Writing in the December 2 Washington Post, Robert Samuelson does an excellent job explaining why Social Security and Medicare must be on the table in budget and deficit talks. Following are some facts to consider.
While Democrats hammer Republicans for not being specific about their proposed spending cuts especially regarding our sacred entitlements, the truth is “you can’t handle the truth.” Telling the truth about what needs to be done brings the wrath of the likes of the AARP, unions and no nothing seniors who believe they paid for their Social Security and Medicare. Telling the truth may also mean unemployment for the candid politician.
Nobody is talking about cutting anyone’s existing benefits. In fact, all suggested changes to date have far less impact on seniors than what is happening to working American’s retirement and benefit programs and has for years; working Americans at all income levels. Many young families earning no more or less than a typical senior pay hundreds of dollars more a month for health insurance than do seniors and have higher out-of-pocket costs as well. The Medicare Part B deductible actually went down in 2012 and modestly increased from the 2012 level for 2013. Given the fiscal problems of the program does that make sense? A couple on Medicare with an income up to $170,000 is protected from paying a higher premium if the Social Security COLA does not at least equal the premium hike. No such protection is afforded a working family earning far less.
Liberals claim they want to protect and help working people when in fact their intransigent position on entitlements merely adds to the average American’s burden now and in the future.
The truth:
Forty-six percent of federal spending (excluding interest payments) goes toward Social Security, Medicare and Medicaid. That is more than twice the spending on defense. How do you deal with budgets and deficits while ignoring nearly half of your spending?
Social Security, despite claims to the contrary, does impact the deficit. Benefits exceed incoming taxes which means that payments come from interest paid by the Treasury and eventually from redeeming Treasury bonds. The Treasury does not have that cash and must borrow more to pay the Social Security obligation … until all the bonds are gone (no more are being purchased). The Congressional Budget Office estimates the gap between taxes and benefits to average 10 percent over the next decade and to be 20 percent by 2030. A politician who makes the claim that Social Security does not impact the deficit is simply ignorant or lying.
As Samuelson points out, if modest cuts to Social Security future benefits are unfair to the elderly, doing nothing is unfair to the young.
Then we have the argument and perception that seniors are poor. I recently tried to book a trip in Europe for mid 2013. I tried three different travel companies catering to older Americans ranging from modest to five-star costs; nearly every date I tried was already sold out. But more significant look at these figures from the Samuelson article.
The Administration on Aging reports that in 2010, 25.9 percent of households headed by someone 65 or older had incomes exceeding $75,000; 19.4 percent had incomes from $50,000 to $74,999; and 18.8 percent had incomes from $35,000 to $49,999.
That means that 64% of seniors have incomes close to or exceeding the average household income of all Americans AND they are not faced with expenses such as college and retirement savings, child rearing and more.
Many people commenting on this blog and elsewhere insist they paid for their benefits; not true. Based on an estimate from the Urban Institute’s C. Eugene Steuerle and Caleb Quakenbush, a couple with average wages retiring in 2010 would receive $966,000 in Social Security and Medicare benefits against taxes of $722,000. Current Social Security and Medicare taxes pay the benefits for the current senior generation and are not saved for use by the taxpayer.
The last I checked Shangri-La was still a mythical place. Today’s progressives seem bent on proving that is not the case.
Related articles
- Dem Leader: ‘Social Security Is Not Responsible for the Deficit’ (cnsnews.com)
- CBO Budget Report Definitively Shows Social Security Is In Fact Adding To The Deficit (headinthegame.newsvine.com)
- Who’s Not Bargaining in Good Faith? (realclearpolitics.com)
- Don’t protect Social Security while bargaining over the budget: Robert J. Samuelson (oregonlive.com)
QUINNSCOMMENTARY 
Dick, excellent article.
However, I very much have to disagree with you about the Social Security and Medicare taxes I paid and whether or not my taxes far, far exceed my potential benefits.
Here’s the scoop:
Since 1979, I have paid the Social Security maximum (matched by my employer) every year, and I am on target to pay the maximum for the next five years until I reach my SSNRA of age 66. I have been employed and paid FICA taxes every year since 1970.
From 1979 to 1993, I paid in the maximum FICA-Med, Part A Hospital coverage. Since then, my average compensation has been significantly above the threshold for many of those years.
I have been paying taxes every year which fund Medicare Part B, and since 2006, Medicare Part D. Further, I have been paying taxes every year since 1970, and directly or indirectly funding Medicaid.
Because I took less wages and worked for an employer with a defined benefit pension plan, and because I denied myself many of the comforts I could have bought to save extensively in my 401(k) plan, and because my wife did much the same during her working years, we have a significant retirement income, and as a result, we expect to suffer both the Part B and the Part D surcharges in our retirement years.
When I adjust my contributions for a market rate of interest, and those of my employer, as well as my spouse’s contributions (I used 4% and 6%), and when I project my Social Security and Medicare benefits (using the cost of Part A, B and D for an individual who has to pay Part A full premium), it turns out that I will have paid almost triple my benefits (if my wife and I have a joint life expectancy at age 66 of 25 years) when I use 6%, and, more than double my benefits if I use 4%.
Don’t forget, as a taxpayer in my retirement years, I will still be paying for my and others’ Part B and Part D benefits.
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I can’t agree with this logic. I don’t think what a person could have earned over the years by saving the SS tax is comparable with a guaranteed life annuity with a spouses benefit with a COLA. Plus a 100% survivor annuity also with a COLA. The theoretical earnings could be wiped out or considerably diminished in a short period of time. There is value in security. And don’t forget the disability benefits and survivor family benefits that are part of the available benefits.
In my case my SS benefits will exceed my contributions in seven years not counting the COLA increases I have received and will receive. Add my employers contribution and the payback period goes to 12 years.
The Medicare premium is 25% of less than half of the total Medicare cost. Even with the supplemental premium it’s less than half the cost.
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For comparison, I also looked at those issues and the cost of ltd and life insurance to replace the sdi in oasdi would have only reduced my calculation modestly. With respect to annuitization, you oversell it given my db plan.
Regardless, I overpaid dramatically. And as my dad died At 53, mom at 76 and all four grandparents before 75 , to the extent longevity is genetic, it makes the cost benefit even worse.
Some of us overpaid. Not many but some certainly did
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Well Jack I hope you live a very long life so some day you can say, boy I got my monies worth from those taxes.
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