Meta-Blog

SEARCH QandO

Email:
Jon Henke
Bruce "McQ" McQuain
Dale Franks
Bryan Pick
Billy Hollis
Lance Paddock
MichaelW

BLOGROLL QandO

 
 
Recent Posts
The Ayers Resurrection Tour
Special Friends Get Special Breaks
One Hour
The Hope and Change Express - stalled in the slow lane
Michael Steele New RNC Chairman
Things that make you go "hmmmm"...
Oh yeah, that "rule of law" thing ...
Putting Dollar Signs in Front Of The AGW Hoax
Moving toward a 60 vote majority?
Do As I Say ....
 
 
QandO Newsroom

Newsroom Home Page

US News

US National News
Politics
Business
Science
Technology
Health
Entertainment
Sports
Opinion/Editorial

International News

Top World New
Iraq News
Mideast Conflict

Blogging

Blogpulse Daily Highlights
Daypop Top 40 Links

Regional

Regional News

Publications

News Publications

 
Deficit reduction: means test the safety net
Posted by: Jon Henke on Wednesday, June 14, 2006

Jeffrey Miron has an excellent TCS Daily article on areas for spending cuts in which there ought to be agreement...
I offer here a list that Democratic economists should embrace. The numbers after each item are the approximate annual savings in 2006 dollars.
  • Agricultural Subsidies: Everyone's favorite whipping boy, and for good reason. These subsidies are a handout to rich farmers, and they raise food prices for everyone. $20 billion.


  • Social Security for the Well-Off: Social Security is not means-tested; people with substantial retirement income get full benefits. This is insanity; recipients did not "save" the benefits they receive; these benefits come from taxes paid by current working generations. Cut Social Security expenditure, say, 20% by introducing a modest degree of means-testing. $100 billion.


  • Medicare for the Well-Off: Same deal as with Social Security. Raise premiums, deductibles, and co-pays in a means-tested manner to save 20% of current expenditure. $60 billion.


  • Higher Education for the Well-Off: State governments currently operate colleges and universities in a manner that makes no distributional sense. Children of millionaires pay the same highly subsidized tuition as children in poverty. State governments should emulate the private sector by setting a high tuition rate and then offering discounts on a means-tested basis. $50 billion.


  • Pork: Although many "bridges to nowhere" are small potatoes, the number of potatoes is large. A recent accounting by Taxpayers for Common Sense estimated 2005 earmarks at $24 billion; most of this is pure pork. Adding big ticket items like manned space flight, Amtrak subsidies, mass transit boondoggles like the Big Dig, senseless flood control projects undertaken by the Army Corps of Engineers, and subsidized disaster insurance, not to mention state and local pork, would easily yield substantial savings. $70 billion.
The grand total from this list is $300 billion annually, roughly the deficit projected for 2006.
Any serious discussion about reducing the debt must at least involve curbing entitlement spending
The economic and moral case for eliminating agricultural subsidies is pretty unimpeachable. Unfortunately, the provincial interests—for agri-subsidies or pork—are fairly strong, so this would require an electoral crisis.

In the long term, though, those areas are less important than the structural debt problems imposed by runaway entitlement spending in Social Security and Medicare. Any serious discussion about reducing the debt must at least involve curbing entitlement spending through either (a) some sort of generalized benefit reduction or (b) means-testing. Tax hikes may play a partial, but not comprehensive role, since, as Alan Greenspan said, tax hikes of "sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base."

The problem is that Democrats will oppose means-testing. Now, Democrats are not in principle opposed to means-testing. The Clinton administration "introduced elements of means testing in the form of taxing portions of Social Security benefits". The problem for the Democrats is not that they object to means testing, per se, but that they fear means testing will turn the social safety nets into 'welfare' programs, making them more susceptible to revision than a broad-based wealth redistribution program. It's easier to maintain the ponzi status quo when everybody's hand is in everybody else's pocket.
If the goal of Social Security and Medicare is a social 'safety net', then why does it cover those in no danger?
Philosophically, though, this strikes me as a somewhat incoherent response. If the goal of Social Security and Medicare is a social 'safety net', then why does it cover those in no danger? We don't extend WIC and welfare to the wealthy — it would be incredibly expensive and inefficient to do so — so why do we extend Medicare and Social Security to everybody?

The stunt man needs a safety net, not the audience.

Means testing revisions to Social Security and Medicare — objectionable as they might be from a libertarian perspective — would actually enhance the security of those who actually need it, without undermining the security of those who do not.
 
TrackBacks
Return to Main Blog Page
 
 

Previous Comments to this Post 

Comments
Well, I’m not at all sure you’d get a huge fight from democrats over means testing SS benefits, but I think you would have problems with the GOP on it.

On the April 29 edition of his nationally syndicated radio program, host Rush Limbaugh declared that only the rich "get screwed" by means testing.

Much as the GOP is staunchly against raising or eliminating the income cap on SS contributions.

Polling seems to indicate broad support both for means testing and eliminating or raising the income cap on SS benefits.
 
Written By: davebo
URL: http://
Yes, it’s true that "...these benefits come from taxes paid by current working generations". But whose fault is that? Had the federal government not viewed social security contributions as an easy source of cash to fund current programs, those contributions would have been put into Al Gore’s lockbox and saved/invested for the contributors. In other words, you’re proposing to penalize (my choice of word) those who have paid in because Congress has the discipline of a pig?

And one could make the argument that Congress has (implicitly) promised the contributors of today that they will receive benefits tomorrow... and taking away those benefits (under means-testing or some other scenario) is a breach of that contract. While you might argue that nobody ought to take Congress at its word, do we really want society to view their ’contract with America’ as worthless? Don’t we want to encourage America to hold their representatives to the promises they made to get elected?
 
Written By: steve
URL: http://
Why don’t we means test voting.

Some people are just too poor and stupid to vote properly, they should be excluded because they don’t have the means to vote with the responsibility required in a modern republic.


Personally, I think means testing for many programs is just plain wrong.
Take school lunches .. poor kids get a free lunch, rich kids pay for their’s and the poor kids, one directly and one through taxes. This is just plain silly.

Means testing of Social Security will be it’s doom, as it would be transformed into just another welfare program. The real reasons for privation will be revealed to be correct .. for many, million, it would be there for them, period.
 
Written By: Neo
URL: http://
So let me get this straight. You’re in favor of some people carrying an extra 15.3% tax on income, for life, with no return, if they end up being successful?

 
Written By: Shooter242
URL: http://
Social Security for the Well-Off:
The Well-Off paid their Social Security taxes. Are you not allowed to have the benefits are are entitled to?
So in your opinion, Social Security is a welfare/entitlement program not a retirement program that the government says it is. In that case the government call it a welfare/entitlement program.
 
Written By: Paul L.
URL: http://kingdomofidiots.blogspot.com/
You’re in favor of some people carrying an extra 15.3% tax on income, for life, with no return, if they end up being successful?
You greedy b@st@rd - you are probably one of those people who wants to keep what he earns! /end sarcasm

Question - can you just opt out of getting SS benefits? What if we gave people the option to take a one time ’bonus’ in order to forego any future payments?
 
Written By: meagain
URL: http://
That would not work meagain.

The poor people would opt for the one time payment also. In a few years, after the money was gone, they would be starving and we would have to start giving them money again. (I say "I wouldn’t mind letting them starve" but I would probably go ahead and feed them. I’m not cruel.)
 
Written By: SkyWatch
URL: http://
In that case the government call it a welfare/entitlement program.
Yup, that’s the bottom line. If it is still a retirement security program, then no ... no means testing.

If it is a welfare program, then fine. But quit collecting double taxes from me to fund it.
 
Written By: McQ
URL: http://www.qando.net/blog
If means testing were in place for Medicare and you are well off and have many illness’; you would not be well off for very long.

I don’t mean any catastropic illness; just hypertension, high cholesterol, glaucoma, or managing heart disease. The cost of health care would have to be under control.
 
Written By: VRB
URL: http://
I would suggest that means testing and the objections I see here can both be accomodated. Everyone would still get the benefits promised under the present system for which they have already qualified. Going forward the program would be supported from the general fund and be a means tested welfare program. The transition would be expensive, but it already is an expensive program, we would just shift the funding. That would be honest and straight forward, which means it will not happen. The myth of a retirement savings program would be exposed and the Democratic party would lose what it believes is its most important program. Existing, and the soon to be, retired would be covered and the promise fulfilled even as it is transformed into something we can afford. Politically however it removes the Democrats raison d’etre. As for Medicare, it is funded primarily through the general fund anyway. This is little more than truth in labeling. Means test it and move on.
 
Written By: Lance
URL: http://
The only people who would object strongly to a means test are middle income retirees or near retirees, unfortunately these same people are over represented amoung the voting population.

Far, far easier to cut oil and farm subsidies especially as neither farmers or oilmen vote progressive.
 
Written By: Unaha-closp
URL: http://
I’m all for means testing as long as it means a course is charted to end SS and other entitlement programs as we know them and turn them, over time, into true welfare programs for that very small segment of society that actually needs them. It will be revolution if the middle class on up still has to pay 15% payroll taxes and gets absolutely nothing in return and I’ll lead the charge or leave the country.
 
Written By: Unknown
URL: http://
In order to deal with the question of folks paying the FICA tax their whole working career, then getting a big raspberry from the government because they were successful, how ’bout if means testing adjusted the Social Security benefit within a range. Folks who did well with savings and investments would get less than folks who came out with less. But, in either case, the benefits would only provide a modest level of sustinence, not a "living wage." Social Security was never intended for that.

I’m also a big advocate for getting Congress to face the fact that they have been spending our retirement "savings" for the past 20+ years. Currently, the debt owed by the Treasury to the Trust Fund is on the order of $1.5 trillion. When the level of current contributions to the Trust Fund is no longer large enough to pay for current benefits, the Trust Fund will start calling in that debt and Congress will have to come up with the money. Just remember, the resulting tax increases will not be to pay for current benefits but to pay for past borrowing.
 
Written By: Joe Gaffney
URL: http//
Another feather in Schumpeter’s cap. Libertarian really is becoming a meaningless word.
 
Written By: frontinus
URL: http://
"Social Security for the Well-Off: Social Security is not means-tested; people with substantial retirement income get full benefits. This is insanity; recipients did not "save" the benefits they receive; these benefits come from taxes paid by current working generations. Cut Social Security expenditure, say, 20% by introducing a modest degree of means-testing. $100 billion."

Social Security was passed and accepted on the premise that it was an investment program. It wasn’t meant to be ’old folks welfare’ although that is how it has been run. It’s something called pride. Even today some would feel ashamed to accept welfare.
 
Written By: jpm100
URL: http://
Here’s a little known Social Security fact... SOME PEOPLE DON’T PAY SOCIAL SECURITY AND ITS LEGAL - for them, probably not for you.

I put that in all caps because it’s the opposite of the holy grail of ’but everyone pays’, when in fact they don’t.

"DCP – stands for Defined Contribution Plan. This is a mandatory Safe Harbor contribution that is taken out in lieu of social security. You can opt out of this retirement plan when you are no longer teaching. The deduction is 7.5% of wages. Contributions are deducted from your salary before income taxes are calculated, reducing your taxable income. " If you participate you pay no Social Security taxes on that income.

here’s a goog link on the value of this plan:
http://atyourservice.ucop.edu/forms_pubs/spd/dcpspd.pdf

You’ll find this is something reserved for employees of government agencies... unless someone knows somewhere else it’s available - I’m reasonably sure it’s not just University Professors. In the meantime remember when you claim that you can means test a well paid Univerity professional has already protected their "Social Security" benefits from you by never paying into the system you are forced to pay into.
 
Written By: Bill
URL: http://
Al Gore’s lockbox
That would have done what with the money? Buried it in the South Lawn?

Or buy those nice safe T-bills?

My core objection to means testing SS and Medicare is it rewards the guy who takes vacations every year and never saves, while the guy planning for the future gets the shaft.
 
Written By: Ryan
URL: http://
I’m going to second the view that SOMEHOW means testing leads to "privatization", otherwise someone pays 15% of their wages FOR NOTHING!
 
Written By: Joe
URL: http://
I think what those of you who object to paying without getting something back forget is that, if you means-test, you’ll be paying a lot less. You won’t be paying 15%, precisely because there won’t be millions of people just like you with their hands out expecting to "get theirs".

Think of it like a forced ponzi scheme. If the goal — codifed, remember, so there’s no getting around it — is to help out those who need it, wouldn’t it be better to simply help the poor directly, rather than creating a massive, complicated redistribution scheme, whereby millions of people who don’t need it pay more than they have to and get back more than they need?

Welfare is more philosophically objectionable than a scheme whereby you at least stand a chance of getting your money back, but would you rather (a) pay 15% in payroll taxes for your entire working life for the potential to get SS, or (b) pay 3% to help the actual poor and keep the rest of your money?

And if you’d prefer the former, why don’t you insist on applying that philosophy to every government program? We all pay into it, so WIC, foodstamps and rent subsidies for everybody!
 
Written By: Jon Henke
URL: http://www.QandO.net
Didn’t we just rid ourselves of a tax from the Spanish-American War? If you think FICA is going to be reduced you don’t know politics.
 
Written By: Shooter242
URL: http://
"Well, I’m not at all sure you’d get a huge fight from democrats over means testing SS benefits"

Except for Teddy and a few other democrats who have already opposed it.

"In other words, you’re proposing to penalize (my choice of word) those who have paid in because Congress has the discipline of a pig?"

And who put these pigs in office?

"You’ll find this is something reserved for employees of government agencies..."

I recall reading of some county and/or other local governmental entities that do not participate in SS, and never have.
 
Written By: timactual
URL: http://
Just track down any retiring state/federal employee and chances are that in any random lunch sitting they’ll be bitching about their inability to collect Social Security. Or throw a rock at any of the assessment farms(quote a few states have them...since the one token gesture to impartiality in standardized testing is that a state can’t score their own tests) and you’ll hit a few doing their patriotic duty of getting over on Uncle Sam so they can draw both Social Security and the other government retirement plan. Teachers are, afterall, by and large just like everyone else in the world—hypocrital and pretentious to boot.
We all pay into it, so WIC, foodstamps and rent subsidies for everybody!
Translated into libertarianese: We all pay into it, so WIC, foodstamps and rent subsidies for nobody!

It’s always in the unguarded moments when the feathers tend to show.
 
Written By: frontinus
URL: http://
Excellent Idea. The analogy is unemployment insurance that everyone pays in. Hopefully you never have to use it, but for those who are unfortunate to lose their job it is the only safety they usually have.

The same idea should hold for Social Security. It is a safety net for those who have no other means. One of the reasons Medicaire costs are out of control is that the very wealth strip their parents of all their assets years before they become incapacitated so that the parents qualify for federal and state aid. You have financial planners telling people to do this.

However, if the discussion is about controlling the Federal deficit, why is there never a discussion of the $500 billion Defense bill. You could easily argue that ove 50% is doing nothing to protect Americans.

And one of the most ridiculous entitlements is the agri subsidy (I think up to $30 billion) that generally just goes to big agri business, not the small farmer. Take a look at http://www.ewg.com to find out who in Dallas, Houston and Tulsa are cashing in huge government checks and never set foot on a farm all year.
 
Written By: Mike Tracy
URL: http://
However, if the discussion is about controlling the Federal deficit, why is there never a discussion of the $500 billion Defense bill. You could easily argue that ove 50% is doing nothing to protect Americans.
If it’s so easy, I assume that you have something to back up that percentage.
 
Written By: Mark A. Flacy
URL: http://
However, if the discussion is about controlling the Federal deficit, why is there never a discussion of the $500 billion Defense bill. You could easily argue that ove 50% is doing nothing to protect Americans.
If it’s so easy, I assume that you have something to back up that percentage.
No problem... Iraq, quagmire and doom... plus any defense program that Mike Tracy doesn’t like, the Army, the Air Force, the Navy, the Marines, AAFES, whatever.
 
Written By: Joe
URL: http://
As a generally leftist individual, I’m guardedly open to the idea of means-testing social security/medicare. My fears are exactly as Jon intuits - that Republicans want to means-test as a prelude to elimination. That’s as is reflected in the comments everywhere, they ultimately don’t give a damn about easing the difficulty of destitute old people who cannot care for themselves.
"Let their kids take care of it. That’s individual responsibility" would be the refrain - and if the kids don’t, then hey, life’s a b****, right? Now get off my street corner.

However, I might be open to means-testing by a Democrat. Personally, I’d rather just scale the benefits down as income/wealth increases rather than eliminating them. Even a symbolic benefit keeps the upper classes more invested than openly nothing.
 
Written By: glasnost
URL: http://
If it’s so easy, I assume that you have something to back up that percentage.

I’d like to see you make the case that every dollar of the $500 billion is being spent efficiently in the midst of the biggest government gravy-train defense boom since post-Sputnik.

I wouldn’t use Tracy’s percents or his description without detailed research prepared, but just for starters I’d mention the well over $100 BILLION dollars we’ve spent to develop next-generation manned fighter plannes when the current generation is completely unchallenged by any threat on earth and there are no programs underway that could challenge them.
 
Written By: glasnost
URL: http://
I’d mention the well over $100 BILLION dollars we’ve spent to develop next-generation manned fighter plannes when the current generation is completely unchallenged by any threat on earth and there are no programs underway that could challenge them.

Good points, BUT:
when the current generation is completely unchallenged by any threat on earth
Air Frames have limited life expectancy. Most fighter airframes are designed for a life of 4,000-8,000 flight hours, IIRC. Meaning that at ~400 hours per year in peacetime use one has about a 20 year life span on an airframe. The reason we can plan on using the B-52 so long, was that until 1991 the B-52’s actually HAD LITTLE FLIGHT TIME ON THEIR FRAMES (They sat on SAC fields on 5 minute alert, waiting to fight a war that NEVER came). Even that is changing since the GWoT and OIF. Bottom-Line: Aircraft wear out. And whilst it IS possible to re-manufacture them and set the flight time to ZERO, it’s ALMOST as expensive to do so as to build new aircraft. So whilst the F-15/16 ARE superlative aircraft they ARE wearing out.
and there are no programs underway that could challenge them.
Technically and practically untrue. There is the French Rafael and the Euro-Fighter Typhoon and SEVERAL MIG- and SU- (whose designations escape me now) series fighters that are in production NOW, that are equal to if not BETTER than the F-15/16. Now their numbers, at present are low, but there ARE aircraft better than the USAF’s current front-line force, and some of those aircraft COULD end up opposing the USAF, a la the Mirage F-1 in the 2nd Gulf War.

I might add that this posting cost me much anguish as my entire family and ALMOST ALL my friends are Ground Force members and we/they are almost GENETICALLY pre-disposed to an intense dislike of all things US Air Force. Though Air Force Base Security Personnel are exempted from this....
 
Written By: Joe
URL: http://
that Republicans want to means-test as a prelude to elimination. That’s as is reflected in the comments everywhere, they ultimately don’t give a damn about easing the difficulty of destitute old people who cannot care for themselves.
Now THIS is errant nonsense...
that Republicans want to means-test as a prelude to elimination.
yes this is TRUE, the current safety net is going to be unsustainable IF UNCHANGED and it would be best if it were eliminated...
they ultimately don’t give a damn about easing the difficulty of destitute old people who cannot care for themselves.
This is nonsense. You’re saying it’s better that folks give up 15% of their income to receive a low (2-4%), 0% (if you’re a Black male) or NEGATIVE return (Younger workers)on your investment rather than a 4-8% RoI if the funds are privately invested? You’re telling me that it’s OK that I and my CHILDREN will have to pay a 70% rate to support the CURRENT system and THAT"S FAIR AND COMPASSIONATE?

Glasnost if you REALLY care about the destitute you’d get them into the Market, not into Social Security. You just buy into or seemingly buy into the notion that a "private" system is "unfair" to the poor, when the reality IS Bill Gates will get Social Security AND BE A BILLIONAIRE, whilst the poor have only a small SS payment per month, as the system currently operates. IT’S THE POOR THAT BENEFIT THE MOST from an end to Social Security, not the rich, the RICH HAVE PRIVATE ACCOUNT ALREADY.
 
Written By: Joe
URL: http://
Jon,

I like McQ but he posts way more than you, which causes your pithy posts to be "buried" deep down the QandO page. Perhaps an arrangement can be made that allows readers to immediately see the title of the posts of Dale, McQ, and yourself. The titles will be links that take you directly to the post. Whaddaya think? Then us Henke "lovers" will not mistakenly believe that you have run out of things to write about.

Talk this over with McQ and Dale and get back to me.

Thanks,
Nuclear
 
Written By: Nuclear
URL: http://
I think what those of you who object to paying without getting something back forget is that, if you means-test, you’ll be paying a lot less. You won’t be paying 15%, precisely because there won’t be millions of people just like you with their hands out expecting to "get theirs".
That’s funny.

No really.

Here’s the way the system plays out:

We means test enough to balance the system with today’s taxes to limit the shaft to the "rich."

Then the benefits need expanding, and we push outside of balance again. No problem, the means testing equation just needs adjustment.

I have no faith you’ll see a government program that starts with just a few people excluded to achieve balance and it won’t creep...

And it still creates a band of people who during their lives will have a choice between spending the money and saving. Save and get nothing. Spend and enjoy now, and later someone else will make up the savings for you.

No thanks.
 
Written By: Ryan
URL: http://
I have a way to get the dems on board. Federalize all employment. Now that everyone works for the Federal government, no one is eligible for Social Security.
 
Written By: Harun
URL: http://
I like McQ but he posts way more than you, which causes your pithy posts to be "buried" deep down the QandO page. Perhaps an arrangement can be made that allows readers to immediately see the title of the posts of Dale, McQ, and yourself. The titles will be links that take you directly to the post. Whaddaya think?
Thanks, Nuke. I don’t think that’s possible, but I’m working on another project right now and I hope to unveil it next week. That might solve the problem to some degree.
 
Written By: Jon Henke
URL: http://www.QandO.net

 
Add Your Comment
  NOTICE: While we don't wish to censor your thoughts, we do blacklist certain terms of profanity or obscenity. This is not to muzzle you, but to ensure that the blog remains work-safe for our readers. If you wish to use profanity, simply insert asterisks (*) where the vowels usually go. Your meaning will still be clear, but our readers will be able to view the blog without worrying that content monitoring will get them in trouble when reading it.
Comments for this entry are closed.
Name:
Email:
URL:
HTML Tools:
Bold Italic Blockquote Hyperlink
Comment:
   
 
Vicious Capitalism

Divider

Buy Dale's Book!
Slackernomics by Dale Franks

Divider

Divider