Monday, February 10, 2014

More Social Security? Yes, for a few.

In the last six years, as a volunteer with Home Works of America, I have visited the homes of, and met and had discussions with, 244 low income elderly retired or younger disabled persons looking for assistance with repairs to their homes.  We are able to assist about eighty percent of homeowners whose homes are previewed, and I have had the privilege of helping with forty eight projects over the last eight years.  Home Works, founded in 1996, repairs about 150 homes per year.

Typical income for homeowners we assist consists only of Social Security of around a thousand dollars a month.  All are on Medicare or Medicaid, so, including that, a very little help from family, and occasional trips to the food bank or visits from Meals on Wheels, they can just barely make it in a house with no mortgage and no maintenance expense. Unfortunately, houses require maintenance.

I say this just to provide some credibility for comments I make and opinions I hold about the problem of poverty in the United States. I am not making this information up.

We have a sad situation, but it provides no support or justification for the arguments some are making  for a general increase in social security benefits and taxes.  The solution to our Social Security funding problems is cuts in both benefits and taxes and careful targeting of the benefits.  

That may seem heartless, but the elderly income data provided in economist Paul Samuelson’s February 7th column provide a sound basis for it.   Samuelson’s information comes from a Congressional Budget Office study based on Internal Revenue Service data and reports average pretax incomes of the poorest to the richest fifth of older Americans in 2010.  Here are the data:

               Poorest fifth: $19,900
               Second fifth: $34,400
               Middle fifth: $55,100
               Fourth fifth: $82,100
               Richest fifth: $219,500

So, at one end of the Social Security spectrum, we have elderly widows in crumbling housing getting along on $1000 a month and seriously needing help.  At the other end, we have retired professionals and executives, people like me, getting probably $3000 a month from SS and hardly being aware of it because of other retirement income.  Many retired people may enjoy but do not depend on Social Security, unless you want to argue that they depend on it for golf and restaurant and vacation expenses or maybe to fund a second home in a low tax state claimed as primary residence.

That would be fine if our Social Security taxes paid over our working years had been invested for our benefit rather than "borrowed" and spent and if our working population were willing and able to continue to fund the program adequately to cover all those benefits.  But the current situation is that the excess funds we paid in are gone, Social Security is on a borrow and pay as we go basis, and young working families are contributing 12.4% to 15% (if self employed) of their pay to Social Security, presumably for their own future benefit, but actually to support the often comfortable retirements of their parents and grandparents.  It isn't fair.  Somebody should go to jail for raiding the fund.  Maybe one of the huge fenced retirement communities could be converted to a prison because the raiders are dead or retired or still members of congress about to be retired due to low approval ratings.

Of course we retired folks are justified in demanding the benefits we were promised.  We paid those taxes all those years, and it's our money.  I still have my very first pay slip from Eastman Chemical in September 1965, and it shows that I paid $27.91 in Social Security (F.I.C.A) taxes on a monthly rate of $770!  I suppose Eastman paid the same amount for me. We want that money back with interest!  We are entitled to it, and we are going to get it even if it does come from our children who are raising our grandchildren on tight budgets, or as loans from China, and even if it ruins the credit rating of The United States of America!

A certain segment of the US population has little or no sympathy for the poor widow on $1000 a month. They argue that her problems are of her own making, but she was probably born into poverty, got a substandard education, spent her life working  in a series of part time jobs at low wages with no benefits, and, without Social Security and Medicare, would be destitute.  You may be asking, “Where are her children?”  Well, they too were raised in poverty, got substandard educations, and are spending their lives working in a series of part time jobs at low wages with no benefits.  And, a hundred years ago, families took care of families, but, for various reasons, family structure and responsibility are not what they used to be due to deterioration aided and abetted by some of our government benefit programs (example). 

So, changes will have to be gradual because we have to keep promises to taxpayers retired and near retirement, but, for the long term we need to shrink Social Security by eliminating promises to future retirees that push total income above $60,000 or so in 2014 dollars while still providing a safety net for us all but luxury and comfort for none.  That will mean lower taxes, lower or no total benefits for most, more benefits for the truly needy, and less money being channeled through Washington DC for redistribution.  

I have read arguments that Social Security must be expanded and benefits increased and that the solution to the financial problems is to remove the cap on Social Security taxes, currently at 12.4% of the first $117,000. I did some analysis on income and tax data that Warren Buffett provided here.   Mr. Buffett and his employer(s) apparently paid the maximum $14,508 in Social Security taxes in 2010.  With the cap removed, he would have paid $7.8M.  I can see why some people might think that is cool, but it would simply result in a much bigger unnecessary flow of money through Washington, DC, much of it going to people who don’t need it and much coming from families who, unlike Buffett, do need it.  It would be much wiser and more fiscally sound to shrink and target the program so that it becomes a true safety net rather than golf money for prosperous retirees.

Those of us campaigning for increases in Social Security in the name of "social justice" while receiving non-essential Social Security may want to carefully review, and probably increase, our charitable giving in support of the helpless elderly and disabled.  Just don’t give it back to the government where it would disappear into a black hole.

As I have argued several times on this blog, we have plenty of money to help the truly poor if we would stop trying to help everybody in an unholy pursuit of votes. 

1 comment:

  1. Yes, Social Security for those blessed with a high income and very substantial wealth is something that should draw to a close. Likewise, those who are only have social security and in their own home will, if they live long enough, will eventually lose their dignity and/or their home. I don't think Home Works and similar charities will be able to fill the void.