August is usually a slow news month – but not this year. The Afghanistan evacuation and refugee crisis, the heartbreak in Haiti, and the marked increase in new COVID “Delta Plus” variant cases in areas of the U.S., offer plenty of major developments at home and abroad to ponder.
There are two stories percolating below the radar, however, that are of great consequence to those who have retired and live on fixed incomes or struggle with persistent health problems.
The first is the troubling spike in inflation that experts feared but had hoped would be temporary. Last month, as in June, the cost-of-living increased by an annualized rate in excess of 5%. The federal government’s look at the cost of consumer goods, with rental housing costs already ascendant, seems to indicate that inflation is not going away. An increase in the inflation rate has the effect of a tax on people dependent on monthly retirement or disability checks and limited savings. Such folks may have nest eggs that are invested in a low-risk manner to preserve capital, which means a return of less than 1%. The resulting negative spread has the feel of a new tax as the buying power of these senior citizens decreases. And with gas prices spiraling at the pump – in less than 9 months the cost of a gallon of regular gas has surged almost 25% — the pocketbook effect on them is even greater than the inflation rate shows, because the cost of gas is excluded from the federal government’s calculation.
I’m no economist, and perhaps these inflation increases are a passing phenomenon. I have written before about the multi-trillion dollar spending spree over the last 18 months by the Trump and Biden administrations. It is hard to believe that the fiscal effect of these massive infusions of cash through federal borrowing won’t have an inflationary impact. Who is watching the effect of this on the elderly and disabled whose Social Security checks increased only 1.3% in 2021?
Social Security, Medicare
And speaking of Social Security, the second big story may be just around the corner and command blanket media coverage. The trustees of Social Security and Medicare are, by law, required to publish an annual report by April 1 on the financial health of these two vital programs, including an actuarial analysis of future obligations. Last year’s 2020 report was issued on April 22nd, and estimated that the trust fund that pays for hospitalization, hospice and skilled nursing facility care will be bankrupt by 2026. The 2021 report has yet to be issued and is widely anticipated because it will capture the effect of the first wave of COVID on trust fund balances and future financial viability.
Where are the numbers?
You may be wondering: why the long delay? After all, it is not uncommon for the trustees to be a month or two late, for various reasons. But this year’s unprecedented delay is raising questions about whether the delay is political and tied to the $3.5 trillion social welfare spending initiatives the Biden administration plans to move through Congress. Obviously, if the hard numbers from the Medicare trustees are as sobering as many fear, then the public’s appetite for another massive spending initiative will be minimal. These trillion-dollar initiatives may greatly limit the federal government’s ability to shore up Social Security and Medicare if they face bankruptcy. I hope and pray that I am proven wrong.
My message for the White House and Congress is simple: Release the 2021 trustees’ report before any additional, big borrowing and spending initiatives are enacted.
(Editor’s note: Aging with Dignity Board of Directors member James T. Capretta has written an excellent piece on how to shore up Medicare to ensure its future solvency. Read it here.)