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Last week’s column on how Washington’s latest jobs plan could further impact our already-ailing Social Security program got a lot of great comments from readers.
For example, here’s what Tom Brown wrote:
“To be fair to the Obama administration, I found on the White House website some fine print that claims there will be no impact on Social Security reserves because the General Fund will make a contribution to make up for the money being temporarily diverted. But where are they going to find $240 billion?”
Yes, Tom. You’re right. When he announced this initiative, President Obama said Washington would have to ensure that it had no material impact on the nation’s finances. In other words, that we would find other places to make up the difference.
But as you note, the devil is in the details. And while Obama laid out his new plan to help pay for these efforts yesterday, I don’t have much confidence that lawmakers will be able to reach any type of consensus on the matter given their recent brinksmanship.
Meanwhile, as Floyd Fuller wrote in to remind me,
“For the past two years we have not gotten a COL increase in our benefits. Up until then (exact date unknown) we were getting about a 3 percent annual increase in benefits. All the while our cost of living has gone up, interest income rates have gone down and the stock market has had big swings that affect our retirement accounts. Some over 65 take jobs, or if unable, live with it.”
You’re right, Floyd. And this is something I have written about extensively in the past.
Let me start by saying that I don’t believe the way in which we currently calculate cost-of-living increases (via Consumer Price Index data) accurately reflects inflation on Main Street … especially when it comes to seniors who spend most of their money on food, energy and healthcare.
Heck, my family’s personal health insurance costs rose 9 percent last year!
Meanwhile, I think switching to a chained CPI measure — as some politicians have recently been suggesting — would create an even WIDER gap between your COLAs and your real-world life.
But what’s crazier is that there are plenty of other little aspects of Social Security that seem unfair, and that many folks don’t even know about.
Here are three of them …
First, as I briefly mentioned last week, the Amish are able to opt out of the program entirely!
The short version of the story is that Congress created a special exemption for this particular religion because its faithful don’t believe in insurance programs. (For the full story, see this article.)
What gets me is that such an exemption was made for just ONE particular belief system.
I mean, what if I belong to some other little-known religion that also doesn’t believe in the program? Why am I not entitled to the same exemption? Simply because we didn’t lobby hard enough? Or because we didn’t exist 60 years ago?
Or why is it simply a religious exemption and not a PHILOSOPHICAL one open to all American citizens?
No, this is not the kind of thing that makes or breaks the system. But it does reek of unfairness … and when looked at logically, it makes absolutely no sense.
Please note that one common fallacy is that Congress doesn’t participate in the program.
It is true that they used to have their own retirement system (along with all other federal civil servants). However, since 1983 they have contributed just like most other American citizens — though long-standing members may also still have legacy enrollment in the original plan, too.
Besides the Amish, the only other groups that may not participate at this point are select groups of state and local municipal workers. (See this article for more on that.)
Second, you can collect unemployment AND Social Security at the same time!
Yes, really. According to the Social Security Administration’s own website:
“Unemployment insurance benefits are not counted under the Social Security annual earnings test and therefore do not affect your receipt of Social Security benefits. However, the unemployment benefit amount of an individual may be reduced by the receipt of a pension or other retirement income, including Social Security and Railroad Retirement benefits.
“You should contact your state unemployment office for information on how your state applies the reduction.”
Am I the only person who finds this absurd? Social Security was essentially designed to provide a baseline income for folks who were retired.
I realize that someone can also be collecting Social Security while they continue to work. But the difference is that their income would likely reduce their benefit check during that time period.
And either way, the idea that someone can be both “unemployed” and “retired” seems kind of silly … especially when you consider how long unemployment benefits can now be extended!
Third, you may not realize just how much the program — and its tax rates — have expanded over the years!
Despite this year’s temporary reduction — and the additional cuts being proposed for 2012 — Social Security tax rates have only gone up, up, and up over the years.
In fact, when the program debuted in 1937, the initial tax rate was 2 percent — 1 percent each from employee and employer.
Today — and again, temporary reductions aside — it’s a shared burden of 15.3 percent! And even if we back out the Medicare component, it’s a combined 12.4 percent … more than SIX TIMES the amount initially contributed 74 years ago.
Why?
Partly because of changing demographics and the pay-as-you-go nature of the program. But also because of massive increases in the types of people covered under the Social Security program — including many categories of folks who haven’t actually contributed any money of their own.
Hey, look, I’m not pointing these things out to be negative or to scare you.
Instead, I simply believe all Americans need to know the truth, the whole truth, and nothing but the truth when it comes to our nation’s finances and programs. Because only by understanding the way things currently work — warts and all — can we have any real discussion about how to make real progress going forward.
Best wishes,
Nilus
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Good article Nilus. Who/What are the categories of people who qualify for, but have not paid in to the Social Security System? Thanks. Mike.
Hi, Mike. One example: People who receive spousal benefits but haven’t worked at all, or haven’t earned enough credits to qualify on their own.
Another example: Children who receive dependent benefits, most of whom haven’t even reached legal working age.
Regardless of anyone’s personal opinion on whether these categories of people SHOULD receive benefits, the point remains that it further adds to the system’s financial strain.
Dear Nilus
A few tough things to say.
If you see someone drowning near your lifeboat every human on earth would go to help. What do you do when the lifeboat is sinking and the people in it face possible drowning. The simple answer is that you all pull together as best you can. Now this is not happening at the moment. It seems as though everyone is trying to pull the boat under and those that can safely get off are abandoning it. And so goes democracy and our way of life.
Nilius: I have seen claims from an “accountant” that he can prove that what the average worker contributed to SS over a 40 or 50 year carreer could have been contributed to a conservative investment fund and later used partially to purchase annuities and exceed the benefits of SS by a large differential. Have you ever tried to confirm that sort of claim?
Dear Nilus,
I’m 67 years old and do not receive SS benefits because I lack 7 credits (40 required). I did not sign up for Medicare at age 65 because I would have had to pay a premium amount I thought unreasonable. And, supplemental insurance would have cost an additional exhorbitant amount, I thought.
Now, I’m concerned just about a major medical situation in the future. I’ve contacted every company imaginable and learned that no one provides plans for people over 65. Any thoughts?