The Stimulus Package Will Help Older Americans

One-time $250 "senior payment" helps people on a limited income—and they’ll spend it
By: Michael Zielenziger | Source: AARP Bulletin Today | February 16, 2009

Older Americans, Medicaid recipients, workers and the unemployed will gain big benefits from the sweeping $787 billion stimulus bill President Obama signs into law tomorrow—marking his first legislative victory in his efforts to turn around a faltering economy.

Workers earning $75,000 or less will get a $400 payroll tax credit—a signature pledge of Obama’s electoral campaign. Millions of Americans receiving unemployment benefits will see a $25 bump in their weekly checks. Unemployment benefits will last longer—as much as 59 weeks in states hardest-hit by job losses. Some $87 billion will be sent to the states to offset potential cuts in Medicaid benefits. The package also provides an extra $20 billion for food stamps over several years. The average family of three will see a 19 percent increase this year, or an extra $63 per month.

Senior payment

Unlike last year’s $152 billion tax rebate plan under the Bush administration, the estimated 51 million Americans who now receive Social Security benefits will automatically get an additional $250 check from the federal government without having to file any extra paperwork. The payment will be sent in late May or early June.

The $14 billion in total payments to older Americans “will help stimulate growth, because those on limited incomes will be spending money for sure,” said Chad Stone, chief economist for the Center on Budget and Policy Priorities in Washington. “This direct payment cuts out the middleman.”

The $250 “senior payment” was never included in the House-written draft of the stimulus package approved in late January, but the payment wound up in the Senate bill after being proposed by Max Baucus, D-Mont., chairman of the powerful Senate Finance Committee.

The provision also was strongly promoted by Sen. Sheldon Whitehouse, D-R.I., who discovered that nearly 10 percent of his state’s estimated 194,000 Social Security recipients didn’t receive last year’s stimulus check, mostly because they were unaware of the need to file a federal tax return or were intimidated by the extra paperwork. “The idea is to make sure Social Security recipients are able to get their rightful stimulus payments without having to jump through the same sort of hoops” as last year, Whitehouse spokeswoman Alex Swartsel said in an interview.

The one-time payment not only recognizes the economic hardship faced by many retirees but also helps boost wider economic growth, “since seniors are more likely to spend the money than any other age group,” noted David Certner, director of legislative policy for AARP, which pushed for the measure early on.

More for Medicaid

A big chunk of the stimulus bill—$87 billion—is going toward an expansion of federal funding for Medicaid, which will allow some states to scale back planned cutbacks in medical services to the indigent. The bill also gives the highest payment boosts to the states hardest-hit by unemployment, such as Ohio, Michigan, Pennsylvania, New York and California. The logic is simple: As growing numbers of workers lose their jobs, a state’s income tax revenues dwindle, while the number of residents qualifying for Medicaid grows.

For example, in California a budget plan offered by Gov. Arnold Schwarzenegger, R, would cut $183.6 million from the state’s Medi-Cal system and exclude from eligibility those whose income exceeds 70 percent of the federal poverty level, which is $632 a month for an individual and $850 for a couple. The current limit is 100 percent of the federal poverty level—about $900 for an individual, $1,214 for a couple.

The stimulus plan should help: It could net the state an additional $11 billion in Medi-Cal funding over the next two years. “We haven’t seen the final numbers yet,” said Tony Cava, a spokesman for California’s Department of Health Services, “but it’s possible we’ll be able to roll back some proposed cuts.”
Is it enough?

Other important spending provisions in the stimulus plan include $19 billion targeted to help hospitals and physicians computerize their medical records; $1.1 billion for “comparative effectiveness” research, which compares treatments, procedures and drugs; $8.5 billion for National Institutes of Health research into Alzheimer’s disease, Parkinson’s disease, cancer and heart disease; and funds for high-speed rail, roads, bridges and energy efficiency.

Although economists like Barry Eichengreen of the University of California, Berkeley believe the stimulus package could have been larger still, most believe the Obama plan will add at least 2 million jobs to the economy over the next 18 months. “Overall, I think the package is too small,” said Eichengreen, who studies economic crashes around the globe. The “small government ideology” of many Republicans got in the way of economic logic, he said. “Three trillion dollars of demand has disappeared, and the stimulus is only a quarter of that size.”

The Obama administration acknowledges that the stimulus alone won’t stop the economic slide. This week the White House will announce new proposals to stem the massive tide of home foreclosures, while the stock markets await more details of a Treasury plan to clean up the enormous pile of bad debt in the nation’s commercial banks.

Michael Zielenziger is based in Oakland, Calif., and writes on business and the economy.