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The Trillion Dollar Welfare Program


It wasn’t that long ago (1987) that the entire budget of the federal government was “only” a trillion dollars. Now just one of the government’s programs has reached that milestone.

On the eighth business day of each month, the Department of the Treasury’s Bureau of the Fiscal Service issues The Monthly Treasury Statement of Receipts and Outlays of the United States Government (MTS). The September statement of each year that is released in October is especially important because it conveys data through the end of the federal government’s fiscal year on September 30.

According to the most recent such issue, total outlays for the federal government in fiscal year 2017 were $3.981 trillion. However, since the government’s total receipts were only $3.315 trillion, the federal deficit was $666 billion. But what is especially significant about fiscal year 2017 is that total outlays of the Social Security Administration (SSA) exceeded a trillion dollars for the first time.

That is more than is spent each year by every department of the federal government except the Department of Health and Human Services (HHS). As CNSNews points out,

That was about 37 times as much as the Department of State spent during the year ($27,061,000,000), 32 times as much as the Department of Justice ($30,977,000,000), and 20 times as much as the Department of Homeland Security ($50,502,000,000).

But unlike the SSA, HHS “administers more than 100 programs across its operating divisions.” Things such as Medicaid, Medicare, Head Start, Temporary Assistance for Needy Families (TANF), the State Children’s Health Insurance Program (SCHIP), the Centers for Disease Control and Prevention (CDC), and the Low Income Home Energy Assistance Program (LIHEAP).

The SSA basically just spends money on two interrelated things: benefit payments and administration costs.

As reported in Table 5 of the September Monthly Treasury Statement, in fiscal year 2017, the SSA spent $791.098 billion on benefit payments from the Old-Age and Survivors Insurance Trust Fund, paid $4.316 billion to the Railroad Retirement Account, and spent $3.678 billion in administrative expenses for that fund. The SSA spent $142.957 billion on benefit payments from the Disability Insurance Trust Fund and $2.692 billion in administrative expenses for that fund. The SSA spent $58.710 billion on the Supplemental Security Income Program (SSI) that provides cash assistance to low-income individuals who are aged, blind, or disabled.

Social Security is properly the Old-Age, Survivors, and Disability Insurance program. According to The 2017 Annual Report of the Board of Trustees of the Federal Old-Age And Survivors Insurance and Federal Disability Insurance Trust Funds,

The Old-Age, Survivors, and Disability Insurance (OASDI) program makes monthly income available to insured workers and their families at retirement, death, or disability. The OASDI program consists of two parts. Retired workers, their families, and survivors of deceased workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program. Disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program.

At the end of 2016, the OASDI program was providing benefit payments to about 61 million people: 44 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 11 million disabled workers and dependents of disabled workers.

171 million people had earnings covered by Social Security and paid payroll taxes on those earnings.

According to the official summary of the 2017 annual report, “Over the program’s 82-year history, it has collected roughly $19.9 trillion and paid out $17.1 trillion, leaving asset reserves of more than $2.8 trillion at the end of 2016 in its two trust funds.”

Like Medicare, Social Security is “funded” by payroll tax deductions from both employers and employees. Since 1990, the rate has been 12.4 percent (split between employers and employees) on a taxable wage base that is now up to $127,200. Also like Medicare, one must pay Social Security taxes for a minimum of 40 quarters to be eligible. Social Security benefits are figured on the basis of one’s Primary Insurance Amount (PIA), the average of a worker’s 35 highest years of earnings (up to a particular year’s wage base), adjusted for inflation. For those born after 1960, the retirement age to receive full benefits is 67. Although SSI is administered by the SSA, it is funded by general federal tax revenues.

Since 2010, the cost of Social Security has exceeded its income from payroll taxes and taxes on Social Security benefits. These annual deficits are made up by interest income and by drawing on the Social Security trust funds — both government accounting fictions. The Social Security Board of Trustees estimates that

DI Trust Fund asset reserves are projected to become depleted in 2028, at which time continuing income to the DI Trust Fund would be sufficient to pay 93 percent of DI scheduled benefits.

The OASI Trust Fund reserves are projected to become depleted in 2035, at which time OASI income would be sufficient to pay 75 percent of OASI scheduled benefits.

But because Social Security is mostly funded by payroll tax deductions, most Americans don’t consider it to be welfare, and certainly not a trillion dollar welfare program.

Social Security is welfare because a welfare program doesn’t need to have a means test to be a welfare program. Unemployment compensation, Medicare, and refundable tax credits are certainly welfare programs, but none of them has a means test to receive benefits.

Social Security is welfare because it is not a personal retirement account. According to an SSA publication called Understanding the Benefits, “The money you pay in taxes isn’t held in a personal account for you to use when you get benefits. We use your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust funds, not a personal account with your name on it. Social Security is more than retirement.”

Social Security is welfare because there is no connection between Social Security taxes paid and benefits received. According to the SSA “Retirement Estimator” website, “We can’t provide your actual benefit amount until you apply for benefits.” That amount may differ from your estimate because “your estimated benefits are based on current law. The law governing benefit amounts may change because, by 2034, the payroll taxes collected will be enough to pay only about 79 cents for each dollar of scheduled benefits.”

Social Security is welfare because there is no contractual right to receive benefits, as the Supreme Court ruled in 1937 and 1960.

Social Security is welfare because if you die before you retire, you forfeit every penny you “contributed” to the system.

But even if Social Security were not welfare, it would still be an unconstitutional program that is not a legitimate purpose of government to operate. Certainly, then, the Republicans in Congress want to eliminate it, reduce it, or means-test it.

Think again.

According to the latest Republican Party platform,

As the party of America’s future, we accept the responsibility to preserve and modernize a system of retirement security forged in an old industrial era beyond the memory of most Americans. Current retirees and those close to retirement can be assured of their benefits. Of the many reforms being proposed, all options should be considered to preserve Social Security. As Republicans, we oppose tax increases and believe in the power of markets to create wealth and to help secure the future of our Social Security system. Saving Social Security is more than a challenge. It is our moral obligation to those who trusted in the government’s word.

In other words, Republicans believe that they have a moral obligation to continue a New Deal, intergenerational, income-transfer, social-engineering, wealth-redistribution program.

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