RE: What are the values you would have underlie Social Security

["Marv. Rohrs" <rohrsm@asme.org>]

Responding to Bob Carlitz's posting on Values:

My background:  I am a 74 year old, semi-retired Professional Engineer -- licensed in 4 states.  Except for some military service in WW-II, I have worked continuously since 1940 (my sophomore year in high school), thus paying SS taxes for almost 60 years.  I've had two executive positions wiped out through "downsizing" and, as a result, have no meaningful company pension.  Over most of my career we did not have IRA's or 401K's and were not allowed by IRS to set up our own retirement plans (using pre-tax dollars) if the company we worked for had a retirement plan (regardless of whether or not we were vested in it).  My "retirement" is funded by Social Security benefits plus income from investments and savings accumulated with after-tax savings, and current earnings (upon which I still pay SS taxes).  I find the redistributive component of the Social Security benefit formula to be particularly galling since it is an unrealistic form of means-testing and makes no provision for the absence of a pension.  I also find the current method of calculating the taxable amount of SS benefits to be totally unfair -- even though total income makes my SS benefits subject to taxation, extremely high family medical expenses reduce the remainder to below the threshold for taxation.  And, I believe that the COLA that is used for adjusting SS benefits is unrealistic -- it does not take into consideration the fact that medical costs are higher for retirees and are increasing at a higher rate than other components.

I offer the above, not in a sense of complaining, but in order to give some insight into the reason for my following comments regarding Values.  In all, I consider myself quite fortunate -- I thoroughly enjoy what I currently do (self employed Engineering consultant), my own health is quite good, and I can live comfortably.  I do regret, though, foregoing some "luxuries" in order to save for retirement, only to be penalized for having done so.
  
1. The program is nearly universal in coverage - 96 out of 100 jobs are covered. 

I believe that all jobs should be covered and there should be no "double dipping" by employees whose wages are paid through taxes.  An individual should not be allowed to collect both an unrealistically high civil pension and Social Security.

2. Benefits are paid as an earned right, with eligibility for benefits and the benefit rate based on an individual's  past earnings. 

I totally agree, with the caveat that the benefit rate should be based upon the TOTAL of an individual's past earnings over his/her lifetime.

3. Benefits are wage-related. 

Same as comment on #2.

4. The system is contributory and self-financed, with contributions from wages specifically ear-marked for Social Security.

While desirable, this could be difficult in the near term.  Having the system totally self-financed would place a huge financial burden upon those who are presently working or who will be working in the future.

5. The benefit formula is redistributive, paying lower-income workers a higher percentage of their pre-retirement earnings than higher income workers. 

This is the present practice and I totally disagree with it.  This gets to the root of the question of whether Social Security should be a safety net or a retirement base.  I believe that it should be a retirement base and that benefits should be based upon an individual's TOTAL contributions.

6. Benefits are not means-tested. 

I am against any semblance of means-testing.  With means-testing there would always be people who fall through the cracks because the measurements that were put in place did not foresee their particular circumstances.  The present calculations that determine the amount of Social Security benefits that are subject to income tax is a prime example of means-testing that uses the wrong measurements.  An individual can have enough total income to have 85% of his benefits subject to income tax but have high enough medical expenses such that, when they are subtracted from his total income, it is below even the threshold for taxation of 50% of benefits.  Means-testing also brings up the question of what level of income is considered high enough that one should not qualify for benefits.  Historically, those who decide seem to use the term "comfortable" as a criterion -- that tends toward pure socialism.

7. Initial benefits are wage-indexed, reflecting improvements  in productivity and thus in the general standard of living. 

I don't see where this is different from prior points.

8. Once they begin, Social Security benefits are inflation  protected, with annual cost of living adjustments tied to  the Consumer Price Index. 

Yes, except that the index should be one that reflects the actual buying habits of retirees, not those of wage earners -- their needs are different.

9. Participation in Social Security is compulsory. 

See answer to #1.