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By No Means

The trouble with means testing Social Security. Which Bush was right on Iraq? Plus more.

3.14.11

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SOCIAL INSECURITY
Re: Ross Kaminsky's The Means Testing Temptation:

Kaminsky's arguments about means testing of Social Security benefits are on target. But what he does not say is that means testing may be the lesser of two evils for those with high incomes and net worths. The other evil is completely uncapping the income of which SS taxes are levied, which is being discussed as a way to increase SS taxes massively.

If I have any sense for how the so-called "rich" would vote, I'd bet that the majority would opt for means testing if it meant that they would be assured that little more than what part of their incomes are now taxed would be taxed in the future.
-- Richard R. West

I'm not sure I understand Ross Kaminsky's point. For almost 75 years Republicans and conservatives have tried to get SocSec means tested; for just as long Democrats and leftists have violently resisted, because they know that as soon as it becomes apparent that SocSec is not insurance but is just another welfare program, the support for it will plummet and it will cease to be the third rail of U.S. politics. For once the Dems and leftists are correct, which is why we should means test it immediately. Then we'll be able to raise the retirement age and stop increasing the benefits such that the program will become solvent again.
-- Scott M. Freeman
New York, New York

There has already been "contamination" of the Social Security benefits through the public pension offsets. Not every government worker is covered under social security. I find it is no coincidence that some of the states where government workers without social security are the more numerous, California, Ohio and Illinois, for example, are the same ones who are also in great financial trouble currently with regards to public pensions.

Over 66,000 retirees yearly in 2009 in California were denied all Social Security benefits on a spousal record because of the Government Pension Offset (GPO), which offsets two-thirds of the amount of a worker's uncovered government pensions. More than 11,000 others were partially offset. The offset in reality is even more than that because of the difference in taxation at the federal (and also the state level in California) so that it potentially becomes a three-fourths offset. Of those offset, 79% are women, who are more likely to have stayed home to care for a family and have a shorter work record.

I am typical of these: I was mostly a stay-at-home wife and mother of four children for most of my 31 year marriage. After my husband died suddenly, I went to work at age 52 full-time as a librarian in a public library. The pension I received when I retired at age 70 caused me to lose all of my spousal Social Security benefit. In other words, my pension only amounted in reality to about $7,000, if you consider the Social Security I lost and the tax consequences. Additionally, I had worked part-time at public libraries after my children were grown, but received neither Social Security coverage, nor a pension.

The other offset, the Windfall Elimination Provision (WEP), rewards a woman (or man, his) who puts her children in child care with "child care credits" on her income tax. If she works 30 years under Social Security, she is "grandmothered in" and can work under an uncovered by Social Security job without any offset penalty. For those with less than 30 years coverage, a sliding scale exists, but does not completely eliminate a benefit.

When one considers the role of Social Security, this issue needs to be examined. The rationale for the offsets is that the public pension is the "same" as Social Security and then the "dual entitlement" rule is quoted. However, in reality it is not so, because in a community property state, one spouse under Social Security can be awarded half of the other spouse's government pension, yet the latter probably won't be able collect any spousal Social Security. 

There are many other ways in which theses offsets are unfair. If they can deny us, they can deny you too. 

For more information on the offsets see www.ssa.gov and look for "government pensions." Also an excellent website on this issue is www.ssfairness.com.
-- Camilla A. Berger
Yorba Linda, California

Ross Kaminsky replies:
To Mr. Richard West: Mr. West makes an excellent point that most "rich" Americans would probably prefer means testing to removing the cap on income subject to Social Security tax. That said, I think the political ramifications would be roughly similar, or perhaps even more dramatic. Those Americans who make more than the cap -- and who therefore have dollars to put behind their political inclinations -- would feel more than ever that they're having their economic blood drained from them by people who chose not to save enough for their own retirements (or were prevented, perhaps by the very high Social Security tax, from doing so).

That said, going the route of raising the cap in the hopes of a rebellion of the non-poor is a very high-risk strategy -- just as allowing aggressive means testing would be. The decision on which of these to try, if any, will be made by politicians who will weigh the likely economic outcomes of the choices -- sometime after they weigh the likely impact on their own careers.

To Mr. Scott Freeman: I disagree that Republicans have been champions of means testing of Social Security. Sure, they understand the potential political gain -- which was one point of my article -- but they also understand that in politics you often must be careful what you wish for lest you actually get it. Another point of my article is that the current budget situation makes the political impact, namely the lessening of support for Social Security overall if it were more aggressively means-tested, less clear than it had been in the past. In other words, the necessity to slash the federal budget might make enough people on both sides willing to means test the program that it actually happens. And once it does, I would suggest there's no going back and there's no way unhappiness with the new situation will be enough to cause the political will to massively reform Social Security into its original intent as a safety net rather than a hammock.

We should raise the retirement age and over time reduce benefits so that Americans not yet particularly close to retirement know they should not and cannot rely on Social Security as their primary source of retirement income. I will continue to strongly object to making Social Security a "horizontal" welfare system in addition to its current "vertical" transfer of wealth, which a friend of mine rightly likened to a "reverse inheritance" from the young to the old. Any changes to the system must recognize the reality of having gone to a world with 8 workers supporting each retiree (in the 1950s) to just over 3 workers per retiree today, and projections of 2 workers per retiree in just over two decades. We've reached the point where the Ponzi scheme of Social Security should be called what it is rather than continuing to find more sacrificial lambs to feed its ever-ravenous fiscal maw.

To Ms. Camilla Berger: I'm very sorry for the sudden loss of your husband. Your point about various government "offsets" and claw-backs of Social Security or other government-provided "retirement" income reminds me of an article I wrote several years ago entitled "Why liberals (and Democrats) should support Social Security reform." In particular, I note that Social Security keeps poor people poor because its benefits are not inheritable, or at least not without the inheriting spouse having to sacrifice his or her own benefits. I made the specific point that the system effectively discriminates against women: "Since women tend to work fewer years and often at lower salaries, they tend to earn lower Social Security benefits than their husbands. Then women tend to live longer. This means that the surviving wife has to take her husband's Social Security benefits (which are higher than hers) but must give up her own to do so. Thus, the 12.4% of her wages which she paid for all those years are simply kept by the government!"

If you and your husband had been able to put even a modest portion of your Social Security taxes into personal accounts -- and I emphasize these would not have to be invested in the stock market, but could be in "safer" investments in the fixed income space -- the value of your retirement savings or your retirement income would likely be three to ten times greater than the results of your 1% "return" on your Social Security payments. (For young men, the return is likely to be negative!)

One example from a 2004 Heritage Foundation study of Social Security myths: "On average, a 21-year-old African-American single mother earning approximately $20,000 per year (the current average income for African-American females) can expect to receive a rate of return from Social Security of only 1.2 percent. If the amount that she and her employer paid in Social Security taxes had instead been invested in U.S. government bonds, she would have received a return of approximately 3 percent ($93,000 more than from Social Security) to fund her retirement. If the money she paid in Social Security taxes had been invested in a portfolio composed of 50 percent government bonds and 50 percent stock index funds, she would have earned nearly $383,000 (before taxes) for retirement ($192,000 more than from Social Security)."

You are right that "there are many other ways in which these offsets are unfair," but the answer is not to make an even more complex web of regulation. Instead, the answer is to encourage and allow people to save for their own retirements. (I could even live with mandatory savings for a time, in the sense of some portion of a person's Social Security tax being required to go into a personal account as long as this is used as a way to raise the FICA tax rate.) Capital markets, despite their volatility and even occasional fraud, are a fairer, safer, and smarter place for people to keep and grow their retirement savings than in a non-existent "lock box" filled with IOUs from one part of government to another, designed to be paid by picking the pockets of future working Americans.

Finally, you are also right on target to say that "If they can deny us, they can deny you too." I would simply point out that this is not new information. In the 1937 Supreme Court case of Helvering v. Davis, a 7-2 majority of the Court, ruling (in my view) out of fear of President Roosevelt's threats to "pack" the court with Progressive lackeys if the Court didn't cooperate, ruled that Social Security is not an insurance program and that the money collected by a payroll tax can be spent in any way the federal government believes to be in pursuit of "the general welfare," meaning that there is no constitutional claim to any Social Security benefit regardless of whether a worker has paid into the system. Certainly political realities make it unlikely that Social Security will be scuttled in the next century, but the fact that "they can deny us" has always and ever been true.

GAME DAY
Re: Lisa Fabrizio's
Chariots of Sportsmanship:

I am writing from the Institute for International Sport to correct some facts in the Chariots of Sportsmanship article.

1) While both the World Youth Peace Summit and National Sportsmanship Day are housed under one organization, they are independent and distinct programs.

2) The World Youth Peace Summit is not an annual event. The first event is occurring this summer.

3) The "Peace Marches" were not held on National Sportsmanship Day as referenced and are completely unrelated to the program.

It would be greatly appreciated if these facts could be corrected in the article.
-- Kim Kennedy
Director of National Sportsmanship Day
Institute for International Sport

Lisa Fabrizio replies:
1) I never said that they weren't; I only said they "sponsor" the Peace Summit. Although this appears on the IIS
website: "Welcome to the official site of the 2011 World Scholar-Athlete Games (WSAG), which includes participation in the 2011 World Youth Peace Summit."

2) Okay, my mistake. But there have been around 15 WSAGs. Also, the official title is "2011 World Youth Peace Summit," which seems to indicate that there have/will be more.

3) I never actually said that the IIS holds the peace marches on Sportsmanship Day, only inferred it. If they are unrelated, why are the two featured prominently on their homepage?

EARTHLY CONSEQUENCES
Re: Paul Kengor's On Bush's 'March of Freedom': Answering My Critics:

In regard to "On Bush's 'March to Freedom'" by the estimable Paul Kengor, "the crux of the debate" is not what is in human hearts -- all are God's people and thus are created equal -- but what is in human minds. It is ideas that have earthly consequences (I am re-reading Weaver) and Middle Eastern minds are not ready, to say nothing about the social institutions of oppression surrounding them. A few elections in Afghanistan and Iraq -- no matter their courage, which is not in doubt at all -- will not change that reality as neither have had time as yet to settle back fully into their milieu, although they are both headed in that direction as the recent news makes absolutely clear with the Shiite majority now suppressing Sunni dissent rather than vice versa. Unfortunately, it was all predictable (and predicted) beforehand and it will be the father who will be vindicated rather than the son.
-- Don Devine

HERSTORY MONTH
Re: William Tucker's Who Are These Suckers?

While listing all the intelligent conservatives out there, you couldn't, if only in celebration of Women's History Month, come up with one woman?
-- Charmian Neary
Rye, New York
 

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