Perverting the Purpose and Meaning
This meme is making the rounds.
It gets some things right. The word insurance is part of the Federal Insurance Contributions Act. That's the law under which we workers pay 6.2% of our wages up to an annual limit. For 2016 the limit remains at $118,500. It is not welfare. It is not a gift. It was created to help protect the elderly against old age and need.
But it isn't your retirement account. You have no property rights to Social Security benefits through FICA. The U. S. Supreme Court made that determination back in 1960 in the case Flemming v Nestor. Therefore, nothing was stolen from any individual because Congress can unilaterally change and/or eliminate your benefits.
Since Congress continues to pay out 100% of the authorized schedule of benefits and there is nothing to indicate that this will change anytime in the future; nothing has been lost. Yet. People were talking about when Social Security and Medicare will go broke back in the late 1970s. In 1981 then Senator Bob Dole mentioned this in his remarks about the challenges that incoming President Ronald Reagan would face regarding the budget; just before Reagan took the oath of office. He mentioned that at that point 76% of the federal budget was already allocated to entitlement spending.
Now calling a program an entitlement is not a negative thing. The people receiving Social Security retirement benefits earned them. They are indeed entitled to those benefits. So are those who receive Social Security Disability Income, although concerns about the rise in fraudulent claims are valid ones based on current trends.
However, it's important to remember that Social Security was not designed to be a full retirement benefit for anyone. FDR made this clear in his comments on signing the Social Security Act.
"This social security measure gives at least some protection to thirty millions of our citizens who will reap direct benefits through unemployment compensation, through old-age pensions and through increased services for the protection of children and the prevention of ill health.
We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.
This law, too, represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness."
The purpose of the Social Security Act was not to replace proper retirement planning and savings. It was designed to partially protect the elderly. Nothing more.
That purpose is being perverted today. Why? Consider the following men and women:
Warren Buffett
Jeff Bezos
Charles Koch
David Koch
Michael Bloomberg
Jim Walton
Alice Walton
S. Robson Walton
Christy Walton
Sheldon Adelson
George Soros
Forrest Mars, Jr.
Phil Knight
Jacqueline Mars
John Mars
Carl Icahn
Anne Cox Chambers
Ray Dalio
Donald Bren
James Simons
Thomas Peterffy
Ronald Perelman
Rupert Murdoch
Stephen Schwarzman
Philip Anschutz
Charles Butt
Donald Newhouse
Samuel Newhouse, Jr.
Jack Taylor
John Menard, Jr.
Jim Kennedy
So what do all of these people have in common? They are all part of the Forbes 400 list of wealthiest Americans. In fact, they all rank in the top 50 on that list. The other thing they all have in common is that they are 65 or older and eligible for Social Security retirement benefits.
That's a perversion of the purpose of the program. They have no need in old age. Should their fortunes take a turn for the worse, they could then qualify for such benefits, based on need. That's the key to this. Social Security retirement benefits should be based on need.
The maximum benefit one can receive from Social Security is $2,788 if the person retires at their full retirement age. They can receive a reduced benefit if they begin receiving payments at age 62. Or they can get $3,576 if they don't start drawing benefits until their 70th birthday.
Now most billionaires don't pay the highest federal income tax rate of 39.6%. But lets pretend they do. Up to 85% of one's Social Security benefits can become taxable income if their other income is high enough. So if Warren Buffett is paying income tax at 39.6% on his other income and he is receiving an annual benefit of $42,912 from Social Security, his tax bill on this amount will be that amount multiplied by 85% and then the product of that equation will be multiplied by 39.6% and the result is a tax liability of $14,444. This means that the second wealthiest person in the United States will take home $28,468 in after-tax Social Security benefits. Where in the world does the situation described by FDR apply to such a person? Or to someone who is earning $250,000 or more after reaching full retirement age? Social Security was not designed as a way to maintain or improve the standard of living of the well-off in retirement. It was designed to provide assistance to those in need.
I'm fine with not means-testing Medicare. Healthcare costs are atrociously high and hit senior citizens harder on average than most people. But it seems clear to me that we need to begin means-testing of Social Security retirement benefits if we are ever to regain a level of fiscal responsibility at the federal level.
It gets some things right. The word insurance is part of the Federal Insurance Contributions Act. That's the law under which we workers pay 6.2% of our wages up to an annual limit. For 2016 the limit remains at $118,500. It is not welfare. It is not a gift. It was created to help protect the elderly against old age and need.
But it isn't your retirement account. You have no property rights to Social Security benefits through FICA. The U. S. Supreme Court made that determination back in 1960 in the case Flemming v Nestor. Therefore, nothing was stolen from any individual because Congress can unilaterally change and/or eliminate your benefits.
Since Congress continues to pay out 100% of the authorized schedule of benefits and there is nothing to indicate that this will change anytime in the future; nothing has been lost. Yet. People were talking about when Social Security and Medicare will go broke back in the late 1970s. In 1981 then Senator Bob Dole mentioned this in his remarks about the challenges that incoming President Ronald Reagan would face regarding the budget; just before Reagan took the oath of office. He mentioned that at that point 76% of the federal budget was already allocated to entitlement spending.
Now calling a program an entitlement is not a negative thing. The people receiving Social Security retirement benefits earned them. They are indeed entitled to those benefits. So are those who receive Social Security Disability Income, although concerns about the rise in fraudulent claims are valid ones based on current trends.
However, it's important to remember that Social Security was not designed to be a full retirement benefit for anyone. FDR made this clear in his comments on signing the Social Security Act.
"This social security measure gives at least some protection to thirty millions of our citizens who will reap direct benefits through unemployment compensation, through old-age pensions and through increased services for the protection of children and the prevention of ill health.
We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.
This law, too, represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness."
The purpose of the Social Security Act was not to replace proper retirement planning and savings. It was designed to partially protect the elderly. Nothing more.
That purpose is being perverted today. Why? Consider the following men and women:
Warren Buffett
Jeff Bezos
Charles Koch
David Koch
Michael Bloomberg
Jim Walton
Alice Walton
S. Robson Walton
Christy Walton
Sheldon Adelson
George Soros
Forrest Mars, Jr.
Phil Knight
Jacqueline Mars
John Mars
Carl Icahn
Anne Cox Chambers
Ray Dalio
Donald Bren
James Simons
Thomas Peterffy
Ronald Perelman
Rupert Murdoch
Stephen Schwarzman
Philip Anschutz
Charles Butt
Donald Newhouse
Samuel Newhouse, Jr.
Jack Taylor
John Menard, Jr.
Jim Kennedy
So what do all of these people have in common? They are all part of the Forbes 400 list of wealthiest Americans. In fact, they all rank in the top 50 on that list. The other thing they all have in common is that they are 65 or older and eligible for Social Security retirement benefits.
That's a perversion of the purpose of the program. They have no need in old age. Should their fortunes take a turn for the worse, they could then qualify for such benefits, based on need. That's the key to this. Social Security retirement benefits should be based on need.
The maximum benefit one can receive from Social Security is $2,788 if the person retires at their full retirement age. They can receive a reduced benefit if they begin receiving payments at age 62. Or they can get $3,576 if they don't start drawing benefits until their 70th birthday.
Now most billionaires don't pay the highest federal income tax rate of 39.6%. But lets pretend they do. Up to 85% of one's Social Security benefits can become taxable income if their other income is high enough. So if Warren Buffett is paying income tax at 39.6% on his other income and he is receiving an annual benefit of $42,912 from Social Security, his tax bill on this amount will be that amount multiplied by 85% and then the product of that equation will be multiplied by 39.6% and the result is a tax liability of $14,444. This means that the second wealthiest person in the United States will take home $28,468 in after-tax Social Security benefits. Where in the world does the situation described by FDR apply to such a person? Or to someone who is earning $250,000 or more after reaching full retirement age? Social Security was not designed as a way to maintain or improve the standard of living of the well-off in retirement. It was designed to provide assistance to those in need.
I'm fine with not means-testing Medicare. Healthcare costs are atrociously high and hit senior citizens harder on average than most people. But it seems clear to me that we need to begin means-testing of Social Security retirement benefits if we are ever to regain a level of fiscal responsibility at the federal level.
posted by me at 7:21 PM
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