Social Security Is Middle-Class Welfare

By Samuelson, Robert J. | Newsweek, March 14, 2011 | Go to article overview

Social Security Is Middle-Class Welfare


Samuelson, Robert J., Newsweek


Byline: Robert J. Samuelson

It's not a savings plan and many seniors don't need it. Let's admit it so we can avert a disaster.

In a recent column on the senior-citizen lobby, I noted that Social Security is often "middle-class welfare" that bleeds the country. This offended many readers. In an email, one snarled: "Social Security is not adding one penny to our national debt, you idiot." Others were more dignified: "Let's refrain from insulting individuals who have worked all their lives -- by insinuating that [their] earned benefits are welfare." Some argued that Social Security, with a $2.6 trillion trust fund, doesn't contribute to our budgetary problem at all.

Wrong. As a rule, I don't use one column to comment on another. But I'm making an exception because the issue is so important. Recall that Social Security, Medicare, and Medicaid, the main programs for the elderly, exceed 40 percent of federal spending. Exempting them from cuts--as polls indicate many Americans prefer--would ordain huge deficits, steep tax increases, or draconian reductions in other programs. That's a disastrous formula for the future.

We don't call Social Security "welfare" because it's a pejorative term and politicians don't want to offend. So they classify Social Security as something else, when it isn't. Here's how I define a welfare program: first, it taxes one group to support another group, meaning it's pay-as-you-go and not a contributory scheme where people's own savings pay their later benefits; and second, Congress can constantly alter benefits, reflecting changing needs, economic conditions, and politics. Social Security qualifies on both counts.

Let's start with its $2.6 trillion trust fund. Doesn't that prove that people's payroll taxes were saved to pay for future benefits, disconnecting them from our larger budget problems? Well, no. Since the 1940s, Social Security has been a pay-as-you-go program. Most benefits are paid by payroll taxes on today's workers; in 2010, those taxes covered 91 percent of benefits. The trust fund's $2.6 trillion would provide only 3.5 years of benefits, which totaled $700 billion in 2010. The trust fund serves mainly to funnel taxes to recipients, and today's big surplus is an accident, as Charles Blahous shows in Social Security: The Unfinished Work. …

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