Thursday, October 15, 2009

The Candyman Can

What is so difficult to understand about cost-of-living adjustments, COLA? The concept is pretty simple. We like a reasonable and slow growth of our economy, so it is generally acceptable to have a small increment of annual inflation. Prices go up, but not too much. For most folks, still in the work force, there is advancement, tenure increases, maybe negotiated wage increases or maybe even job changes. But for retirees whose income is fixed there is a danger that over ten, fifteen or twenty years, a reasonable retirement could erode to a pittance and you would be unable to afford the essentials. That's where a COLA comes in.

But a COLA is not a raise. It is merely an adjustment to keep your buying power constant in a changing economy. Historically costs of living have risen over the last fifty years. The variance has largely been between some, more and lots of increase in costs. Maybe the best way to think of it that you don't receive a Social Security check each month, you receive a bag of groceries. With COLA, you get the same bag next year and the year after. You don't get more groceries, and when you get an annual COLA you aren't supposed to get more pay.

This isn't rocket science here. Now, what happened last year? We entered a deep recession. Housing values dropped. Stock prices dropped. Gas prices dropped. Holy contraction, Batman, that must mean cost-of-living went down! Yes, Robin, it does. But does that mean my kindly old grandmother won't be getting a raise in her Social Security check in January? Sure it does. But remember she will have the same buying power because of lower costs.

The law has kicked in. The COLA adjustment has been announced for next year. Remember, there is never logic in law, there is only politicians handing stuff out to voters. While COLA can increase if costs rise, the good congress-critters have ruled out reduction in payments if costs decline.

Yet, even though the rules are the rules, in this world of bread-and-circuses the party of the people seeks to continue to play Santa Claus even from a threadbare toy-sack:

Let's Stage the Battle of Carthage This Week

The Messiah's favorables are declining, so what can he do? Why he will do what he has always done. He will hand out candy and favors. No COLA because no increase in costs? No problem. Simply dispense a check anyway.

"What do you think it will take for them to like me, Rahm?"

"I dunno boss. They're stupid old folks, just give'em a couple hundred."

"Where's it come from, Rahm?"

"We'll write some stuff into the healthcare bill, they'll pay for it out of Medicare co-pays next year, so it doesn't cost a cent."

"OK, let's announce it!"