Yesterday, I read an interesting report about the future of food prices. Because of weird weather, increasing costs of transportation and processing, and other factors, predictions are that food prices are very likely to continue to increase for the foreseeable future.
The article focuses on concerns about feeding the world's burgeoning population (according to last month's feature story in National Geographic Magazine, we'll be reaching 7 billion soon), and on the fact that production and demand are currently in a very delicate global balance that could be upset by unexpected crop failures (floods, freezes, or even civil unrest).
Closer to home, it seems to me seniors will be most heavily affected by increases. Food is something that older folks can't really put off buying, yet in many cases their income is fixed, static, and -- as the increase in food prices that we've already experienced suggests -- also steadily decreasing in buying power.
I've been retired for ten, going on eleven years now and have seen the the cost of heating the house double in just three years (2000-2003); my monthly water/sewer bill likewise; local taxes have also nearly doubled in the same period; and food prices are up (though I don't know by how much) and going higher. Such increases are tolerable, if unwelcome, for me, at least so far; but I wonder about those who are making do on less, or who have been retired much longer than I have.
The fact is that the real universe today's retiree lives in is diametrically different from the model universe on which most pension plans, including social security, are based. In the old model, prices of utilities and food were low, slow to change, and (except for food) largely regulated. For decades, we were told that food constituted a lower part of the average U.S. family budget (as I recall, about 22%) than in any other country. Social Security and many other defined benefit plans, as well as the cost of living adjustments for which some plans provide, were all constructed on the assumptions of this older model.
The grand incongruity is that the shifting ground of cost expectations for basic commodities and goods comes at a juncture when we are also under pressure to cut government spending and get our deficit under control.
To me, there is absolutely no question that for the country's economic health, the costs of entitlements -- social security, Medicare, and (not to be forgotten) military expenditures -- must be reduced or paid for in different ways. As we're doing that, it will be essential, albeit difficult, to consider carefully the countertrend (rising prices and decreasing buying power) that will affect seniors.