“Come to think of it, thanks! But….” | Real Life

Now, in this designated season for being thankful, here’s a “Thank-you” that I’ll bet we haven’t thought of. Believe it: Our Social Security system!

Despite its flaws, both real and politician-ranted mythical ones, since the 1930’s we’ve been enjoying its bargain-priced bundle of income benefits. We pay (part of FICA) only half-price for them, and even that’s income-tax favored. Our employers pay the other half, a tax-sheltered gift to us -- unless self-employed, but even then there’s a big tax deduction.

Still, we fuss over the increasing tax, for most workers now more than our entire wage was when we were just graduating high school. But let’s gratefully note that its retirement checks are vastly fatter old-age retirement checks than they used to be, and growing by cost-of-living increases. Plus, they’ll continue coming for more and more years as our lives lengthen.

That’s just one benefit. Sooner or later, when we finally do die, our widowed surviving spouses, ex-spouses, and ex-ex spouses, continue receiving pensions for the rest of their lives, each at full benefit, no matter how many there are. No extra charge, sir and ma’m!

More: The qualified disabled among us have been receiving our retirement income since ‘way back before “normal retirement age”. Even more: Benefits are sharply increased for dependent children. Again, no extra charge, sir and ma’m!

Is it possible to pay in and get little or nothing back? Few are those who never will incur any of the above eligibility-triggering events. Sure, it’s possible to contribute to an insurance plan for years, and never incur a claim, or suffer losses totaling less than we’ve contributed. That’s what insurance is all about, pooling of risks. But Old Age, Survivors’, and Disability Insurance (OASDI) is a certain “win” for very nearly every insured.

In the mid-1930’s, after several years of deep economic depression’s pervasive unemployment and poverty, Congress and the “New deal” Franklin D. Roosevelt administration created it to be an income-redistributing, social engineering “floor of security” for everyone. In one way or another, many other countries do, too. Ours ranks near the top in money’s worth (”overhead” is less than 1%) and national affordability (not even 6% of GDP).

Government welfare? No way! The concept is a stand-alone, viable, actuarially sound insurance program, engineered to be stable and self-supporting if government officials, Congress, and fraudster claimants allow it to be.

Is OASDI badly flawed, existentially threatened? The comforting expectation is that the system will, of course, survive -- affordably. The gurus argue the flaws and the fixes with each other, but they all agree that it will.

Besides, what member of Congress or president who hopes to be re-elected would blunder by not leaping onto the “Save Social Security” bandwagon? We hear a lot of politician-ranting about repealing Obamacare, but how many -- us ordinary folks, too -- advocate repeal of Social Security? Incidentally, Medicare, either? It probably will require trimmed-down eligibilities and trimmed-up funding via taxation above the current 12.7%, or benefits reductions. Regardless, we actually can expect some benefits increases, to offset partially the rising costs and standards of living.

The 1930’s “floor of security” ideal: When I was a kid, our new 1936 Dodge sedan cost $600.00, gasoline for it nine cents a gallon, my future-father-in-law pharmacist made $ 9.00 a week, today’s price for a glazed, poppy-seeded Sabbath egg bread bought two baker’s dozens of them in Grandpa’s bakery, and Luigi the barber got two bits for a haircut.

Of course, the “floor” ideal won’t ever rise enough to support our 21st-century lifestyle living minimum standards and wage-price levels, but the goal is to assure the “significant” income level that millions of beneficiaries must rely on. Analyzing a recently Gallup survey, Sean Williams wrote in “The Motley Fool” on-line periodical that OASDI is the key income source for 59% of today’s retirees, and at least significant for 90%.

That analysis also seems to express majority guru opinions about why OASDI’s reserves would be exhausted by 2034 unless the formula is modified or benefits are reduced by over one-fifth, estimated by the Social Security and Medicare Board of Trustees a year ago. Why? Most of us are living far longer than Mom’s and Dad’s generation. Boomers are booming, retiring at the rate of 10,000 each day, thus overwhelming the worker-to-retiree ratio’s ability to keep funding up with claims. The Federal Reserve’s low-interest-rate policy decimates the reserves’ ability to generate investment income.

Commentators also exclaim that the outlook is worsened by Congress’s cop-out raids on the trust funds to cover its mirror-trick budget-balancing, plus its kick-the-can-down-the-road deferral of re-paying both interest and principal on those “loans”. Further, Congress will have to stop procrastinating the unpopular inevitable long-run necessity to raise the tax rates, eligibility threshholds, and wage base.

Incidentally, the Philadelphia Inquirer’s Erin Arvedlund’s observation (Sun News carried it) that raising the “normal” retirement age, now 67, would be discriminatory, because the higher your worth and income are, the higher the probability that you’ll both reach your 70’s, and live longer than average. Guys, we add that it pays to be female, too.

Then, there’s the rampant disability claims fraud and malingering. It’s largely unchallenged because, in contrast to Medicare’s commendable anti-fraud program, Congress underfunds Social Security Administration’s ability to attack it, as well as SSA’s customer service and operating-efficiency improvement projects.

I recall a hard-working print shop owner client in the 1970’s, when printing entailed heavy physical labor. His profile revealed fifteen-year and continuing OASDI disability benefits for “back trouble”. And suddenly his office wall acquired a new photo of him white water rafting on the New River’s springtime Class 5 rapids.

Then there’s the fellow big-rig RVer, happily captaining and maintaining his forty-two-foot diesel-pusher motor home, SUV in tow, all over the continent, rendezvousing each month with his disability check, for “neurological disorder severely exascerbated by physical activity”, to catch up with him.

The “shadow economy” -- untaxed off-the-books paid-in-cash contractor casual labor, restaurant and taxi-driver tips, under-the-counter payments for over-the-counter-merchandise -- All that’s fraud, too, depriving all government programs of revenue.

Short-term, what changes to expect? Election year, none, of course. 2017: Todd Campbell, also of “The Motley Fool”, just posted for us 60 million claimants. Summarizing: The CPI will produce a benefits increase, but likely less than one percent. But the 30% of us beneficiaries who aren’t eligible for the “hold harmless” provision will see a soaring Medicare Part “B” premium, up maybe 22 %, and even higher for “high-income” beneficiaries subject to Medicare premium adjustments, therefore a lot less monthly net. Thus, if your single income is more than $ 85,000 (jointly $ 170,000), your OASDI check will be less than in 2016. As you know, “File and suspend” is gone, but “Restricted application” might not be -- Born before 1954 or widowed, delay and allow your primary benefit to grow until age 70, while collecting a spousal benefit. However, you won’t be permitted to go back and collect for deferred time.

The Washington Post “Federal Insider” column reports a growing campaign to restore SSA’s budget cuts that profoundly impair management and customer service, affecting all of us. After all, “We’ve paid for it”. In light of all the above, the comprehensive benefits expansion that the Obama Administration advocates isn’t likely in 2017, or foreseeably thereafter, either, but at least the restoration of services has a fighting chance.

Thank you, Social Security!

This story was originally published November 21, 2016 at 1:56 PM with the headline "“Come to think of it, thanks! But….” | Real Life."