Social Security Means Testing: A Bird in the Hand is Worth Two in the Bush!

In one of his first initiatives as President, George W. Bush proposed privatizing approximately 3% or less of an individual’s social security contributions to relieve pressure on the social security system in the future. These were to placed into one of three different funds operated by private investment companies but the nature and contents of the funds regulated by the government.

THE DEMOCRATS HOWLED!! People would fritter away the money, they said. They would be coming to the government for reimbursement if they lost the money, they said. Private investment firms would rob them of the contributed funds, they said.

Fast forward to 2010/11! Social Security, the single biggest entitlement for which the government in on the hook, is broke. The government smashed the lock box, stole the money, frittered it away and robbed those who contributed to it. Now the government has to put the money back...and surprise of surprises…it doesn’t have money. And now we are broke. Guess what…the government can’t bail us out. Isn't that what they were supposed to save us from?

Social Security is the single most popular program ever instituted by the government. Originally intended to supplement the retirement income of depression era pensioners who had already lived past life expectancy, everyone contributed to the system, and everyone withdrew from the system based on what one contributed.

But as in all things government, the program grew and expanded, and many people came to view social security as their total retirement, which it never was intended to be. The system was not an annuity type system, but a giant Ponzi scheme, wherein those who contributed to it previously were paid their share out of those who were contributing to it currently. That was fine as long as the baby boomers were working to support those above then. But now the triangle is reversing, making it impossible for those coming up to support that massive demographic bloat on top of them. And the government spent the money anyway…all that is in the system is a bunch of IOU’s that government can’t pay back. And the Democrats were worried about George Bush’s privatization plan? Hello!!!!

Couple that with people living into their nineties, and 75% of those eligible for social security take early retirement at age 62, instead of currently waiting for full benefits at 67. As the insurance commercial says, a bird in the hand is worth two in the bush.

President Obama’s blue ribbon panel made several recommendations to save social security, including raising the retirement age to 70, increasing contributions…and using means testing as a prerequisite to receiving any benefits. Translated, if you are wealthy, notwithstanding how much you paid into it, you ain’t getting’ a dime out.

This proposal is being supported by Republicans and Democrats alike. Here’s the problem. If the government does this, the fundamental nature of the program will change. It will just become another welfare program. They tell you now that it would only effect the uber wealthy of the country. After all, why should Bill Gates or Warren Buffett get a social security check? They obviously don’t need the money.

On the other hand, government welfare programs always experience government creep. First, it will be the very wealthy..then the wealthy…then the upper middle class…then the middle class who will be determined to be too wealthy for Social Security. Why should anyone save for their old age if they know that the social security withholding from their paycheck every other week will be going to someone else who didn't save?

Means testing for Social Security is a dangerous game. The government might just end up with a bunch of totally broke senior citizens who decided better to spend the money while they can enjoy just so long as the government will use somebody else’s money to support them. After all, a bird in the hand is worth two in the bush.