Means testing

Democrat James Clyburn, who was just appointed by Nancy Pelosi to the SuperCommission, thinks we should means-test Social Security.

Dean Baker and Mark Weisbrot explain in their book Social Security: The Phony Crisis, why means testing puts a disproportionate tax burden on the elderly:

Some policy analysts and advocates have argued for “means testing” on the grounds that the government should not pay money to wealthy senior citizens while it cuts programs for poor chidren.

There are compelling reasons, however, to reject this approach. Most important is the danger that it poses to the program’s broad base of political support. One reason it has been so difficult to cut, privatize, or dismantle Social Security is that 43 million beneficiaries receive it. The more that base is reduced, especially by cutting off those seniors who have relatively more of a voice in politics, the shakier Social Security’s position becomes.

It is not just the absolute numbers that are significant but the nature of the program as well. Social Security is a social insurance program in which retirement benefits are proportional to one’s payments into the system. Means-testing would convert the system into a welfare program. And we know from the recent cancellation of the most important federal welfare entitlement, AFDC, how much more difficult it is to defend welfare against political attacks than it is to defend social insurance.

The justification for denying benefits to people who have paid taxes into the system is also questionable. We do not deny interest payments to the wealthy owners of U.S. Treasury bonds, for example, and it is difficult to se 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 all be getting taxed more — not just the ones who happen to be over 65.

3 thoughts on “Means testing

  1. the other problem with means testing is that it probably won’t save any money. if people with incomes or assets over a specific threshold get no social security or a reduced social security benefit, that means that there has to be a bureaucracy in place to check on each person’s means. which means saddling the social security program with a whole new administrative cost as social security administrators have to review the financial records of individuals claiming social security when they apply for benefits, and then checking up on claimants to make sure that their economic circumstances have not changed after they become beneficiaries.

    it also means that people will try to game the system, hiding income or wealth to get a larger social security check, which would mean that the social security administration would need to create an anti-fraud unit. an anti-fraud unit is even more of an expense.

    it’s an open question whether the means-testing bureaucracy plus the anti-fraud bureaucracy will add more costs to the program than the savings from not sending social security checks to wealthy people. it actually seems quite plausible that the extra bureaucratic costs will more than eat up any theoretical savings.

  2. The minute I heard Clyburn’s name I muttered “oh shit.”

    he sucks in that issue. The committee is so transparently rigged.

  3. I have not known very many politicians, but, except for one, all the politicians I have met are dumb as posts about anything outside the realm of their personal self-interest. They have managed to get one or two ideas in their heads and stick with them despite any evidence or reasoning come hell or high water. like Clyburn with his means testing or Mitch McConnell on taxes.. This is really what scares me about the idea of a group of them meeting in a room to agree on anything important.

Comments are closed.