The N.Y. Times reports that Social Security benefits will not increase this year. This makes sense on a number of levels. First, over the last year we have been experiencing deflation. The CPI decreased -0.4% between March 2008 and March 2009. Second, wage growth has been negative as well over the past year. Unemployment has grown and tax receipts have slowed. Thus, it only makes sense that seniors should share in the economic burden.
Holding Social Security benefits constant will also affect Medicare. This…”in effect, puts a cap on premiums for Part B of Medicare, which covers doctors’ services. If there is no cost-of-living adjustment for Social Security, about three-fourths of beneficiaries will not see any change in their basic Part B premiums, federal officials said. But some beneficiaries do not have this protection and could face substantial increases in their Part B premiums.”
Not all is bad news for seniors. Deflation means that the money seniors have saved will be able to purchase more goods.