Entitlement cuts and social security

Published 7:00 am Friday, February 9, 2018

By Ira Nirenberg

Much to the consternation of many conservative politicians we no longer live in the 19th century. Once upon a time there were the notions of rugged individualism and the self-made man. A 19th century poster child example was the pioneer family.

The fearless family eked out an existence while battling acts of God and hostile Native Americans.

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No government handouts or entitlement programs for those hardy souls.

Really? Well, I’ve got news. A total of 270 million acres was given free of charge to homesteading pioneer families. Each homestead was 160 acres. That sounds like a pretty nice government handout.

At the time of the first Homestead giveaways in the 1860s about 80 percent of the US population was rural. By the 1930s that number had almost halved. Eleanor Roosevelt had been a proponent of subsistence homesteads (a component of the New Deal) where the urban poor might grow enough to feed themselves.

The program lasted a bit over three years until it was understood that sending urbanites back to the land was not the best remedy for lost jobs and extinct saving accounts.    

One can argue that the creation of the Social Security system in 1935 was an urban version of the Homestead Act. Only this time, it wasn’t free.

The Social Security tax in 1937 was a modest 1 percent. The rate today is 6.2 percent. There are two major reasons for this increase. A person who was born in 1900, at age 65, could expect, on average, five years of Social Security benefits before leaving this life. Additionally, there were four workers paying into the system for each person receiving benefits. Today a person retiring at age 65 can expect 20 years of benefits, yet there are only 2.8 workers paying into the system. So, longer life and fewer workers are the primary reasons we pay a higher Social Security tax today.

Currently, the Social Security fund is flush with $2.8 trillion. As opposed to so many other government programs, Social Security has always paid for itself. It is, however, estimated that the fund will run dry by 2033. The requirement to keep the system solvent another 50 to 75 years is an increase from the current 6.2 percent tax to approximately 9 percent.

It seems a prudent idea to pay the extra money.

Republican law makers are now ready to tackle “entitlement reform” to make up for the $1 trillion their tax bill will remove from future government revenue, primarily due to the permanent tax cuts given to corporations (your tax cuts are temporary). You might do well to remember one very important fact when entitlement reform arguments are made: Social Security does not add anything to the federal debt.  Cutting Social Security benefits won’t mean fewer taxes for you—just less money.

And if Republicans tell you they have no intention of touching Social Security, it’s kind of like candy producers promising not to raise their prices. They keep their word, but you get fewer candies for the same money.