Last week Republican Mitch Daniels once again pushed the “means testing” argument against Social Security, saying that we can no longer “afford to send millionaires pension checks” or “pay medical bills for even the wealthiest among us.”
Daniels even appropriated the rhetoric of the 99 percent, arguing that we must “stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy and do little or nothing to foster growth.”
I kept waiting for Grover Norquist or Karl Rove to yell “mic check!” But behind Daniels’ 99-percent rhetoric lies a means-testing scam designed to protect millionaires, not restore justice.
Means-Testing Sounds Reasonable
Daniels and his fellow Social Security attackers are able to draw on a very reasonable-sounding (but completely deceptive) argument, one that’s been honed and promoted by billionaire-funded think tanks and other anti-government organizations. The “means testing” argument does sound fair – until you think about it.
After all, what could be more reasonable than saying we can’t afford to send “pension checks” to millionaire retirees who don’t need them?
There is something that’s much more reasonable – and much easier to implement, too: Just tax them what they should have been paying in the first place.
So You Want to Be a Millionaire?
First of all, what’s a “millionaire”? If you say that a millionaire is someone with $1 million or more in investable assets, past studies have showed that only about one American in one hundred meets that definition. After the collapse of the housing market and the decimation of private pension plans, the percentage of retirees who meet that definition is probably much smaller. And it’s shrinking every year.
Besides, why punish people who were wise enough – and fortunate enough – to save for their retirement? Are we suddenly a nation that punishes thrift and investment? If one of these “millionaires” retires at 65 and has a life expectancy of 20 years, their million dollars will provide a comfortable but not lavish income.
If you define “millionaire” in a more reasonable way – say, as someone who earns at least a million dollars each year in investment and other income after retirement – the number of people who fit the definition becomes extremely small.
A Vast Conservative Bureaucracy
The Social Security Administration (SSA) is already cash-starved, especially by Republicans who have gutted its budget. These cuts have already delayed the processing of applications and appeals, and have threatened to slow the distribution of checks. These cuts hurt the disabled, children, and seniors.
How is the SSA expected to handle this new means-testing function? Right now its overhead is admirably low because it’s a simple cash-in/cash-out program. Will it now be forced to process new paperwork on every applicant? Will it have to link its computer systems with those of the IRS, creating a new electronic database of information on every American? Will every retiring senior be grilled by government officials as part of a screening process?
The cost of means-testing could well be greater than the amount of money saved. After all, there are more than 38,000,000 people over the age of 65 in the United States today. And every one of them will need to be screened every year.
I thought Republicans wanted to cut bureaucracy, not increase it.
No Cost/Benefit to Cutting Benefits
And let’s consider how much money would – or wouldn’t be saved. The very maximum anybody receives from Social Security at today’s rates is roughly $39,000, and almost nobody gets that much. To receive that much in benefit you’d have to have earned above the payroll tax cap limit – which is about $106,000 today – every single year of your working life from the age of 21 or so.
A more typical benefit for high earners would be somewhere in the high $20,000’s. So we’d be building an enormous new bureaucracy just to reduce benefits for less than one person in 100, and probably much less. That just doesn’t make sense.
Pension My You-Know-What
Here’s what would make sense: Tax those high earners so that they’re contributing their fair share to the economy. And if you’re concerned about paying benefits to the wealthy retired, that can be solved with a tax-based program too.
But it shouldn’t be solved that way. Why? Because Social Security benefits aren’t “pension checks,” despite Daniels’ rhetoric. They’re benefits from a fund that every working person in this country contributes to with every paycheck. If a millionaire’s receiving Social Security, they paid for it throughout their working life.
In fact, Social Security was designed that way for a reason: So that politicians like Mitch Daniels – and any Democrat that wants to strike a “Grand Bargain” with them – weren’t able to pretend they were doing anything other than violating an agreement that working Americans honor with every payroll tax deduction. They’ve kept their part of the bargain. Now it’s time for the government to keep its part.
Why would conservatives propose a vast new Federal bureaucracy when it isn’t needed, and when it would only be focused on a tiny minority of people? One possible answer could lie in reports from groups like the right-wing Concord Coalition, which proposed cutting benefits for ‘high-income’ Americans – and then defined ‘high-income’ as anyone who earned more than $20,000 per year on average!
In other words, the means-testing proposal is a Trojan horse. It uses anti-millionaire rhetoric to create the machinery for denying benefits to rich people, but its backers will then use that machinery against most Americans.
Daniels went on to say that “The mortal enemies of Social Security and Medicare are those who, in contempt of the plain arithmetic, continue to mislead Americans that we should change nothing. Listening to them much longer will mean that these proud programs implode, and take the American economy with them.”
But its Daniels and his allies who are showing contempt for arithmetic – and for fairness, too. Even the most dire predictions don’t say that Social Security will “implode.” They say that, without changes, it will “only” be able to pay 75 percent of projected benefits – a quarter-century from now. That’s now implosion, and it’s easily fixed if we make the right adjustments today.
One simple adjustment would be to lift the payroll tax cap altogether. That would restore the program to 100-percent stability. Another would be to assess a financial transactions tax, which could help cover this long-term shortfall and slow down the risky bank speculation that’s already crashed the economy once.
99-to-1: Fair Solutions
But are solutions like that fair? Yes, and here’s why: Baby Boomers were hit with an increase in payments back in the 1980s, along with a higher retirement age to cover the “age wave” they represent. That brought the program back into balance. They’re not why Social Security has this long-term shortfall.
As economist L. Josh Bivens and others have shown, the only reason Social Security has any problem at all is because the payroll tax cap is too low. It was designed to cover 90 percent of all income. But the top 1% of Americans has grabbed much more of than nation’s wealth than anybody could have predicted back in the 1980s – even Alan Greenspan, who headed the redesign of Social Security back then.
Social Security’s only problem is, at its root, the same problem so many corners of American life have: the ruthless hijacking of our national wealth by a tiny, greedy minority. Means-testing is just a distraction, a diversion, a way of redirecting people’s justifiable outrage into a program that supposedly targets millionaires, but will really just rob them again so that millionaires don’t have to pay their fair share.
If the people who have enriched themselves at the expense of everyone else are asked to step up, Social Security’s long-term imbalance disappears.
But you won’t hear Mitch Daniels say that. Some Democrats will, but too many others have avoided making that argument for the American people.
They should. It’s time to debunk the ‘means-testing’ hoax forever.