was the subject line of an email I received from a reader:
Last week you wrote a Corner post on means-testing Social Security. This is what you wrote in your second paragraph:
Means-testing of entitlements, meanwhile, comes in many flavors. Some forms—such as a cutoff point based on income in retirement after which no benefits would be paid—would indeed reduce the incentive to save. Most actual proposals would cut benefit levels based on lifetime earnings, which increases the incentive to save as high earners make up for lower benefits. If we want to balance the books, the alternative is to tax high earners more in order to keep their benefits from being cut. That doesn’t exactly reward thrift, or make sense in other terms.
My question is, what is the difference between means testing my social security and means testing my bank account? Soc. Security is just my forced savings after all. If the government can decide I’m too rich to keep my Soc. Sec. savings what’s the difference between those savings and the savings in my bank account?
So my first problem with means testing is that to advocate it it seems you must make a highly unprincipled leap–yes the government forced me to save for my retirement with the promise that I would eventually get it all back (with meager interest) but now the government has just decided to keep it, giving back only however much of my money they think I deserve back.
The above is bad enough, but how much do means-testers think I should get to keep? I hope to save about $3 million before retirement. You need about $1 million in the bank for every $30,000 you want to live off of annually in retirement because you will need safe haven investments in retirement. So my $3M should yield about $90,000 a year, comparable to a mid-range government pension. I don’t know what my Social Security check will be, but let’s say I’ll get $30k/yr from Social Security. If that’s taken away I need to save another $1 million to make up the difference. If I save an extra $40k/yr on top of what I’m already saving (which I can’t do), I’ll need to work an extra 25 years to make up the loss of social security.
But what about the $3 million I save–why not just spend that someone might ask? First off, I don’t know when I’ll die, so I can’t spend my savings. Second, in addition to needing the interest off that money to live, I also plan to give the $3 million to my church when I die. Means-testing Republicans might say sure I worked all my life to give that money to my church and ideally that’s where it should go, but that’s no longer politically feasible. If I want the Republican Party to survive then I have to put the government before the church, which as you know means leaving the church.
Perhaps I should just give more of that money to the church now so that I qualify to get my forced Soc. Sec. savings back. But as you pointed out, most means-testing proposals would cut benefit levels based on lifetime earnings, so if I give that money to the church now I still won’t qualify for my social security savings because the government means-testers decided that it was wrong for me to give that money to the church instead of keeping it for myself. Either way, when it comes to my money, the government is telling me I have to leave the church.
My second problem is when you write that we’ll need to do some kinds of means testing “if we want to balance the books.” If Kevin Williamson’s numbers are right, we need to balance the books to the tune of $106 trillion in new revenue to fix Social Security and Medicare. We aren’t going to balance the books because Social Security is an unsustainable Ponzi scheme that never should have existed in the first place. Why in the world do “we want to balance the books,” when 1) it’s not possible, and 2) it would necessitate an immeasurable loss of freedom to even try.
Perhaps it sounds like I’m contradicting myself in saying I don’t want my money means-tested, but I believe Social Security is unsustainable and therefore I won’t get my money anyway. I don’t expect to ever get my money, but it’d be worth losing it if government Ponzi schemes collapsed in the process, and if my party didn’t succumb to putting the government ahead of church and family. The worst case scenario is the loss of freedom that would come with balancing the books.
All this said I completely understand and buy the political argument that the party that seeks to end social security is doomed, and if I think Republican means-testing is bad, wait until I get a load of Democrat means testing. But that kind of realpolitik brings to mind the old Malcolm Wallop line that if the Democrats put up a plan to burn down the U.S. Capitol, the Republicans would counter with a plans to burn it down in phases over 5 years. The political reality is that ending social security is off the table. In that case I vote for collapse.
Here’s another way of looking at it. Social Security pays out benefits according to a complicated formula based in part on recipients’ lifetime earnings. I’m proposing adjusting that formula so that the wages you make in the future “earn” you fewer Social Security benefits. You don’t have a property right to any Social Security payments: That’s the law. Perhaps it could be said that a 65-year-old has a moral right to the payments that have been promised to him. But a 21-year-old in his first day at work doesn’t even have a moral right to benefits he hasn’t earned yet. Every plan to adjust the benefits formula recognizes this distinction. (That is, it lowers the rate at which benefits are earned going forward.)
The alternatives to reducing the future benefits of middle-income and high-income workers are 1) to tax them more heavily, which seems if anything more vulnerable to my correspondent’s objections or 2) let the system “collapse,” i.e., not pay the benefits and thus also incur many of those objections. And while there are a lot of problems with Social Security, it is not “unsustainable” in the sense that my reader suggests: Cut the growth of future benefits and it can be sustained for decades to come.