Smash the Gerontocracy!

For Throwback Wednesday, AARP's army of pickpockets

Okay, technically this one isn’t a column.

From June 2020 to September 2022 I was associated with a New Mexico-based radio station. In addition to on-air work, I did a lot of writing. Many of my pieces were longer than a column, and nearly all focused on policy issues directly impacting the Land of Enchantment.

Some, though, had more of a national perspective, and since NDAI’s subscribers can be found from Texas to New York, from South Carolina to Arizona, I will occasionally drop a radio-origin piece in for Throwback Wednesday.

I thought this screed, from January 2022, would dovetail nicely with Monday’s rather dreary column.

Enjoy!

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Tax cuts are almost always a good idea.

But when revenue-rapacious pols reject a targeted tax break that plays Identity Politics and rewards recipients of a welfare program that is bankrupting the nation, it’s a cause for celebration.

Earlier this week, a House committee nixed HB 48, a bill to exempt Social Security from New Mexico’s income tax, and that’s a good thing. Picking winners and losers in the types of income New Mexicans earn and/or receive is little more than odious vote-buying. But bestowing special status on Social Security is particularly egregious, because it perpetuates the sophistry that undergirds the popularity of “the largest program in the federal budget.”

Senior citizens, whether they live in New Mexico or New Jersey, are long overdue for a thorough debunking of their treasured Social Security myths.

CLAIM: Social Security is retirement income — no different than a pension or 401(k) plan or annuity.

REALITY: No, it’s not. Social Security is a government program. As such, it’s whatever politicians want it to be. That’s not the opinion of a coldhearted libertarian, it’s the determination of the U.S. Supreme Court. The Cato Institute’s Michael Tanner explained:

Many people believe that Social Security is an “earned right.” That is, they think that because they have paid Social Security taxes, they are entitled to receive Social Security benefits. … However, in the 1960 case of Fleming v. Nestor, the U.S. Supreme Court ruled that workers have no legally binding contractual rights to their Social Security benefits, and that those benefits can be cut or even eliminated at any time.

Ephram Nestor was a Bulgarian immigrant who came to the United States in 1918 and paid Social Security taxes from 1936, the year the system began operating, until he retired in 1955. A year after he retired, Nestor was deported for having been a member of the Communist Party in the 1930s. In 1954 Congress had passed a law saying that any person deported from the United States should lose his Social Security benefits. Accordingly, Nestor's $55.60 per month Social Security checks were stopped. Nestor sued, claiming that because he had paid Social Security taxes, he had a right to Social Security benefits.

The Supreme Court disagreed, saying [that to force] “upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands.” The Court went on to say, “It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.”

The Court’s decision was not surprising. In an earlier case, Helvering v. Davis (1937), the Court had ruled that Social Security was not a contributory insurance program, saying, “The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.”

In other words, Social Security is not an insurance program at all. It is simply a payroll tax on one side and a welfare program on the other. Your Social Security benefits are always subject to the whim of 535 politicians in Washington.

No senior citizen likes to hear that the monthly check he or she receives from Washington is “welfare,” but denial makes for poor policy analysis. As columnist Robert J. Samuelson put it, since Social Security “taxes one group to support another group” and Congress has the authority to “alter benefits, reflecting changing needs, economic conditions and politics,” the “w” word is apt.

CLAIM: There’s no way it’s welfare — how can it be, since we get back only what we paid in?

REALITY: Not even close. The Urban Institute regularly conducts an inflation-adjusted analysis of “the lifetime benefits earned and the lifetime taxes paid by hypothetical workers participating in Social Security.” Here’s how different kinds of individuals and married couples who turned 65 in 2010 fare:

• Single male with low earnings: $125,000 in taxes paid, $188,000 in benefits

• Single female with average earnings: $278,000 in taxes paid, $345,000 in benefits

• Single female with high earnings: $430,000 in taxes paid, $456,000 in benefits

• Married one-earner couple with low earnings: $125,000 in taxes paid, $320,000 in benefits

• Married couple with two average earners: $556,000 in taxes paid, $655,000 in benefits

• Married couple with one high earner and one average earner: $708,000 in taxes paid, $785,000 in benefits

Throw in Medicare (which is far more generous than Social Security), Medicaid (which covers a huge portion of U.S. nursing-home expenses), and a rapidly aging population, and it’s easy to see why the national debt is $29.9 trillion. According to the latest report from the program’s “trustees,” since goodies are being paid out at a faster clip than revenue is coming in, Social Security “will have to cut benefits by 2034 if Congress does nothing to address the … long-term funding shortfall.” Further into the future, the numbers get scarier. John Goodman and Laurence Kotlikoff discovered that the program’s total unfunded liability is $59.8 trillion, “over 2.5 times the size of the U.S. economy.”

Janice Rogers Brown, at one point on George W. Bush’s short list for the Supreme Court, once lamented that her “grandparents’ generation thought being on the government dole was disgraceful, a blight on the family’s honor,” but those days are over, and now, “senior citizens blithely cannibalize their grandchildren because they have a right to get as much ‘free’ stuff as the political system will permit them to extract.” Take a clear-eyed look at the math, and it’s difficult to disagree with her assessment.

CLAIM: America’s senior citizens must live very modestly, and too many fall below the poverty line.

REALITY: However strong the image of grannies eating dog food and freezing in their tiny apartments may be to some, it’s a grotesque misrepresentation of how older Americans actually live in 2022.

Gary Burtless, of the left-leaning Brookings Institution, explored the long-term trend:

In 1959, about 35 percent of the population past 65 was classified as poor. This was by far the highest poverty rate of any age group. Thanks to liberalized Social Security benefits, broader participation in workplace retirement plans, and higher savings, the old-age poverty rate fell to 15 percent in 1979 and to just 9.2 percent in 2017. Income poverty in the elderly population is now lower than it is among nonaged adults. It is substantially lower than the poverty rate among children.

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Since 1979, both the median and average incomes of households headed by someone past 65 have climbed faster than the incomes of households headed by people in younger age groups. The difference is not small. Census statistics show that the average real income of elderly households climbed 82 percent between 1979 and 2017 while the average income of households headed by someone younger than 65 increased just 37 percent.

For the elderly who are low-income, in addition to assistance from family, friends, and charities, all manner of money-saving perks are available. SeniorLiving.org recently compiled “over 100 … discounts to cash in on,” covering retail, restaurants, leisure, transportation, telecommunications, and healthcare.

And one expense no retirees need worry about is the payroll tax. In contrast, the levy is so cruel to workers, “about two-thirds of households pay more in payroll taxes than income taxes.”

For those willing to face the truth about America’s entitlement catastrophe, it’s quite clear that immediate, broad, and substantial cuts must be made to the programs that benefit senior citizens. But political careerists care nothing about the nation’s fiscal future. Their focus is on the next election, and plenty of voters prefer “free” stuff to the well-being of their children, grandchildren, and great-grandchildren.

There’s no end in sight to the crisis. While HB 48 failed to make it out of committee, four other bills lightening the taxation of Social Security await action in the Roundhouse. Greedy geezers have their boot on the neck of America’s finances. Don’t expect mercy anytime soon.