The large and growing cost of Social Security and Medicare is likely to be an important battleground in future conflicts between young and old Americans. In government jargon, such programs are called entitlements.
Entitlements, which total $700 billion, make up half the federal budget;
60 percent is distributed to 12 percent of the population: Americans who are 65 and older.
The biggest outlay, $300 billion, is Social Security, which next year will move ahead of defense to become the costliest budget item. Social Security income is largely untaxed and, in the words of Time magazine, ”goes equally to millionaires and to the poorest widow.”
Medicare, also dispensed without regard to income, accounts for $130 billion.
Entitlements to retired Americans are increasing at a greater rate than inflation or economic growth, but efforts to reduce the deficit by controlling their costs can be political suicide.
It has been noted that Washington lawmakers, wary of elderly voting strength, liken Social Security to a subway`s third rail: ”Touch it and you die.”
U.S. Sen. Warren Rudman (R-N.H.) has lamented ”a conspiracy of silence about entitlements among presidential candidates as well as most members of Congress” while acknowledging ”the fear that if you address the issues honestly, you will lose votes and possibly the election.”
Rudman advocates means-testing federal retirement programs, which would assess financial need in determining allocations.
Appearing recently on the ”Larry King Live” TV show, he said: ”We`re not asking people to make great personal sacrifices. But we are saying that middle-income Americans who are retired maybe should pay more of their Medicare costs, possibly should get less Social Security if they`re secure financially.”
Rudman noted that employees now pay 7 1/4 to 7 1/2 percent of their wages to the Social Security fund each week and that the sum is matched by their employers.
Rudman said that if we are to maintain the same level of benefits, it will be necessary in 23 years to raise weekly contributions to between 27 and 35 percent. ”The country,” he said, ”could not survive.”
In a Senate speech in March, Rudman said: ”It is time to be honest with the American people. We either take steps to cut the growth in these
(entitlement) programs, raise the taxes to pay for them or do a combination of the two. . . . The future of this country depends on it.”
To understand the large proportion allotted to Social Security and Medicare, consider:
– One-third of the federal budget now goes to defense and interest on the federal deficit.
– Only 11 percent, a figure that has remained steady for several years, is allocated by Congress to ”discretionary” civilian projects such as education, highways, parks, mass transportation, medical and scientific research, the space program and fighting drugs. Cut out all these things we normally associate with government costs, and the budget deficit would still exceed $200 billion.
– Affluent households receive more in entitlements than poor households.
– Only 20 percent of entitlement programs are means-tested. An example is Aid to Families with Dependent Children ($17.5 billion in `89).
– Only $1 of every $8 in federal benefits reaches those in poverty.
– In 1969, 25 percent of the elderly were designated poor, compared to 14 percent of children younger than 18. In 1991, 20 percent of American children were living in poverty, the highest of any age group, and 12 percent of the elderly were poor, the lowest of any age group.
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– The government spends $10 on the elderly for every $1 on children.
– In 1991, 20 percent of major benefit programs went to households making $50,000 and more each year. Social Security alone wrote checks of more than $55 billion to households with incomes above $50,000.
– Medicare in 1991 spent more than $18 billion on households earning at least $50,000 annually.
– At least $400 billion-more than half of all entitlement dollars-went to households with incomes over $30,000. At least $200 billion-more than 25 percent-went to households making more than $50,000.
– An elderly family in a middle-income bracket pays about 8 percent in federal taxes; a non-elderly family making a similar income pays 22 percent.
– In the last 11 years, the average federal benefit to households with incomes under $10,000 dropped 7 percent while the average benefits (mostly Social Security, Medicare and federal pensions) among households with incomes above $200,000 doubled.