But I am a little surprised at your continued focus upon our “social security system” as a generally unearned and perhaps undeserved benefit taken from the young and given to the old. I believe there is little argument that the “healthcare” side of the equation has ballooned to an alarming degree -- in concert with all of the other costs of healthcare in the country. As long as we refuse to deal with the questions of national control of healthcare, we will not see a solution in this component.

But I want to remove the medical cost problems for a minute. Let’s take a closer look at the dollar components of the basic “generational wealth transfer” (I will use the only decent figures I have access to -- the 2007 federal “Trustee Report” covering the system). Roughly half of the $1 trillion spent in the last couple of years, or $500 billion, was for direct income maintenance payments to those over 62. With about 42 million recipients, that comes to about $12,000 per retiree -- this averaging is misleading because many individuals do not receive anywhere near the approximately $20,000 maximum, others do; and some elderly couples each qualify and receive payments, thus raising their effective household income, and so forth.

For the sake of argument, I am going to assume that 25% of recipients get the maximum payment, representing about half ($250 billion) of the total outlay. This leaves half for the remaining 75% of all recipients. These 30+ million souls thus receive on average something on the order of $8,000 a year in “wealth transfer”. Since lower payments signify much lower lifetime earnings, I will raise the distinct possibility that most members of this larger group are not living extravagantly on their basic Social Security income. Let’s assume in fact that this part of the “wealth transfer” you discuss is providing a minimum safety net against poverty and misery. As it was intended to do. And let us not forget that these lower income recipients, though not taxed on their SS benefit, still pay rising premiums for their Medicare coverage, which is tied to an economic environment in which they no longer participate.

Now we can turn to the other half of the basic benefit recipients -- in my model about 12 million persons. Let’s pretend that half of all these are less than flush with liquid assets -- whether it is investments, owned property, etc. Leave their benefit payments alone. Let’s then cut by 50% payments to the other half that is assumed to be well off, and receiving “unneeded” financial benefit. Well, hm, that might give us a savings of $60 billion. Given that SS payments are already taxed to higher income retirees, it might well be less. I will allow that as boomers retire, one can assume that the “well off” portion of all retirees should increase, thus the savings through means testing might be considerably larger. Then again, one wonders what the administrative costs of all this means testing would be. A frightening vision of IRS working closely with the SSA -- perhaps even the VA (!!!) comes to mind. I suppose that if an effective system of screening future recipients for higher income were devised, it might support a general reduction in the program costs. IF the boomer generation enters retirement generally well off.

How does such a “reform” of the basic entitlement stack up against the projected needs of other components of the system? Not too well. Some $450 billion is spent on the medical components through Medicare (I am not including the $95 billion “disability” outlay here, since this again is presumably justified supplemental income). It is projected to rise at least 10% a year through the next 3 decades, or more than $45 billion annually. So far, “reform” of the healthcare component of the system includes rising premiums for the beneficiaries, to partially offset the costs of boomers retiring and seeking care. So far, the basic income maintenance payment is not indexed to cover these rising charges.

(I think we all know now that the many questions revolving around national healthcare are so complex that even daring to mention future prospects gives one serious pause, and eventually, migraine and heartburn).

May I suggest that if one fairly looks at the original Social Security “system” as a reasonably humane income maintenance program for the less well off, then suggesting reductions in “unearned or unneeded” payments to retirees reduces the ability of the program to meet its original goals. The fact that many recipients of SSA income payments receive back in a short period of retirement the total of what they and employers paid into the program is simply a fact. The balance of income aspects of the payments were conceived in a different era. And they supported those who came before them (the parents of many reading this article).

I believe it is more than apparent that the healthcare component (Medicare, drug subsidies, etc.) is the real elephant in the room. Here, there is more than ample room for adjustments of various types, including perhaps means testing and other checks on the real need for care. At the same time, most observers of the medical scene recognize the need to rationalize the present system of compensation and oversight for providers and hospitals and clinics. Only in this area does it seem we can somehow manage the potential tax burden of supporting our aged and the impacts on emerging taxpayers.

And yes, Charles, as you know I am now 69 and a newbie member of the “aged” population. I get the maximum payment. I could live without it -- some things would have to be adjusted, such as helping my young son with rather stiff expenses. But I would support whatever reforms seem fair.


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