Where is the US economy headed?

Just received our AARP Bulletin informing us that seniors on social security will not receive a cost of living raise in 2010 which will be the first time in 35 years that such has happened. At the same time the tax for Medicare Part B deducted from social security benefits will be greatly raised.

But nobody making under $250,000 will see their taxes raised.

That is some magic act.

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@Foxfyre,

I don't belong to that liberal Democratic supporting organization, Foxfyre. Smile

Looks like we need to call Harry and Louise and tell them about the no raise in pay?

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@okie,

They did strongly support Obama for sure. We do belong because they do keep us abreast of what legislation affecting us is pending out there (plus our AARP card gains us a few discounts and advantages.) It will be interesting to see if they do acknowledge when certain initiatives are proved flawed. It seems their current issue of the Bulletin is a bit more balanced than what we've seen in the past.

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@okie,

You're right. I am a member, but you are right. Sort of like Sierra Club or the NRA. They are all essentially single purpose organizations.

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@Foxfyre,

I'm sorry about the absence of the cost-of-living raise. But I don't see how that leads you to insinuate that Obama broke his promise:

Social Security's Cost-of-Living adjustment is regulated by legislation passed in 1973, which Obama did not change. To calculate the adjustment for, say, the second quarter of 2009, the Social Security Administration looks at the inflation over the year leading up to the first quarter 2009 and raises your Social Security payment by the same percentage. (Source: Social Security Administration). Hence, if AARP expects no cost-of-living adjustment in 2010, it must be because it expects zero inflation over the year 2009. That's in line with economic forecasts. The Economist, for example, expects 0.9% deflation for 2009. None of this has anything to do with Obama.

As for the tax deduction, I don't see what your problem is. It's a deduction -- a decrease in your tax base, and hence in the amount of money you pay in taxes. I could understand your frustration if the deduction had decreased. But a raised deduction means more money in your pocket. Why on Earth would you complain about that?

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@Thomas,

Thomas wrote:

I'm sorry about the absence of the cost-of-living raise. But I don't see how that leads you to insinuate that Obama broke his promise:

Social Security's Cost-of-Living adjustment is regulated by legislation passed in 1973, which Obama did not change. To calculate the adjustment for, say, the second quarter of 2009, the Social Security Administration looks at the inflation over the year leading up to the first quarter 2009 and raises your Social Security payment by the same percentage. (Source: Social Security Administration). Hence, if AARP expects no cost-of-living adjustment in 2010, it must be because it expects zero inflation over the year 2009. That's in line with economic forecasts; it has nothing to do with Obama.

As for the tax deduction, I don't see what your problem is. It's a deduction -- a decrease in your tax base, and hence in the amount of money you pay in taxes. I could understand your frustration if the deduction had decreased. But a raised deduction means more money in your pocket. Why on Earth would you complain about that?

I think you misunderstand what I posted Thomas. No cost of living increase for the first time in 35 years--I actually wouldn't have a problem with that at face value if it was part of an overall and far reaching attempt to reduce the size and scope of government which, in this case, it isn't--but the intent is to INCREASE the taxes imposed on our social security to pay for health insurance all but the most affluent are required to have if they have insurance at all.

So that is a reduction in a formerly promised increase in income couple with a tax increase on many millions of elderly Americans, many who can ill afford it, after an emphatic promise that those earning under $250,000 would not see any of their taxes raised.

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@Foxfyre,

I didn't misunderstand what you said, you're just having your facts wrong.

The lack of a cost of living adjustment in 2010 is not a raise in taxes, because it will only happen if there's no increase in the cost of living in 2009 -- which is likely.

An increased tax deduction on Medicare benefits represents a decrease in the taxes you pay, and hence works out as a tax cut for you.

You're complaining about tax increases, yet neither of the things you're complaining about is a tax increase.

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@Thomas,

What deduction? I'm not getting any deduction in taxes owed. I'm being assessed a substantial increase in the amount that is deducted from my social security benefits to pay for Part B Medicare while having a promised increase in the benefits eliminated. That will be a substantial reduction in my income in 2010. You aren't understanding the difference between 'deductions' from taxes owed and 'deductions' from income that constitute taxes that are owed and required to be paid.

Deduction from income on which taxes are assessed = less income confiscated by the government.
Deduction from income that would otherwise be received = equals more income confiscated by the government.

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@Foxfyre,

Alright -- in that case I did misunderstand the latter part, and I was mistaken to say you had your facts wrong on that one. My bad.

You're still wrong on the first point, though. Social Security promises a cost of living adjustment equal to inflation, as measured by the Consumer Price Index. Inflation will be zero in 2009 for the first time in 35 years, probably longer, so there will be no cost of living adjustment in 2010 for the first time in 35 years. Indeed, if The Economist is right about 2009 and things were fair, your Social Security benefit ought to be cut by 0.8% to adjust the cost of living.

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@Thomas,

Thomas wrote:

Alright -- in that case I did misunderstand the latter part, and I was mistaken to say you had your facts wrong on that one. My bad.

You're still wrong on the first point, though. Social Security promises a cost of living adjustment equal to inflation, as measured by the Consumer Price Index. Inflation will be zero in 2009 for the first time in 35 years, probably longer, so there will be no cost of living adjustment in 2010 for the first time in 35 years. Indeed, if The Economist is right about 2009 and things were fair, your Social Security benefit ought to be cut by 0.8% to adjust the cost of living.

I have to ask. In what world is there an opinion that inflation will be zero in 2009? I paid more for a can of corn and a pound of butter this week than I paid last week. Fuel costs are up substantially from this time last year and they continue to rise. Obama's new CAFE standards will add thousands of dollars to new automobiles and if he gets his cap and trade initiative through, that will escalate energy costs to the general public to unprecedented levels. Interest rates are edging up day by day, something that does NOT occur when inflation is zero. Do you honestly think that the wealthy producers that Obama plans to soak for funds to implement more government spending will take that lying down? Or will we see it included in the costs of goods and services that the rest of us have to buy?

Inflation zero in 2009? I don't think so.

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@Foxfyre,

I definately take your point in price increases, especially groceries. If that were the only point considered, we would be due for a hefty increase. Still, the increase we received for 2008 (5.6% if I recall correctly) was largely based on fuel costs of around $4.0o/gal. Now, that particular cost is down, and it is probably a big enough part of the budget to offset food increases. I guess. The bright side is that we got that increase along with lower fuel prices - so far.

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@Foxfyre,

Foxfyre wrote:

I have to ask. In what world is there an opinion that inflation will be zero in 2009?

In the world of The Economist, for example. Note that The Economist is not exactly a mouthpiece for the American Left.

http://media.economist.com/images/20090606/TAB1.gif

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@roger,

Yes, as long as Congress intends to spend every dime it can get its hands on plus a whole lot more, I pay into the system a pretty good chunk every year and will take anything I can get back of that and won't quibble about whether I 'deserve it'. But coupled with the collapse in the market, the rapid increase in inflation, and no relief in sight, and now denying seniors a cost of living increase on top of an escalated rise in Medicare taxes, our fearless leader has pretty well ensured that my husband and I, both well past retirement age, will not dare fully retire at this time which we both would very much like to do.

It is true that fuel costs are considerably less than they were at this time last year, but if you look at the trend, they have been going up every week for weeks now and, if that trend continues, and projections are that it will, we will be seeing fuel costs comparable to last year soon enough. And many seniors who are taking it on the chin financially, don't benefit all that much from lower fuel costs because they don't drive all that much if at all. They will be paying higher costs for heating and cooling though if the President's cap & trade system is adopted, and we all incur the higher costs for food and other services. There are bargains to be had in luxury items--at least until those are taxed a lot more--but few bargains to be had in necessities right now.

Anyhow, my point was that I do resent not receiving a promised cost of living increase despite the cost of living obviously increasing. Meanwhile those of our leaders who can dictate that sort of thing are practicing no austerity or self sacrifice or leading by example whatsoever.

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@Foxfyre,

Un huh. I have often suspected an increase in groceries is being offset by a decrease in mink coats. Of course, they are using broad averages that should affect the entire population. That's not always helpful to us.

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@Foxfyre,

Foxfyre wrote:

Anyhow, my point was that I do resent not receiving a promised cost of living increase despite the cost of living obviously increasing.

"Obviously"? I have posted my evidence that the cost of living, as measured by the Consumer Price Index, probably won't rise in 2009. Where is your evidence?

Anyway, if you turn out to be right and the CPI will increase over 2009, your Social Security payment will increase accordingly. Either way, you have no problem.

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@Thomas,

My evidence is in my Quicken program I use to manage our household and business finances, Thomas, in my checkbook, and in the prices I see at the grocery store and the gas pump week to week. And it is also in the projected cost of automobiles in the wake of the mandated CAFE standards, the corresponding costs that will be inevitable for parts and maintenance, the projected energy costs if cap & trade is adopted which is acknowledged by the most liberal of the Democrats, and in the increases I have already seen in insurance premiums and various annual subscriptions. We recently refinanced our home mortgage and as a result we were closely observing interest rates for the last several weeks. They are rising, not decreasing.

Yes, wages are not increasing and in fact have been decreasing as have housing prices and this does offset the rest and is factored into the inflationary ratios. Neither is any comfort or relief for those who pay out of pocket for day to day living expenses however. Less in the social security check is not devastating for my husband and myself so long as we have the ability to work. It will be a substantial blow to many, however.

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@Foxfyre,

Foxfyre wrote:

My evidence is in my Quicken program I use to manage our household and business finances, Thomas, in my checkbook, and in the prices I see at the grocery store and the gas pump week to week.

I see. Nothing solid, then.

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@Thomas,

Well you're a liberal. I don't expect you to understand. Smile

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Actually, unless we can slow the growth of entitlement checks, as compared to a lowering of the ratio of workers vs retirees, deficits are going to be very very difficult to get under control. That means structurally changing, tweaking how cost of living increases are calculated, etc. Do I suspect games are being played with inflation figures, yes, and this is probably one of the dirty little secrets that bureaucrats and politicians play.

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@Foxfyre,

It has nothing to do with being liberal.

You provided zero evidence. Even if we were to accept that your quicken account is proof, maybe your shopping habits have changed. Mabye you went from eating bargain beef to USDA choice. Maybe you went from the Safeway/Dominiks brand to the name brands.

You're shopping list is not objective proof.

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