(This column originally appeared in The Hill)
I was recently on a flight from Philadelphia to Hilton Head. Behind me was a couple in their 60s, and I couldn’t help but overhear their conversation with their seatmate.
They were saying how much they loved retirement. They were talking about how the pension and healthcare benefits they were receiving from their former corporate jobs were allowing them to travel and see their grandkids whenever they wanted. And they were both excited to get to their vacation home — their third home! — which they boasted was being paid for entirely by their monthly Social Security checks.
Good for them. They earned it, right?
But come on — is this what Social Security is for? Is this what FDR intended when he established this program back in 1935? To fund a life of leisure and a vacation home for two upper-middle-class retirees?
I am 60 years old and a small-business owner. According to the rules, I will soon be allowed to start collecting Social Security and receiving Medicare benefits. If I were to begin collecting Social Security at the age of 62, my monthly payment would be about $2,500. If I wait until the age of 70, my monthly payment will be $5,000. This doesn’t include the payments my wife will receive.
When we turn 65, both my wife and I will also be eligible for Medicare. That means that our hospital insurance will be free. And although we will pay a separate premium for doctor visits and prescription drugs, the premium will be significantly less — thousands less per year — than we are paying right now.
That’s lots of extra cash coming in just a few years. Should we buy a vacation home in Hilton Head too?
That’s one way to look at it. But there’s also another way: It’s people like us that are causing these entitlement programs to go broke.
The 2024 Social Security Trustees Report projects the combined Old-Age and Survivors Insurance and Disability Insurance trust funds “will be depleted in 2035.” The 2024 Medicare Trustees Report projects its trust fund will run out in 2036.
My wife and I are not the intended recipients of these funds. When Social Security was first established 90 years ago, FDR said its purpose was to provide economic security and protection for vulnerable Americans during times of hardship.
“We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age,” he said.
When Medicare started as part of LBJ’s “Great Society,” its goal was different. It was not intended as charity. It was considered to be an entitlement.
“Nearly every older American will receive hospital care — not as an act of charity, but as the insured right of a senior citizen,” Lyndon Johnson said at the bill’s signing.
But does every senior citizen need this kind of entitlement?
The answer is no. We don’t — at least not this year. About 3.2 percent of current retirees — Americans aged 65 and older — have total retirement account assets exceeding $1 million, based on the 2022 Federal Reserve Survey of Consumer Finances. I suspect that number has risen over the last few years. I don’t think these people need the help either. Maybe some of us will in the future, and if that’s the case then fine — we’ll apply and get it.
And this is how we fix this funding problem. People who don’t need help from the government shouldn’t be automatically getting it. Means testing should be required to qualify for Social Security and Medicare. Rather than just receiving checks once a certain age is reached, recipients should have to prove that they are in need of these funds.
Like any other government aid program, we should be made to apply for the help and submit documentation — bank statements, tax returns, asset disclosures — that demonstrate our need. Otherwise we shouldn’t get it.
But wait — aren’t we owed this money? Didn’t I spend a lifetime paying into Social Security and Medicare through payroll taxes? Isn’t it unfair that many others in my same financial position received this government aid, even though they didn’t need it?
Yeah, it’s unfair. Life is unfair. Sometimes things turn out. Sometimes they don’t. But the reality is that this system of entitlements can’t be sustained much longer.
In the most recent fiscal year, spending on Social Security and Medicare combined amounted to about 36 percent of all federal spending, or almost $2.5 trillion. There are so many others who need government aid that aren’t getting it because programs are being shut down or cut in order to fund these entitlements. We have national defense issues. National debt issues. And meanwhile, these two retirees are using their government checks for a vacation home in Hilton Head.
Can we refuse the money? Give it back? Good luck trying. Maybe I should take that money (and pay the taxes on it) and give it away to a charity. But how many people are going to do that? How many people are instead — like my fellow passengers on that flight — going to spend it on themselves? Too many.
According to a recent study from Georgetown University, as many as one-third of all people (employees and their families) associated with small businesses rely on Medicare, which is funding that small-business owners don’t have to provide. Our older employees who choose to retire do so with the expectation that Social Security will help them pay their bills, otherwise who else will they turn to? Will the necessary funding of these programs result in higher taxes? Cutbacks in other programs that benefit our businesses?
Or will the government merely print more money to meet these obligations and thereby put further inflationary pressure and higher borrowing rates on us? That seems most likely.
And yet any business owner who knows their numbers will agree that fixing the underfunding of Social Security and Medicare is possible. Just go back to the original aims of these programs. Take the benefits away from people who don’t need them and give them to the people who do.
Unpopular? Perhaps. Common sense? Most definitely.
