The Committee for a Responsible Federal Budget — an independent think tank in Washington, D.C., that focuses especially on our insane federal deficits — raised more than a few eyebrows this week with a new report on Social Security.
The “average” Social Security beneficiary, they said, gets back “far more” in benefits than they paid into the program through contributions. The figure for those retiring this decade, they report, is about 133%. In other words, retirees can expect to get back about $1.33 in benefits for each dollar they contributed during their career.
The numbers are based on calculations from the Congressional Budget Office, and have been confirmed by the CBO. You might quibble with how we calculate the time value of money — i.e., what is the value today of a dollar paid in 1984, and so on — but overall, the figures are correct. Social Security pays out more than it takes in, which is precisely why the program is heading towards a financial reckoning in around eight years.
The CRFB was seeking to rebut the populist claim that beneficiaries “just want their own money back.” Technically, according to the CBO, most people outside the top 20% of earners will get back more than they put in. Those in the top 20% will get back roughly what they contributed.
The more interesting question is where this leads.
There are many conservatives who want to recast Social Security — not as a public pension program, but as a welfare program. The so-called trust fund isn’t even real, they point out (correctly). You’re not getting back your own money, let alone with any investment gains. Today’s workers pay contributions to support today’s retirees. When today’s workers retire, they will be supported by contributions from those who are working. And so on.
Some have even argued that this makes the program a Ponzi scheme — although, by that definition, pretty much everything is a Ponzi scheme. (The value of the stocks in your 401(k) is based entirely on future profits to be paid by future customers.)
But if conservatives want to turn Social Security into a welfare program, and complain that they have to pay for something that they aren’t going to use, it raises all sorts of follow-on questions which, I suspect, they won’t like.
For instance, why is Social Security financed by a flat tax at all? Payroll taxes account for a flat 15.3% of income, including 12.4% for Social Security and the rest of Medicare. These FICA taxes are incredibly burdensome on the lowest paid, including the working poor and those in entry-level jobs. They make no sense, especially if, as a matter of public policy, we want to encourage people off welfare and into work. If Social Security is going to be viewed as a “welfare” program, we should scrap these taxes completely and finance the whole thing through progressive taxation. That will raise taxes on higher earners — but, hey, them’s the breaks.
And if a criticism of Social Security is that many of us higher earners end up paying in more than we get back, why should that criticism stop at Social Security?
Adjusted for inflation, the U.S. government has spent about $40 trillion on the Pentagon during my lifetime, and I have received little, if any, benefit. As a taxpayer, do you think you got “value for money” from the Vietnam War? How about the two invasions of Iraq? The Cold War? What about this adventure in Iran? What’s your return on invested capital?
Constitutionally, we aren’t even supposed to have a standing military. The Second Amendment places national defense securely in the hands of all those citizens who have chosen to arm themselves. A third of Americans have guns; mny of them have small arsenals in their homes. If we want to go to war with Iran or Canada for some reason, we can just draft the NRA. Why am I paying for this?
As I was educated privately and abroad, don’t have children, and don’t drive a car, I don’t feel I am getting much value for money either for all the tax dollars I have to fork out for schools or highways — especially for the highways in all those rural states where I don’t live. Can I get my money back?
It goes further. It is a statement of mathematical fact, beyond any dispute, that the average U.S. state, like the average Social Security beneficiary, gets back “far more” from the federal government than it puts in. The numbers can be found in federal databases and are tracked, for example, by the Rockefeller Institute of Government. They used to be tracked by a conservative think tank in Washington, but it stopped about 20 years ago because the numbers were too embarrassing for … er … conservatives.
The reason? The states which get the best deal are almost all “red,” conservative, rural states. (The main exceptions are Virginia and Maryland, which are home to many federal departments, and New Mexico.) True-red Alaska is one of the biggest welfare states, getting about $13,000 more in federal spending per resident than it pays in taxes. West Virginia, Kentucky, Wyoming, Montana, Arizona, Missouri, Oklahoma — they’re all getting back far more than they put in.
So too does Wisconsin, whose senior U.S. senator, Ron Johnson, is an avid fan of anarcho-capitalist author Ayn Rand. I look to watching Sen. Johnson tell his lazy, deadbeat constituents to get off their rear ends and stop living off Uncle Sam.
And which states are carrying the budget? Step forward: New Jersey, New York, California, Washington, Massachusetts and New Hampshire. These are the only states paying in more than they take out.
If Atlas shrugged, a lot of red states would be in trouble.
Personally, I am fine with this “I want my money back!” argument so long as we take it to its logical conclusion. Sure, taxes would rise and government services would fall right across the South and the West. But, hey, omelets and eggs, amirite?
Yet so many of my conservative friends just want to apply it to a few things, like Social Security, and stop there. I wonder why.
