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Home Publications Blogs Beat the Press How Will Cuts to Social Security Affect Spending By Retirees?

How Will Cuts to Social Security Affect Spending By Retirees?

Monday, 16 August 2010 04:44
For some reason this question was never raised in a WSJ piece reporting on the expected reduction in spending by baby boomers who will be retiring over the next decade.
Comments (5)Add Comment
written by izzatzo, August 16, 2010 5:46
Any economist knows that retirees are Duesenberry Consumers at heart, and will maintain current consumption levels based on past consumption standards whether through a recession or cuts in SS, also driven by deep desires to keep up with the rich.

This is why economists focus on consumption rather than income and wealth, because it reveals what the living standards really are. As always, consumption by retirees will not be affected with cuts in SS. They will keep right on consuming. That's why they're working in fast food jobs now, to pay for the plastic surgery, the new car and catering services for parties.

If it weren't for the automatic stabilizer effect of the Duesenberry Consumption Function, the deep recession and cuts in SS would be a lot worse.
written by AndrewDover, August 16, 2010 6:45
Most likely benefits cuts to social security will be means tested, if any are enacted, which seems unlikely with a democratic President and Congress.

So the reduction in spending will be similar to the reduction in spending from the expiration of the Bush tax cuts, also not mentioned in the article.

However in both cases, the government will borrow less, tax less, or spend more, balancing out the effects of the rise in taxes or cuts in social security benefits.

The chart shows the growth in health insurance/care costs diverting money from autos, eating out, and furnishings.
From the chart
written by diesel, August 16, 2010 5:19
""There are going to be many luxury items that will simply have to be eliminated," for retirees to make ends meet."

What luxury items?

The biggest expenses were health and food. Hobbies, appliances, booze and such were already minimal. Pretty tough to pare back on what isn't there, unless one considers food and healthcare luxuries.
Boomers already retired
written by LJM, August 16, 2010 7:17
Did they take into account the boomers who are aleady retired, including the ones who got the boot from the job they wanted to keep and are now living on so much less that heat and airconditioning may be considered luxuries. Eating out isn't on the radar anymore for many people still working. Eating in means eating more snack ramen, soup and peanut butter.
written by air max, August 24, 2010 9:39
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.