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$250 Checks to Seniors: Just Say No

By Edward Zelinsky

Because the rate of inflation for 2009 has effectively been zero, the Social Security Administration has announced that Social Security payments will stay flat for 2010. In response, the Obama Administration has asked Congress to send every Social Security recipient an additional $250 in 2010.

This is a bad idea. The Administration’s proposal is both unfair and misfocused.

Many Americans would be delighted to have the same deal as Social Security recipients, namely, the identical cash income in 2010 that they received in 2009. To millions of newly unemployed Americans, that looks like a good deal. Not as good as being president of a bailed-out bank, but still a good deal.

For 2010, the salaries of many Americans working in the private sector are frozen or reduced. In countless cases, compensation decreases are taking the form of fringe benefits eliminated or reduced, for example, the termination of employers’ 401(k) contributions.

As the latest saying goes, for these working Americans, flat is the new up. It is inequitable for federal taxpayers to finance $250 checks in 2010 for Social Security recipients with stable incomes, but not for the working and unemployed Americans whose incomes have declined, often precipitously.

And this is before we consider the tax-free nature of most Social Security benefits.

To illustrate, compare a young married couple with a retired couple receiving Social Security benefits. Let us suppose that both of these families have annual incomes of $20,000. The members of the hypothetical young family have minimum wage jobs while the retired family receives yearly Social Security benefits of $20,000.

While the nominal, pre-tax incomes of these two families are identical, the younger couple pays FICA taxes of $1,530. In contrast, the retired couple receives all of its Social Security payments tax-free. Thus, on an after-tax basis, the younger family has substantially less income per person than the older couple.

If federal checks are to be sent to either of these couples, the younger family is the more deserving recipient. Neither of these families is rolling in dough. However, there is no reason to target federal largesse to the retired couple rather than the young working family, with the same nominal income but which pays FICA taxes on all of its income.

In effect, the younger family would, by its FICA tax payments, finance the $250 checks the President wants to send to seniors.

The Administration has suggested other programs for 2010 which make more sense than the proposed $250 check to Social Security recipients. The Administration has advocated that, in light of the poor job market, unemployment benefits be extended and that so-called COBRA subsidies also be prolonged to help the unemployed purchase continuing medical insurance from their former employers. Both of these suggestions are compelling. Indeed, the COBRA subsidy should be made permanent.

If the federal fisc provides additional relief beyond this, Congress should expand the earned income tax credit for 2010 to relieve low-income working families, like our hypothetical younger couple, of some of their tax burden.

In contrast, the proposal to send all Social Security recipients $250 is ill-conceived. This proposal is not fair to working and unemployed Americans struggling with reduced incomes and tax obligations. This proposal misdirects the focus of federal assistance. When it comes to the $250 checks for seniors, Congress should just say no.


Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America.

Recent Comments

  1. Gerry

    Obviously written by some one not on Social Security. If inflation was measured by a reliable means I would agree. However the current rating method is neither accurate or realistic. The point the writer tries to get across about the young working family leaves out the single most important factor ! They have the ability and opportunity to work for more income. An elder or disable person does not have that option. Also, if the economy rises so will inflation leaving people on Social Security screwed. Sorry sir, your post is misguided, uneducated and thoughtless. Get a clue.
    Gerry

  2. womens health

    I agree with the point that If federal checks are to be sent to either of these couples, the younger family is the more deserving recipient.I also agree with one of the review that If inflation was measured by a reliable means I would agree. However the current rating method is neither accurate or realistic.I like the post and its information.

  3. uberVU - social comments

    Social comments and analytics for this post…

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  4. Sam @ Defence jobs

    Its also very bad timing, we should be doing everything to reduce costs and save money so we can be well clear of the situation that is now recovering. This is something that should be implemented after the heathcare reform and when the economy is stable again.

  5. wii spiele

    Hi,
    The idea is not analysed properly by the administration.Therefor it will definitely spark some controversy.

  6. Alphonsus

    I think it’s essential to attempt to keep folks afloat while the economy struggles, hence I think it’s essential to extend additional unemployment benefits, including the additional $25/week provided by the previous stimulus bill, throughout at least 2010. The jobs simply aren’t out there, and it’s hard to imagine why it would be helpful to drive folks out onto the street and/or the welfare rolls.

    The COBRA subsidy is also a good idea, and should be extended, indefinitely, until health care reform takes effect.

    As for the Social Security checks, I have no fundamental problem with it in that at this point, unfortunately, the economy continues to be in need of life support, and it’s far more effective to send out $250 checks to social security recipients than to further extend the subsidies still provided to the financial interests–which are likely to be clamoring for more as the forthcoming commercial real estate contraction hits with full force.

    However, unless those checks are targeted to those social security recipients of lowest income I think it’s a far lower priority than extending unemployment benefits, the supplement, and COBRA subsidy into 2010–at present they expire at the end of this year.

  7. vegas02

    what are you smoking zelisky… why would you be opposed to ANY DOLLAR that ANY AMERICAN **below the poverty level** GETS at **any point…

    – you oughta be FOR the other Americans you speak of getting 250 smackers of their own…

    – you outghta be FOR the poverty-stricken and seniors getting THEIRS **AS WELL**

    – GET A FRICKIN’ CLUE IN THIS LIFE ZELISKY

  8. Chris

    We are a couple in our 70’s and don’t get anywhere near $20,000 for social security. Plus we pay out $4800. a year for our Medicare subsidy to the insurance company. $250. may not mean much to you, but it would sure help us

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