Why Not Means Testing
Bob McGrew wants to know
why no one wants to turn Social Security into a means-tested program—by reducing benefits for the well-to-do and shoring up benefits for the poor. Huh, well, the semi-disingenuous answer from this liberal is that, however much financial sense means-testing might make, it would kill off a lot of political support for the program. This is because, I suspect, that in the vague haze that is the American Collective Outlook, people view Social Security as an earned right rather than as a dirty government redistribution program.
This is largely, I think because the system rewards higher income (or "Rewards work!" if you prefer) and has a regressive tax base—much like all of those widely popular social programs in Europe. Everyone's part of the system, so everyone loves it. An important side-story comes when we remember that attitudes towards welfare in American often have an ugly racial component—the president may be ever-so-thrilled with early-dying black people now
, but we all know how this game is played, and if Social Security was a means-tested system-for-the-poor, we'd be hearing about ghettos rife with "Social Security queens" blowing their checks on pedicures and a three-car garage. I'll pass, thanks.
There are all sorts of more subtle arguments against means-testing, but I won't pretend they're anything but secondary. For one, if the system gave you less in benefits the more savings you had upon retirement, you'd probably be inclined to spend a chunk of that savings right before you hit 67. (I understand Britain has this problem
.) Employers, too, might start seeing the company pension plan as a zero-sum game—i.e. "Why should we chip in all these extra dollars for your retirement when all we're doing is reducing your Social Security check"—and hence reduce their own contributions. You'd also probably see fewer people buying annuities before they retire (since doing so would raise their income and hence lower their Social Security benefit), and instead just keeping the money in a bank and possibly blowing it all before they die. I imagine that when it all shakes out, people are saving less and probably end up poorer, but that's a rough guess.