More Social Security Mendacity

Originally Posted At Forbes.com
By Lawrence A. Hunter
April 9, 2012


Just when I think I’ve said enough about Social Security for a while, a politician or a court mouthpiece of the Washington Establishment pulls me back into the fray by uttering blatant untruths about it.  It has happened again with Robert Samuelson’s grossly misleading column on Social Security in today’s Washington Post.

On April 1 in this space, I wrote that Social Security has become a very bad deal for workers, and the Washington Establishment’s desperate efforts to cut retirement benefits and turn Social Security into a gigantic welfare program by means testing it constitute a bait-and-switch scam of unprecedented proportions, both morally wrong and fiscally impotent to solve the program’s financing problems.

Today (April 9), Robert Samuelson writes in the Washington Post purporting to demonstrate that Social Security already is “a vast welfare program grafted onto the rhetoric and psychology of a contributory pension.”  He ridicules the notion that retirees earned their Social Security by contributing to it each and every payday during their working careers, and he laments the fact that Social Security is not well targeted to those who “need” it. He insists the only prudent thing to do with Social Security is tailor the program to perform more efficiently as redistributive welfare by asking “who among the elderly need benefits? How much? At what age?”  In other words: Raise the retirement age and means test Social Security.

Samuelson mischaracterizes as “welfare” a program that originally was an early-stage, virtually universally mandated Ponzi scheme where the contributions of later participants were used to payoff early entrants.  He further propagates the canard that Social Security already is welfare providing handouts to undeserving retirees by ignoring the fact that the program no longer yields workers windfall, higher-than-market rates of return in exchange for the taxes they paid.  As I demonstrated in my earlier article, workers retiring today can expect to receive a negative return on the exchange.

Samuelson cleverly attempts to mask this reality.  First, he reports how Social Security used to provide workers a huge windfall: “A one-earner couple with average wages retiring at 65 in 1960 [before Medicare was enacted] received lifetime benefits equal to nearly 14 times their payroll taxes.”  True, but that was then, this is now.  As I showed in my April 1 column:

"According to research by C. Eugene Steuerle and Stephanie Rennane of the Urban Institute, Social Security has become a bad deal, and gets worse everyday. A two-earner married couple both retiring in 2011, who both earned the average wage ($43,500 in 2011) throughout their working careers would pay a lifetime-value of Social Security taxes equal to $611,000 and expect to receive a lifetime-value of Social Security benefits equal to only $560,000.  Right out the gate, then, this typical couple pays nine percent more in Social Security taxes than they can hope to recover in Social Security benefits.”

Samuelson uses the true but irrelevant fact that workers retiring in 1960 received a huge windfall to screen his own huge deception about Social Security today. He reports exactly the opposite of the truth about what workers retiring last year can expect to receive from Social Security, implying nothing much has changed since 1960:

“Although new recipients have paid payroll taxes higher and longer than their predecessors, their benefits still exceed taxes paid…A two-earner couple with average wages retiring in 2010 would receive lifetime Social Security and Medicare benefits worth $906,000 compared with taxes of $704,000, estimate Steuerle and Rennane.”

Whoa.  After writing ten preceding paragraphs about Social Security exclusively, with no mention of Medicare and using as a statistical benchmark a time when Medicare didn’t even exist, Samuelson suddenly throws statistical sand in the reader’s eyes by comingling Social Security and Medicare data to portray Social Security as an unearned windfall today.  That’s a statistically significant damned lie, pure and simple.

Even though Medicare was legislated into law by amending the original Social Security Act, Medicare is not Social Security; it is a completely separate program.  Moreover, Samuelson’s column is not about Medicare except when he finds it convenient to slip Medicare data into his argument to mislead readers into believing Social Security is a “vast welfare program” rather than a poorly structured, government-run earned-benefits program.

My April 1 column was not an April Fool’s joke but Samuelson’s column today is a big, slick and clever lie.  It reminds one of the Leprechaun who deceived the man who found his pot of gold under a well-marked bush by running around marking every other bush in the field exactly the same way to confuse and disorient the man when he returned to claim the treasure.

But Samuelson’s deception about Social Security doesn’t end with deceitful statistical manipulations.  He also blames the wronged workers for the crimes of the politicians who victimized them with the government's Ponzi scheme when he characterizes Social Security recipients as welfare queens.

“The trouble,” Samuelson says, “is that [Social Security] contributions weren’t saved. They went to past beneficiaries.”  Well, actually it is worse than that.  Since 1985, the Congress collected more in payroll taxes than it paid out in benefits—to the tune of $2.5 trillion accumulated value last year—which neither went to past beneficiaries nor were saved for future beneficiaries.  Instead, these surplus Social Security revenues were raided by Congress and spent on other government programs to feed the congressional spending addiction. But this theft under the color of law doesn’t lessen workers’ claim on the stolen funds anymore than Jimmy Hoffa’s heist of the Teamsters’ Union pension funds lessened union workers’ claim to their pension benefits; nor does the raid on Social Security somehow mysteriously transform Social Security from an earned-benefits program into a welfare program.

Congress’s appalling handling of Social Security makes Hoffa’s misuse of Teamster pension fund monies pale by comparison.  Just because it’s Congress, however, doesn’t make it any less criminal than what Hoffa and company did.  And, it certainly doesn’t justify compounding the felony by means testing Social Security and stealing workers’ paid-in contributions and cutting their earned Social Security benefits in the name of some higher “national need. . .something the nation does for its collective good” as Samuelson demands.

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