TIME IS RUNNING OUT

We've seen this before (1970's).  The current administration is running out of time.

Health insurance premiums are rising, poverty is up, and the nation's unemployment rate is nearly 10% and now the government is expected to announce this week that more than 58 million Social Security recipients will go through another year without an increase in their monthly social security benefits.

Just one more check mark in the notebook to support a significant deceleration in consumer spending over the next three to six months.  Not to mention the political back lash from this move.

As a point of reference, social security and Supplemental Security Income benefits are adjusted annually to reflect the increase in inflation; the average CPI-W for the third calendar quarter of the prior year is compared to the average CPI-W for the third calendar quarter of the current year and the resulting percentage increase represents the percentage that will be used to adjust Social Security benefits beginning for December of the current year.

The projection will be made official on Friday, when the Bureau of Labor Statistics releases inflation estimates for September. Those on social security haven’t had a raise since January 2009, and now it looks like they won’t be getting one until at least January 2012.

While the government may not see inflation, the average American is experiencing inflation.  Just look at the chart below for a broad measure of inflation -  the CRB Foodstuffs Index. 

The economy is also running out of time as it relates the waning impact of stimulus on the economy; the stimulus life lines that have supported consumer spending for the past 24 months are coming to an end.

  • Health care: The Recovery Act set aside $87 billion to assist states covering their soaring Medicaid costs.
  • Tax credits: The Recovery Act boosted the Earned Income Tax Credit and Child Tax Credit, as well as put more money in the pockets of low-income workers with the Making Work Pay credit of $400 a person. These tax benefits end this year.
  • Needy children: The stimulus program also gave $2 billion for child care subsidies and another $2.1 billion for Head Start, an early learning program for needy children, both of which end after September 30.  
  • Homeless: The act provided $1.5 billion over three years to prevent homelessness and find places to live for those without a roof over their heads. It increased the maximum food stamps benefit by more than 13% for several years and also sent $150 million to the states for emergency food assistance in 2009.
  • Unemployed: The Recovery Act pushed back the deadline to apply for extended unemployment insurance, which is now set to run out at the end of November.  Jobless benefits alone are credited with keeping 3.3 million people out of poverty last year, according to the Center on Budget and Policy Priorities.

Howard Penney

Managing Director

TIME IS RUNNING OUT - crb foodstuffs