One of the ideas being floated by people who make proposals for bringing entitlement spending under control is that we require applicants for social security to pass a means test. It is a bad, bad, bad idea. The first reason it is a bad idea is the fairness issue. The underlying implication of this means test is that the people who have earned the most money and paid the most FICA taxes will receive nothing in return. It will end the idea that this is a pension program and turen social security into a welfare program.
But it is also a bad idea because of the bureaucracy that will have to be created to apply and enforce the means test. Before I explain let me disclose that I am a Social Security recipient. I confess that I think I may be a target of this proposal because I aslo receive a private pension and receive near the maximum of social security benefits because I paid maximum FICA taxes most of my working life and, indeed, am still working. (At age 66 you can begin to receive full benefits even if you are continuing to earn money).
But even if I didn’t have an interest in the outcome of this proposal I think I would be opposed to it because of the horrendous bureacracy that will be required to administer and enforce means testing. I speak as a former welfare worker. The first problem is who loses benefits and on what basis? Do we measure income? Assets? Income and assets? If I sell my house and realize the capital gain that has been building up over 20 years because I think it is time to move into a smaller home or an assisted care facility, do I lose my social security benefits for a year? Do we differentiate between income sources as we do now for people applying for early social security benefits at age 62? That is, do we take into account income earned from working or self-employment but not from dividends and investments? It gets real complicated real fast.
In contrast, when I applied for Social Security benefits two years ago, I didn’t even have to set foot in a Social Security office. I applied online. Social Security did whatever they do to make sure that I am who I say I am, perhaps matching the address on my checking account to the address from which my tax returns have been filed for the last 18 years. And, voila! monthly deposits to my designated checking account. I’m sure there was a human being somewhere who looked at the whole thing, but I am equally sure it was mostly done by computer.
At present, I suspect (based on my own experience and a sister who was formerly employed by the SSA) that the vast majority of claims representatives at the SSA are employed in determining eligibility for Social Security Disability. That is because most of the other claims processes are pretty cut and dried and based on facts that are not easily disputed, like your birth date (which the SSA has had, possibly since your birth) or your prior earnings record. All of the types of SSA benefits have appeals processes available, but I am going to guess that 90% of appeals have to do with Disability benefit claims. That is because, when money is involved, what sounds like definite firm guidelines on paper turns into opposing lawyers briefs in real life.
If we add a means test to SSA benefits which are based on age, we are going to need three or four times the bureaucracy we have now. My question is, we will actually even save money? How can we design a fair system that is not incredibly complicated? How can we easily and cheaply administer an incredibly complicated system?
When it comes to means testing social security, give that some long deep thought.