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Wed Nov 14, 2012, 07:49 PM

'Means Testing' Social Security Is A Bad Idea


"....almost every plan for "fixing" it forwarded thus far will ultimately weaken it.

That includes the idea of means testing, or reducing or eliminating benefits for wealthy individuals. On the face of it, it sounds almost progressive. Why should the well-off get the same benefits as everyone else? They don't need them, why shouldn't that money be redistributed to those who need it more?

The simplest answer is that it's their money, too. They paid into the system and, in doing so, bought into the same promise as the rest of us. Which gives them the same incentive to support the program as the rest of us. In their 1999 book, Social Security: The Phony Crisis, Dean Baker and Mark Weisbrot address this.

The justification for denying benefits to people who have paid taxes into the system is also questionable. We do not deny interest payments to wealthy owners of U.S. Treasury bonds, for example, and it is difficult to see how the payment of Social Security benefits to rich senior citizens is any less appropriate. Indeed, why single out senior citizens as a group for special treatment in this regard? If we think that the rich are getting too much of the economic pie, then they should be taxed more--not just the ones who happen to be over 65.

It's important to recognize, though, that there is already a progressive earnings test built into the system, in that higher income retirees pay income tax on a portion of their benefits, and lower-wage earners get a higher return on contributions. In that sense, income fairness exists already in the program.

Exchanging that basic fairness for means testing Social Security would take away that "legal, moral, and political right" of all Americans to collect their pensions. It turns Social Security from what is essentially an insurance program into welfare. Which in turn would deeply erode political support for the program. The constituency for any aid program is far less powerful than the constituency for Social Security--the whole of the American workforce, and those with money are the most powerful.

There are other, simply practical reasons, to reject the idea of a means test. Primarily, there just aren't enough wealthy seniors to achieve significant savings by reducing their benefits. Use the cut-off level of $250,000 for the definition of wealthy. With roughly two percent of all tax filers in the US claiming that level of income, the percentage of seniors in that bracket is insignificant.

In fact, the administrative costs for the Social Security Administration (SSA) in trying to make income determinations, measuring need, and policing the system would be significant--potentially outweighing any savings in benefits. Take the example of Medicaid, which is means tested. Significant administrative resources have to be devoted to determining assets, and policing would-be recipients trying to hide those assets in order to qualify.

There's a compelling argument that means testing would also serve as a disincentive for retirement saving. AARP's executive vice president for policy make this argument:


Imposing new limits for the well-off could backfire in various ways. A means test could adversely affect retirement planning and lower the personal savings rate if people concluded the program would penalize them for having higher retirement incomes or larger nest eggs. It would discourage older persons from continuing to work beyond eligibility age, depriving them—and the economy—of additional money. It would create incentives for people to take lump-sum distributions from pension plans, strategies that could prove shortsighted and harmful.


snip

http://www.dailykos.com/story/2011/02/20/947639/-The-case-against-means-testing-Social-Security

41 replies, 2935 views

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Arrow 41 replies Author Time Post
Reply 'Means Testing' Social Security Is A Bad Idea (Original post)
amborin Nov 2012 OP
Honeycombe8 Nov 2012 #1
wryter2000 Nov 2012 #4
Faygo Kid Nov 2012 #12
Qutzupalotl Nov 2012 #2
jberryhill Nov 2012 #6
Qutzupalotl Nov 2012 #11
HiPointDem Nov 2012 #21
jberryhill Nov 2012 #27
HiPointDem Nov 2012 #28
jberryhill Nov 2012 #29
HiPointDem Nov 2012 #30
jberryhill Nov 2012 #31
HiPointDem Nov 2012 #32
CTyankee Nov 2012 #40
Honeycombe8 Nov 2012 #33
FogerRox Nov 2012 #24
HiPointDem Nov 2012 #36
DCBob Nov 2012 #3
doc03 Nov 2012 #8
DCBob Nov 2012 #9
doc03 Nov 2012 #10
DCBob Nov 2012 #14
doc03 Nov 2012 #18
Honeycombe8 Nov 2012 #34
DCBob Nov 2012 #38
doc03 Nov 2012 #5
forestpath Nov 2012 #7
former9thward Nov 2012 #13
GitRDun Nov 2012 #15
Cleita Nov 2012 #16
democrattotheend Nov 2012 #17
Faryn Balyncd Nov 2012 #19
FogerRox Nov 2012 #25
mainer Nov 2012 #20
Snarkoleptic Nov 2012 #22
Canuckistanian Nov 2012 #23
Honeycombe8 Nov 2012 #35
FogerRox Nov 2012 #26
Major Nikon Nov 2012 #37
quispquake Nov 2012 #39
wishlist Nov 2012 #41

Response to amborin (Original post)

Wed Nov 14, 2012, 07:52 PM

1. This makes sense to me. If people pay in, they should get their $ back. That's what it's all about.

But we really don't need to be considering at this time. SS IS NOT PART OF THE BUDGET.

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Response to Honeycombe8 (Reply #1)

Wed Nov 14, 2012, 07:58 PM

4. Thank you!

I wish we could get that fact out into the popular culture.

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Response to Honeycombe8 (Reply #1)

Wed Nov 14, 2012, 08:14 PM

12. +1

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Response to amborin (Original post)

Wed Nov 14, 2012, 07:53 PM

2. One more reason:

If means testing is enacted, the very rich will object to paying for a benefit they can't collect — and they would have a point.

It's much better to continue to pay everybody who has paid in, regardless of need. As the OP says, there aren't enough wealthy to achieve much savings by means testing.

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Response to Qutzupalotl (Reply #2)

Wed Nov 14, 2012, 08:01 PM

6. Should childless people pay school taxes?


Can't anyone simply make it to retirement and say, "I have been blessed to not need this?"

I'm sorry, but I have a hard time with Dick Cheney begrudging other people of his age the ability to buy an extra can of cat food because, "Goddammit, I paid into this thing."

Have you ever loaned money to someone who intended to pay it back, but fell on hard times and couldn't? I have. And my reaction has always been to thank my lucky stars that I didn't need that money as much as they did.

What the fuck is wrong with people? What has happened to basic decency?

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Response to jberryhill (Reply #6)

Wed Nov 14, 2012, 08:13 PM

11. You'd think.

I happen to be childless but don't begrudge school taxes because they make society better. You'd think the ultra rich would say the same about SS — that it would reduce petty theft out of desperation, stop people from starving, etc. But I know how these people think, and mark my words, they would use means testing as a rallying cry for a revolt, and with the funds at their disposal, they might even win. All I'm saying is, it would be an unwise move on our part to adopt means testing.

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Response to jberryhill (Reply #6)

Wed Nov 14, 2012, 09:56 PM

21. dick cheney isn't saying any such thing. there's nothing wrong with those people. they paid in

 

with the assumption they'd get benefits, and that's what keeps them supporting the system -- even though their benefits have been taxed since reagan, which is already a kind of means testing.

what's stupid is to think that the top 20% is going to go along with a 13% tax they don't benefit from.

The folks pushing more means testing are doing so to undermine support for social security so they can kill it, that's the political reality. And it will work.

So I consider those who take that position to be either dumb or complicit.

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Response to HiPointDem (Reply #21)

Wed Nov 14, 2012, 11:09 PM

27. Really?

I used to consider people who disagree with me to be ignorant sheep-fucking dumbasses with shit for brains.

Later in life, I realized that sometimes people just disagree.

Sometimes.

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Response to jberryhill (Reply #27)

Wed Nov 14, 2012, 11:13 PM

28. Yeah, & most of the time one of them is wrong.

 

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Response to HiPointDem (Reply #28)

Wed Nov 14, 2012, 11:18 PM

29. Well I'll tell you something then...

I won't need social security, have no problem paying into it because I know that current payments into it are supporting the current recipients, and I further have no problem paying my portion of my employees' SS.

But I look forward to receiving your children's money, and am glad to hear you don't mind committing it to me on their behalf.

Thank them for me, willya?

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Response to jberryhill (Reply #29)

Wed Nov 14, 2012, 11:20 PM

30. anyone who feels that way has the option of refusing payments. i don't care if you take it or not;

 

i care about the continued existence of social security.

means testing will ensure its death.

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Response to HiPointDem (Reply #30)

Wed Nov 14, 2012, 11:24 PM

31. Well, I wouldn't want to be "dumb or complicit"

So, having been corrected, rest assured I will take every dime from your kids that you insist I take.

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Response to jberryhill (Reply #31)

Wed Nov 14, 2012, 11:27 PM

32. As you wish. I don't care what you do. I care about the future of social security. Those who

 

push the idea that SS should be turned into a welfare program are, knowingly or unknowingly, pushing for its destruction.

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Response to HiPointDem (Reply #32)

Thu Nov 15, 2012, 09:56 AM

40. I think that is the reason behind Joe Scarborough "something has to be done with entitlements..."

He wants to see this outcome. It's all been baked in a cake, this idea. It has been the long term strategy of the RW think tanks all along.

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Response to jberryhill (Reply #6)

Wed Nov 14, 2012, 11:29 PM

33. But that would make SS like any other tax, when it's not. It's a social program.

You pay a tax, sure. But it's for your future. If you live long enough, you'll get all or most (or more) of it back.

It'd be a lot easier to do away with Social Security if more people can't get it back...they just pay a tax, for nothing. It's not a social program to them.

Taxes are a lot easier to fool around with than social programs.

Besides, I just don't think it's right. It's okay if someone doesn't NEED their social security that THEY paid, but use it for luxury items or travel or whatever. It's their money taken out of their income they worked for. If they die young, they won't get it (but a spouse can).

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Response to Qutzupalotl (Reply #2)

Wed Nov 14, 2012, 10:59 PM

24. TO paraphrase FDR

IF we take nothing from capital we owe nothing to capital

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Response to FogerRox (Reply #24)

Wed Nov 14, 2012, 11:34 PM

36. +1.

 

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Response to amborin (Original post)

Wed Nov 14, 2012, 07:56 PM

3. it is a good idea.

because it could be setup so if the weathy suddenly become poor then they can start their benefits at a higher rate to compensate for the years lost. Im not sure thats the proposal but it ought to be that way. I think rich folks would be happy with that setup.

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Response to DCBob (Reply #3)

Wed Nov 14, 2012, 08:02 PM

8. Define wealthy n/t

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Response to doc03 (Reply #8)

Wed Nov 14, 2012, 08:04 PM

9. $250,000+ yr income.

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Response to DCBob (Reply #9)

Wed Nov 14, 2012, 08:12 PM

10. How do you know they will use that figure? If that is where they set the

limit and they don't adjust it for inflation a person that retires 20 years from now may be
living in poverty at $250,000. When they started taxing SS the threshold for taxes was set at $34000 for a couple and $24,000 for a single and it has never been adjusted for 30 years as far as I know. I have a employer pension and I am single, I pay better than 1/3 of my pension into taxes.

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Response to doc03 (Reply #10)

Wed Nov 14, 2012, 08:17 PM

14. Just a guess based on the number the President uses for tax reduction cutoff.

Of course it can always be adjusted if the poverty level suddenly rises to 250,000.

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Response to DCBob (Reply #14)

Wed Nov 14, 2012, 08:59 PM

18. Those things tend to never be adjusted, just like the tax on

SS. Actually if you consider that tax, SS is means tested already. I am
apparently wealthy since I received a pension through collective bargaining and
did the responsible thing and saved for my retirement. We were told that retirement was a three legged stool SS, Pension and your savings, so now we get penalized for working hard and playing by the rules. We were told SS was never intended to be your sole source of income so we try to better ourselves and get penalized.

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Response to DCBob (Reply #3)

Wed Nov 14, 2012, 11:31 PM

34. You do understand the OP is saying it's a bad idea for the wealthy not to get their benefits? nt

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Response to Honeycombe8 (Reply #34)

Thu Nov 15, 2012, 07:27 AM

38. yes.

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Response to amborin (Original post)

Wed Nov 14, 2012, 08:00 PM

5. What would be the threshold for benefit reduction? Would people that have an

employer pension be hit with it, how about if you did what we were told and invested in a 401K. Why would anyone even try to bargain for a pension or save if you get penalized. Things like that start out at a high limit then they tend to never get adjusted for inflation. For example I have a pension and I have to pay tax on 85% of my SS and get taxed again on my pension, my tax rate is higher than the 35% top bracket. The threshold for tax on SS started in the Reagan Administration and never adjusted for inflation.

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Response to amborin (Original post)

Wed Nov 14, 2012, 08:02 PM

7. K&R

 

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Response to amborin (Original post)

Wed Nov 14, 2012, 08:16 PM

13. We already means test SS.

I you are on SS and make too much money your benefits are taken away from you. And these are SS benefits that have already been paid for.

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Response to amborin (Original post)

Wed Nov 14, 2012, 08:26 PM

15. Never thought about it this way...

OK you convinced me...

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Response to amborin (Original post)

Wed Nov 14, 2012, 08:29 PM

16. Why does this keep coming up?

This crazy idea was cooked up by rich Wall Streeters who have been trying to destroy Social Security since the day it became law.

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Response to amborin (Original post)

Wed Nov 14, 2012, 08:30 PM

17. Agreed 100%

Social Security has so much popular support because it is designed to benefit everyone. Everyone pays in, everyone gets back. That was the brilliance of it when it was designed and today.

If we turn it into a welfare program it will be a lot easier for politicians to cut. You can see the evidence for that just by looking at the differences between Medicare and Medicaid. Lots of doctors take Medicare but not Medicaid because the payments to doctors are so low under Medicaid. Medicare is in some ways better than most private insurance, whereas I don't think most people would choose Medicaid if they had another option.

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Response to amborin (Original post)

Wed Nov 14, 2012, 09:51 PM

19. It would undermine the very reason Social Security has widespread support.

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Response to Faryn Balyncd (Reply #19)

Wed Nov 14, 2012, 11:02 PM

25. Bingo, yup

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Response to amborin (Original post)

Wed Nov 14, 2012, 09:53 PM

20. Everyone who contributes should get something back

however, the recipient should be subject to income taxes if their total income is high enough.

Means testing means more and more people will rebel against paying into the fund.

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Response to amborin (Original post)

Wed Nov 14, 2012, 10:15 PM

22. Means testing is bad news as it gets the camels nose into the tent.

Once pugs succeed in defining it as a program for those of below a certain income level, that level will be continually pushed downward until SS is defined as some sort of welfare program. This will make it easier to for the pugs to achieve their dream killing it altogether. This has been their objective since the moment SS was enacted.

The first time I "FICA'd out", I freaked as my net pay suddenly jumped. I think you "FICA out" currently after reaching $106K in calendar-year earnings. We need to shore up SS by either eliminating this cap or vastly increasing it.

Beware of those proposing increases in retirement age, decreases in benefits or other such "improvements".


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Response to amborin (Original post)

Wed Nov 14, 2012, 10:38 PM

23. No! Don't do it

We here in Canada have our Canada Pension Plan (CPP) and it has had a STRICT policy of UNIVERSAL coverage.

Why? Because once you start making "exceptions" and drawing lines, those lines can be easily be altered and thereby possibly exclude people who might really need it.
Besides, these days fortunes can change easily and some who don't need it this year may depend on it the next.

And it may encourage those who are excluded from the benefits to feel resentment for paying into it and call for it's reduction or even abolishment. It would create a two-tier society that would slow down social change and entrench the gulf between rich and poor.

No, keep it universal. Everyone pays, everyone benefits.

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Response to Canuckistanian (Reply #23)

Wed Nov 14, 2012, 11:32 PM

35. +1.

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Response to amborin (Original post)

Wed Nov 14, 2012, 11:06 PM

26. An extremely important fact that should be universally known

but isnt. Thanks for bringing this one back. KNr

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Response to amborin (Original post)

Wed Nov 14, 2012, 11:39 PM

37. I think means testing SS is a good idea in theory, but perhaps not so much in practice

The purpose of SS is to lift the elderly out of poverty, and for that purpose it does an excellent job. However, as a retirement plan it's not so great. I think the public would be better served by keeping SS as a safety net and having it means tested, so long as there is a national pension system to compliment it. However, the environment in the US where demagogues can so easily frighten the public about anything that remotely resembles socialism, I just don't see this happening.

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Response to amborin (Original post)

Thu Nov 15, 2012, 09:53 AM

39. Just get rid of the $100,000 cap!!!

I'm paying 6+ percent on all my income...why should the rich stop paying their 6+ percent after they make $100,000???? That's complete bullshit...ALL INCOME SHOULD HAVE A 6+ percent SS tax...and huzzah...SS is saved...

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Response to amborin (Original post)

Thu Nov 15, 2012, 10:14 AM

41. Agree since Fed Income tax already applies plus Fed windfall offset

My husband gets a small SS check but because our other income brings us up to the $70.000's, we have to pay significant federal taxes on his SS and if we were in a higher tax bracket we would pay even more. I am a retired Federal employee under the old Civil Service retirement where I paid Federal retirement contribs and into Medicare but I only paid into Soc Sec on other jobs. I have paid in enough (thousands$) to Soc Sec to be eligible but because of my Federal pension, the amount of Soc Sec I will get when I apply will be tremendously reduced from a couple hundred a month to only about $45 and that's before federal income taxes.

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