Oct. 20 (Bloomberg) — Just when you think they couldn't possibly grab any more, they do. Senior citizens, that is, now that President Barack Obama has proposed sending each retiree a $250 check some time soon.

The check story starts with what seems like good news. Comparing September 2009 with September 2008, actuaries saw no inflation, at least not according to the consumer price index for urban wage earners and clerical workers upon which Social Security calculates payments. Instead of increasing payments to account for inflation, Social Security left benefit rates unchanged.

This hasn't happened since the adjustment was created in 1975, when the COLA acronym, short for cost-of-living adjustment, was young. You would think such a rare moment would be savored by seniors, many of whom are great philosophers of monetary theory. More importantly, an economy without inflation is an economy in which seniors benefit much of the time, since many depend on fixed-income private pensions and personal savings.

Seniors might be pleased as well since the lack of inflation helps their offspring. Usually, the amount of worker earnings subject to the payroll tax that funds Social Security goes up every year. Today the amount subject to this tax is $106,800, whereas in 1975 it was $14,100. Because of the way the law was written, though, the maximum tax doesn't increase when there is no COLA. So this year, for once, employees won't see this heavy levy get heavier.

Grumpy Grannies

But the grannies aren't happy. They want their $250 checks, even though they got a check for the same amount earlier this year, as part of the stimulus package. To seniors, an increase isn't an increase — it's "what I'm owed." As AARP Chief Operating Officer Thomas Nelson put it, "Without relief, millions of older Americans will be unable to afford skyrocketing health care and prescription drug costs, as well as other basic necessities."

The rest of us go along, in part out of respect, as per Senator Bernie Sanders of Vermont: "We can't turn our back on them."

The pension plan faces terrifying shortfalls in the future. Politicians act as though reforming Social Security is impossible. In fact, making Social Security solvent is so easy that Max Baucus, chairman of the Senate Finance Committee, could figure it all out and write legislation in one afternoon.

Getting More

Currently each cohort of seniors gets a larger pension than its predecessors, even though workers in both cohorts may have had exactly the same career. That's because base pensions are pegged to both inflation and movement in the average, real wage. When wages rise, pensions rise.

Altering the benefit formula would eradicate much of the shortfall. Lawmakers wouldn't even have to take away the COLAs. All they'd have to do is stop increases in real pension benefits. Each sibling would get as much as his brother before him, with an adjustment for inflation. This is a compromise Generation X, Y, and Z would find more than acceptable.

In his years at the Bush White House, pension adviser Charles Blahous sketched out scenarios that make this possible. A few Democrats and Republicans, most notably former Congressman John Kasich of Ohio, also put forward a benefit adjustment plan.

Giving Up

But the adjustments didn't become statute. President George W. Bush put a Social Security overhaul on hold, and instead paid his respects by signing off on an expanded senior prescription-drug benefit in Medicare in advance of the 2004 election. After his victory he promised to use political capital to remake Social Security, but this effort proved even weaker than the first.

Bush's largess for Medicare and inability to get through a Social Security fix reminds us is that seniors aren't willing to consider even sound reform. They will go to the mat for a raise every time.

Every penny extra that Wall Streeters stand to get this year is under scrutiny by state attorneys general, the Securities and Exchange Commission and Obama's compensation czar, even when those pennies come from the private sector and fill tax coffers and prop up property values in towns where seniors dwell. Yet seniors' mini-bonuses are classified as helpful multipliers, despite the fact that they cost an extra $13 billion.

In the 12 months ended Sept. 30, 21 percent more seniors opted to begin collecting their Social Security benefits than in the year-earlier period. This was higher than the 15 percent increase actuaries forecast. Many signed up to collect cash at age 62, forgoing the significantly higher pension due to those who retire later in their sixties.

That leap into retirement suggests that the golden age of challenging retirees and lampooning AARP in editorials has passed. Since they can't argue with seniors, Americans are rushing to become them.

(Amity Shlaes, senior fellow in economic history at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.)

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