Who would have thought that such a small thing could have such a big impact on our economy. It just shows how dependent we have become on the government. This is huge, and it will probably just be a blip, if even that, for most folks on a news ticker…
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No COLA – Bernanke gets Trumped?
Social Security announced that there will be no increase in benefit levels for another year. The reason? Deflation. Based on the Cost of Living index no increase in checks is justified. You might get an argument on that from the 60+% of the beneficiaries whose primary source of income is SS. This will impact the macro economic picture.
In the period 2000-2008 the average COLA increase was 3%. Because of the big eco dump it has been zero for 2010 and now again for 2011.
SSA will pay ~$700b in benefits this year. 3% of that comes to $21b. That is a pretty important number. Most of the SS checks are spent. Little of it is saved, so this will impact consumption on a nearly 1 to 1 basis. $21b is 1/4% of our GDP (includes multiplier). Poof!
Does this matter? Sure it does. Economists who forecast growth will have to knock down their numbers by at least ¼% (more…)
myBlessedHope 