Social Security What's Buzzing

Expand Social Security, don’t means test it

Written by Diane Archer

Ever since a few weeks ago, when President Obama joined with Bernie Sanders, Hillary Clinton, Elizabeth Warren, Social Security Works and a growing league of policy makers and policy experts calling to expand Social Security, opponents have been pushing back as hard as they can; they want to keep Social Security benefits low; many want to “means test” it and turn it into a welfare program. Make no mistake, expanding Social Security promotes retirement security; means testing Social Security puts it at risk.

Social Security, like Medicare, are earned benefits, not charity programs. They allocate funds equitably, with most benefits going to lower income individuals. The vast majority of Social Security benefits (75 percent) go to individuals with annual incomes of less than $20,000. And, more than 90 percent of benefits go to people with annual incomes under $50,000.

Very little Social Security funding goes to the wealthiest Americans. Dean Baker and Hye Jin Rho at the Center for Economic and Policy Research calculated that just 2.3 percent of Social Security benefits go to individuals with incomes of $100,000 and up, and only 0.6 percent of benefits go to individuals with incomes of $200,000 and up.

Reducing or eliminating Social Security benefits for people of wealthier means–“means testing” Social Security–may sound reasonable in theory, but it would save almost no money if it applied only to the wealthiest Americans. Because so few retirees earn more than $50,000 a year (half have incomes under $24,150), means testing benefits would only create real savings if people earning $30,000 a year saw their benefits fall. And, that would jeopardize retirement security for middle-income earners.

Moreover, Social Security is an insurance program designed to benefit everyone who contributes in it, not a need-based program. As with life insurance, everyone paying in receives benefits, regardless of income. We don’t means test access to public schools because we want to benefit the collective, deliver opportunity to all. Similarly, we don’t means test Social Security because it is a public good that helps deliver financial security.

Social Security gains its strength from being inclusive and protecting everyone who pays in “against the hazards and vicissitudes of life,” as Franklin D. Roosevelt posited. A progressive tax system is a better way to ensure that everyone contributes their fair share, not means testing.

To generate larger Social Security reserves, it makes sense to lift the cap on Social Security contributions so that wealthier Americans pay into Social Security throughout the course of the year, as the overwhelming number of Americans already do, not to cut their benefits.

If opponents of Social Security expansion genuinely want the wealthiest Americans to benefit less from the government, why don’t they support lifting the cap on contributions into Social Security and/or having them contribute to Social Security after they pass and before their heirs benefit from their estate tax exemption? And, why aren’t they calling for means-testing 401(K) contributions or the large housing subsidy we offer homeowners through tax deductions?

To read more about why means testing is a bad idea, click here. Click here to read Dean Baker’s latest piece on Robert Samuelson’s attack on Social Security.

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5 Comments

  • Means testing Social Security would send it the same direction as what used to be welfare, now “Temporary Assistance to Needy Families.” In other words, it would become a welfare program, plain, pure, and simple, and as such, would be subject to cuts and regulations far beyond anything currently dreamed of by any SS recipients. Making Social Security into a welfare program has been the aim of the Republican party ever since they learned they couldn’t simply pass a law outlawing it.

  • With all due respect, this is not about ‘saving money’. This is about bottom line blunt fairness to citizens of this country. If you have an income over 200K WHILE YOU WOULD BE GETTING SOCIAL SECURITY the bottom line is that you should not be getting anything from Social Security in the real world.
    Social Security should rightly be the purview of at most the upper-middle class and down. We should also stop with the idea of “Limiting Social Security based on what someone earned in their lifetime!” and more find out what the average middle-class income is in X area and pay out that amount minimum for SS payouts.

  • …I am all for lifting the cap. But we can do more. For one call in the IOUs for funds borrowed against the Social Security account by previous administrations that were used to balance budgets, offset tax breaks (mainly for the wealthy) and fund unnecessary wars. Next we need Social Security to be made a “real” protected trust, not just a Treasury Account (see below), which would keep all funds, including any surpluses, in the programme and out of the reach of politicians.

    As a Treasury Account any surplus generated (as occurred after the Reagan Administration increased the SS payroll deduction in 1982) goes into the general Treasury fund for as stated “other government purposes”. So the “looting of the programme that many decry is actually “legal” under the way it is set up. Social Security should not be a “slush fund” for politicians to use as they please. As a true independent trust, it would also no longer be subject to deficit ceilings.

    People contribute into Social Security all their working lives for the purpose of retirement, or if they are unable to work for physical/mental reasons. In that sense, it is not an “entitlement” as some politicians would lead you to believe.

    By these three measures, there would not only be enough in the trust to keep it solvent for a long time, but also allow benefits to be increased so they meet living costs better than they do now.

  • The problem: Thievery has no limits and politicians are too many.

    The solution: Erase the cap on contributions to SS. Minimum SS payments 10% over poverty line. Slash congress and senate numbers and pay 50%, same SS/ Medicare as taxpaying citizens.
    No SS funds looting. No ifs, ands, buts or crap. Period.

    It’s a good start. Seriously.

  • This is a very helpful and informative article. It’s surprising how little income can be derived from taxing the rich.

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