What inflation fighters overlook
I had a pleasant little note from Uncle Sam the other day. It informed me that my social security check for July will be up by $76. This is supposed to be my compensation for inflation. It is based on the assumption that inflation in the United States is now running at the rate of 11. 2 percent.
That may be the case for a wage earner who is trying to buy a new house at today's prices and at today's interest rates on mortgages.
But how many of the 36 million people in the US who receive social security checks each month are buying houses at today's prices and interest rates? Relatively few. Mostly they are living in houses they bought and paid for long ago. They feel the inflation at the grocery store where it is not running at 11 .2 percent. For pensioners the inflation rate is probably down around 8 or 9 percent, if that much. It would depend on individual life styles.
This means that there are some 36 million persons in the US today who on July 1 will receive an income benefit higher than the rise in their cost of living. They will be ahead of the inflation.
But they will add to the inflation in two ways.
They will add to it merely by spending their super-inflation-rate bonus.
They will also add to it by not making the fuss about inflation they would be making were their raise in social security payments less than the rise in their living costs. There is nothing like an economic pain to stimulate an interest in checking inflation.
If social security payments were frozen at existing levels there would be 36 million people adding their weight to the demand for a curb on inflation. Those 36 million angry voices would be politically powerful. A much higher percentage of pensioners vote than among the nonpensioned balance of the population. Pensioners are more politically conscious than younger voters.And usually they have plenty of time to get to the polls on election day.
Which, of course, is precisely why our gallant inflation fighters on Capitol Hill have looked the other way whenever anyone dares to suggest a less generous method of calculating social security payments.
There is some talk of revising the calculation. Instead of basing it on the present Consumer Price index, which takes into account current housing costs and interest rates, it could be based on teh current prices of those things which are most important in an average pensioner's budget. That could bring the increase in social security payments down to a more realistic figure.
The July payments will be the first ones which the Reagan administration could have trimmed back had it had the political courage to do something about this particular source of inflation.
There is one political reason for having done it with the July payments. The 1982 midterm elections are still more than a year away. It is sound politics to do unpopular things early in the first year of a presidential term, and get them out of the way, or put them off until the third year when the President has nothing to lose. Right now would have been the less damaging time for cutting back on social security checks. By 1982 it will be too late politically.
The end result of not doing it now is to substract the weight of those 36 million potential voters from the anti-inflation pressures bearing upon the politicians on Capitol Hill.
Social security pensioners are the most generalized class of voters. They are to be found in every state and every constituency. They may be thicker on the ground in Florida and southern California than in the Dakotas and Wyoming. But they are to be found even in those more rugged and chillier climes.
The administration likes to claim that its budget cutting is fair to all classes of citizens. It would be fairer if the administration could work up the political courage to cut back on social security checks.