Robert Samuelson: Why Social Security Is Welfare

RealClearMarkets ^ | 03/07/2011 | Robert Samuelson

[Dr. Sivana]

Payroll are distinctly different than federal income taxes. Payroll taxes were designed to provide specific benefits.

Irrelevant. The benefits and the taxes have been decoupled. The payroll taxes themselves are regressive. It doesn't matter what the benefits are, because those paying the taxes have no say in paying them, and have no choice in opting out (e.g. you have a disease that makes early death likely, like sickle cell or severe diabetes). All the money goes into the general fund. The purpose or intent of the tax has nothing to do with the effect of the tax itself, which is regressive.

The 50 percent not paying federal income taxes are tax freeloaders.

No they are not. They are paying taxes. A guy making $50,000 a year with eight kids, paying no fed income taxes, but paying about $7,500 a year in FICA/Medicare who dies of a stroke on his 65th birthday, and took no fed benefits except the indirect benefit of having a military is not a tax freeloader.

I advocated going back to NO income or SS/Medicare tax, and you claim that I have a leftward bias. That is laughable. It is also an attempt to dodge my explicit points which you have not addressed so far, except to indirectly admit that SS and Medicare are taxes.

I will repeat. When Rush states that 50% pay no federal taxes, when many of them in fact pay significant payroll taxes, he is being misleading, and technically inaccurate. BECAUSE PAYROLL TAXES ARE TAXES.

[Walts Ice Pick]

I just want to feel like I’m not on welfare until I collect what I’ve paid in.

If we means test Social Security and Medicare benefits, then we could provide adequate benefits for the seniors who really need them without crippling the younger folks who are trying to support the system. Young people have some needs, too, like feeding and educating their children.

Why should we be taking money from struggling young families and sending it to some wealthy geezer who doesn't truly need it?

[nascarnation]

If we means test Social Security and Medicare benefits

So if I saved a bunch of money while I was working, but my neighbor spent it on hookers and blow, I should receive less Social Security?

[businessprofessor]

You are wrong about payroll taxes. Benefits are connected to taxes although less directly than before. You cannot receive benefits unless you pay taxes for a specified period. Payroll taxes are capped because benefits are capped. The left wants entitlement benefits both ways. They want to force participation in entitlement programs but then claim that payroll taxes are no different than federal income taxes. Everyone should pay federal income taxes in addition to payroll taxes. Any able individual not paying federal income taxes is a tax freeloader.

[Walts Ice Pick]

So if I saved a bunch of money while I was working, but my neighbor spent it on hookers and blow, I should receive less Social Security?

I can identify with what you're saying. The upside is that, if we wanted to, we could spend money on hookers and blow right now whereas your neighbor is now destitute and struggling with the health problems he brought upon himself.

Please don't tell me that you wish you could trade places with the neighbor (or that he somehow "beat the system").

[Uncle Miltie]

My wealthy parents and mother-in-law collect Social Security to supplement their lavish lifestyles, from the paycheck of my daughter who earns minimum wage.

That’s Social Justice for you!

[nascarnation]

I agree this is a tough problem.

My fervent hope is that the Democrats who gave us this dilemma will get “credit” for doing so.

But I’m not too optimistic on that outcome.

[CynicalBear]

Why don’t people separate those who have worked all their life paying into the system from those who have lived off the system all their lives while never having paid in. I would like to see figures on just paying out to those who have paid in for 45 years or more who then retire as opposed to giving the money they paid in to those who never paid in.

[July4]

You didn’t “means test” me when you forced me to pay into Social Security.

Give the damned SS $ to the “old geezer.” It’s HIS money.

[Dr. Sivana]

You are wrong about payroll taxes. Benefits are connected to taxes although less directly than before. You cannot receive benefits unless you pay taxes for a specified period. Payroll taxes are capped because benefits are capped.

The connection has become so tenuous as to be practically meaningless. The thresholds for benets are quite low, the tacs for Medicare (as someone else emailed me just now) are not capped at all. In any event, since we agree that it is a tax, it makes little difference what the whys and wherefres of it are, just as the federal tax code in general is a crazy quilt of rules and regulations that do not change the character of it as a tax on those who earn an income.

The people all living before the 16th amendment were not tax freeloaders. A person living off of personal pre-existing wealth and has no new income is not necessarily a tax freeloader. And the guy who pays payroll tax but due to medical condition has no expectation of receiving benefits is not a freeloader.

Your definition is arbitrary, and makes no sense to apply as a universal. And of course, since we agree that a payroll tax is a tax, then those who pay it are in fact paying federal taxes, and that the number who pay these taxes is above 50%, so Rush's statement is technically inaccurate.

[Freedom_Is_Not_Free]

Can we at least compromise on: “Social Security is an earned WELFARE benefit”?

For some people maybe. My mother's sister died at 55 from lung cancer. My mother's best friend also died at 55 from lung cancer. There are 2 people who paid the SS tax their entire lives without collecting their "welfare" benefit. It isn't welfare if you can't possibly collect it before you die.

SSI is welfare. Many people collect who never paid a single penny into the system. I can't call SS welfare, even if somebody paid in $100,000 and collects $250,000. Also, what does it mean to say people are collecting more than they put in? If that is raw dollars, then it sure as hell isn't welfare.

If you steal my money for SS contributions that I could have otherwise used to invest in the great bull market of 1985-2000, averaging over 10% returns, you have to calculate what the present worth of that annuity contribution would be. You can't act like their is no time-value to the money people have been forced to give to the government for their "retirement" money. So a person who was forced to pay $100,000 to SS over 30 or more years, may very well have a present worth of $200,000 or more. Now take the 20 or more years it takes to draw down that investment.

omebody please do the math on a $100,000 annuity paid in for 30 years and drawn down over 20 years in equal payments, all compounded at 7-8% interest, and let me know the present worth. THAT is the break-even amount that seniors deserve. Not that BS crap about "you collected more than you paid in". Of course you should collect more than you paid in. That is how an investment is supposed to work!!!! If you only withdraw the principal you paid in, then you've been cheated your entire life.

[9YearLurker]

There’s lots wrong with the current system, but the truth is SS and Medicare both have made promises so far beyond what the country can support that it is an existential issue. All that welfare stuff, culturally corrosive as some of it might be, is still the small potatoes. If you’re going to have a knock-down fight, it might as well be about what’s most important.

[9YearLurker]

I’ve been self-employed for decades and thus have been paying both sides too.

The simple reality is that many of your cohorts and elders have been taking out benefits that far exceed what they’ve put in for both SS and Medicare. I know my parents certainly have. The good news is that they’ve been healthy and long-lived enough to partake of it. And, it has been there for many a medical issue.

But in practicality that was just taxes you were paying. For many, the same goes for garden variety taxes: they’d have got more benefit from the payments if they’d been allowed to keep and invest them for themselves.

[MontaniSemperLiberi]

“If the politicians say Social Security is welfare then give me back all the money I paid in over the years.”

I don;t think it’s right to call it welfare. It’s more of a transfer payment. The money you and I put in was transferred to our parents and grandparents. They spent it. It’s gone.

[hobbes1]

So if I saved a bunch of money while I was working, but my neighbor spent it on hookers and blow, I should receive less Social Security?

You live next to Charlie Sheen?

Seriously, though...yes....

Social Security is currently a wealth transfer program...not a savings program...at some point means testing is going to be part of the reform.

Or...Do you think also that those demographics with a shorter life expectancy should have younger retirement ages?

The average life expectancy for Black men had been right at retirement age since the programs inception, so ..and average gainfully employed black man works for 50 years, and collects one or two checks, and dies.

While the Rich white guy collects that $$$$ into his 70's. (and it gets worse as you look at life expectancy and socio-economic position...)

[MontaniSemperLiberi]

“Social Security is an earned benefit.

The prescription drug benefit for seniors is welfare.”

I pay Social Security and Medicare taxes both of which are transferred to those people on those programs. Those dollars are then given in return for mowed lawns, dinners at Olive Garden or hip replacements. There is no bank vault of mowed lawns, dinners and Olive Garden and hip replacements.

[MontaniSemperLiberi]

The Dr. is right. They are paying SS taxes today and expecting to be supported by SS in the future. Yes, over time, they are SS winners but just right now, they are paying taxes.

Rush is making a good point but he’s pedantically incorrect.

[rolling_stone]

The problem with Social Security is the government runs it. They can't manage anything without politics and special interests (voters & contributors) interfering with its management. It is doomed for failure unless politicians are not allowed to interfere with it. (won't happen)Look at all the additions and broadening that has happened to SS since its introduction. Politicians used the money to buy votes and should be in jail like Madoff. At the very least their pensions should be seized and given to SS. They won't need it if they are hanging from lamposts.

Private enterprise on the other had would work better with a few regulations regarding risk and actuarial tables. The only interference would be from competitors who will shave profit's and make smarter investments to get more clients.

[ladyjane]

The first cuts should be the illegals, then those who have never worked and paid into the system.

Why should Granny’s prescription drugs be cut when non-citizens are getting billions of dollars of free care?

Why should Granny’s pain medication be cut when Jose gets to go to a free methadone clinic and Maria is getting a free epidural delivering her baby?

Why should Granny not be able to afford gas in her car when Jose gets a free car, free gas, all insured, with AAA and towing.

Why should Granny not be able to afford to heat her apartment when 17 year old welfare moms are getting free heating in their free apartments with their free furniture.

[Notary Sojac]

We are seeing the usual dancing around the problem here by those who can’t face the reality that their personal entitlement is not self sustaining.

The most common dance steps are:

the “Cutting Waste and Fraud Will Solve The Problem Two-Step”

the “Get Rid of Every Government Program Except The One That Benefits ME Tango”

the “Economic Growth Will Take Care Of It Waltz”

and that evergreen favorite, the “Kick The Can Down The Alley Until After I’m Dead Fox Trot”