Thursday, May 16, 2013
Means test Social Security right now, based on accumulated wealth as well as income, says a major investment company
Jay Roumell, founder of his own investment management fund, has a shocking proposal on p. A17 of the Washington Post, Thursday, May 16, 2013. The rich should give up their Social Security benefits NOW. And the criteria should be accumulated wealth more than income.
The title of the printed article is “A balance-sheet fix: Sacrifice by the wealthiest can save Social Security”. Online, the title is even more blunt: “The rich can save Social Security, by giving up their checks”. The link is here. The site for Roumell’s company is here.
Of course, we can come back with the usual Ayn Rand questions. Who decides who is rich? Where are the cutoffs? Etc. Roumell even admits that can be a problem.
The idea of using accumulated – especially inherited – wealth for means testing may not be that new or unachievable. There are many measures of accumulated wealth – starting with estate or trust tax returns. The far left, four decades ago, used to rail against inherited wealth and wanted to eliminate it.
Roumell dismisses arguments that current recipients paid into the system. First, he says, they should be grateful they can make a gift. The he makes existential points that are irrelevant to the questions about the nature of FICA “taxes”.
Two points come to mind. The Supreme Court, as noted on Jan 2, had ruled in Flemming v. Nestor that there is no “property right” to the value of FGICS contributions. On the other hand, the Social Security Trust fund is effectively a bond holder on the Treasury (this point became clear in a New York Times debate column on the debt ceiling in January 2013), and like China, might have a legally enforceable claim preference in case of debt ceiling issues. That point became controversial a few days ago when Congress (the GOP) did propose legislation ratifying the bond holders claims on the Treasury, an idea that caused an outcry.
I have a big problem if someone shows up at the door and demands a claim that can expropriate from my life. So I have a problem with the unconditional “gift” idea in his arguments.
But I think Congress should pass legislation addressing Flemming – conferring ownership rights to the actuarial value of FICA contributions (including legal spouse’s) based on life insurance industry standard calculations (for annuities). And I think bond holders do come first on the Treasury.
Furthermore, I don’t see why we shouldn’t continue to consider gradual increase in retirement age, increase in the FICA ceiling, and COLA (chained CPI) formulas to reduce the burden.
When all these things are done, it may be appropriate to look at means testing, and that could look at accumulated and inherited wealth as well as income – for benefits above the actuarial value justification. But really, this discussion belongs more in the area of Medicare – where Medicare taxes on wages pay for only a fraction of benefits used today. That fits into yesterday’s discussion of how we use medical procedures.
What’s important to me is the integrity of the system. Most people understood FICA taxes as supporting their own income later in life, as their money, even if the Supreme Court questions it. Congress should fix that (most of all, the GOP). Fix the accounting at an individual beneficiary level before you get into "a pervert's guide to ideology" (to quote a controversial film). If the system if live in has no integrity, than I have no purpose myself at this point in my life.
Sam Seder discusses means testing for Medicare above, by increasing premiums.
Wikipedia link for Saverna Park MD picture (there Sunday).