Saul Friedman: “Do the wealthy deserve Social Security benefits?”

Saul Friedman writes on seniors issues for Newsday, and while I don't always agree with his viewpoints his column is worth reading. This week in particular, where he looks at the question of how progressive Social Security should be and whether a means-test for higher income retirees should be considered. Here's part of it:

…Social Security is not an entitlement like welfare that can be cut off if we earn too much. All of us, rich and not so rich, have paid into Social Security. It is a guaranteed defined benefit pension program, which also provides insurance benefits for survivors and minor children of a worker who has died.

More important are the principles of Social Security, which has made it work for more than 70 years - through wars, several recessions, stock market crashes, savings and loan failures and the current economic chaos. Here's political scientist Max Skidmore, in his new book, "Securing America's Future":

"Means-testing Social Security would change its nature and destroy the system. Universal coverage, regardless of need, is one of Social Security's strong points. Millionaires do receive benefits, but they also pay into the system. Their benefits represent a smaller return on what they pay than do the benefits of lower-paid workers."

Just as a company's pension system does not take into account a beneficiary's needs, Skidmore writes, "Building in 'need' as a criterion to qualify for benefits would require the majority of Americans to contribute for a lifetime to a program from which they could draw no benefits."

This question becomes important when we think about Sen. Obama's proposals, which would shift the tax burden significantly to the rich by imposing new taxes above $250,000 and providing a refundable income tax credit to low/middle earners to compensate them for payroll taxes. Likewise, President Bush's plan for "progressive indexing" for benefits would have imposed significant reductions on high earners, modest reductions on middle earners, and no reductions at all on low earners. While some take it for granted that Social Security reform should be highly progressive, and argue only over whether it should be accomplished on the tax or the benefit end, policymakers should bear in mind how that may alter the not-particularly-progressive tax/benefit structure Social Security has had since its founding.