The value of a dollar

by Dave Munger


A typical conversation about money with my stepbrother goes something like this: I ask how things are going, then he tells me something that has gone wrong. His TV is broken. One of his teeth is disintegrating and he needs to go the the dentist, but it's not covered by Medicare. Mark's small income from Social Security Disability barely covers his mortgage, food, gas, and the fixed utility bills he must pay every month. Whenever anything unexpected occurs, it's a crisis.

It's a crisis for me, too. I give him some extra money each month to help with the inevitable unexpected expenses and to put into repairing his flood-damaged home. But it's never enough. So when Mark mentions a problem that this regular income can't cover, it's an awkward moment for both of us. Mark doesn't want to ask me for additional help; he thinks I'm doing enough already. I want to help, but I'm not made of money, and my wife and I must balance our financial decisions about Mark with other needs, including putting two kids through college.

So I tell Mark that he should go to the dentist and not worry about the money; I'll cover it. But I don't say anything about the TV. I feel terrible that he doesn't have a working TV; he's isolated enough as it is, but clearly that's not as important as the teeth, right? Or is it? Maybe I should just write him a check and let him decide how to spend it. But what if the check doesn't even cover the dental expense?

Mark tells me everything is getting more expensive and his money doesn't go as far as it once did. He hasn't gotten a raise in his disability payments for two years — and I haven't increased the amount I'm sending him either. Mark doesn't buy the reasoning of my column from a few months back, where I point out that while prices haven't increased much in recent years, they have increased more for people like him.

From his perspective, prices haven't just increased a bit more than average; they've increased a lot. He's furious that the most-commonly reported measures of inflation ignore food and fuel prices, since they are some of his biggest expenses. When I remind him that the Social Security cost of living adjustment does include food and fuel prices, he's not impressed: He still hasn't gotten a raise in two years; how can I explain that?

I can't, other than to say it's political.

I've seen an argument that one way to control entitlement spending is to tie cost of living adjustments to “chained” price data. This measure adjusts the inflation data to account for the fact that when, say, the price of steak goes up, people tend to substitute cheaper products, like chicken or hamburger. If steak goes up 10 percent but people are now eating chicken, we shouldn't give them a cost-of-living increase to pay for steak, this line of reasoning goes.

But using chained pricing data is problematic when you're talking about people in poverty. They're already buying the cheapest products they can find. If prices go up, they have fewer options for changing. Any many expenses are fixed. There's no way for Mark to substitute a cheaper mortgage or electric company. Since these fixed costs take up most of his budget, he doesn't benefit much from substituting cheaper products.

And as Mark notes, buying the cheapest products has another cost: they break more frequently then higher-quality items that wealthier people can buy. Part of the reason he needs a new TV now is because he bought the cheapest TV in the store three years ago.

When we ask people to “substitute” products because the products they used to buy are now too expensive, aren't we asking them to reduce their standard of living? If a person is already living in poverty, how much further can we ask them to pare back? Should they be allowed to have a TV? What about teeth?

As I write this, Congress is locked in a game of chicken about the debt ceiling, with competing Democratic and Republican visions about how “bold” they can be with budget cuts. Maybe the issue will be resolved by the time the column is published, and maybe his Social Security check will arrive on schedule August 3. (Incidentally, this is the reason the debt-ceiling deadline is set for August 2: The third is when millions of Americans receive their Social Security payments, and if the ceiling isn't raised, there may be no way to pay them.)

Regardless of what happens, Mark won't be able to stop worrying. His income, which he earned by paying into the Social Security system for decades, is no more than a negotiating chip in the budget debate. Maybe it will be spared this time around, but next time he might not be so lucky.

He's disabled; he can't work at a regular job, so if his benefits are cut, he will have few additional options. Meanwhile, fuel costs continue to rise and his electric and gas bills soar to new heights. He's afraid to go to the dentist because he hasn't been for years and his treatment will almost certainly be painful and expensive. And when he gets the bill, he'll have to hope someone is generous enough to pay it for him.