1. Obviously that’s not true of leftists.

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  6. The good old days when Jimmah was in office.

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  7. And we are not even 10 months into this 48 month disaster.

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  9. My mother hated seeing COLA added to her SSI. Her rent was based on her income. Income goes up - rent goes up. With Food Stamps, the opposite happens. Income goes up - amount of food stamps goes down.

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  11. I still remember line it was yesterday when Willard Romney went after Rick Scott for pointing out Social Security is a inter-generational Ponzi scheme.

    The GOP is as bad as the Democrats at protecting Big, Unsustainable, Government entitlements and spending.

    YOLO, indeed. Screw the future generations, don’t forget.

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