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In case you haven’t heard, there will be no cost of living increase for Social Security recipients next year. This has spurred outrage and consternation on Capitol Hill. After all, seniors vote in large numbers and are a politically-powerful voting bloc, so efforts to placate senior citizens are usually received favorably in Congress.
It appears that policymakers in both parties, including President Obama, have settled on the idea of providing $250 payments to the more than 50 million seniors on Social Security. While $250 for each senior citizen in America may not seem like much, the cost to taxpayers is $13 billion in debt that will be placed on the backs of America’s children and grandchildren. For the current year alone, the federal budget deficit has surged to an all-time high of $1.42 trillion. This is on top of all the other deficits including those we already face for Social Security.
Social Security and other entitlement programs like Medicare already burden today’s younger taxpayers and their children with massive debt. According to trustees of the Social Security system, the program’s unfunded liability in perpetuity is $17.5 trillion. The program would need that much money today in a real trust fund outside the government earning a true return to pay for all the benefits that have been promised over and above future Social Security taxes. Alternatively, the payroll tax rate would have to rise by 4 percent just to pay the bills for the existing system.
While free market advocates like us at the Rio Grande Foundation question the merits of government transfer payments – as opposed to the provision of actual services like defense, roads, and police – from one group to another, at least normally when governments do these things, they take from the rich and give to the poor. Not in this case.
The dirty little secret here is that senior citizens as a group actually are the wealthiest segment of society. According to the most recent data available, the average net worth of seniors age 65-74 is $146,000, while the average net worth of Americans under age 35 is a mere $9,900. With the addition of the prescription drug benefit under President Bush that was not taken into account in this data, the disparity has only grown.
Rather than burdening future generations with ever-greater debts, congressional leaders need to stand up for fiscal sanity and for fairness by opposing any additional, unwarranted, Social Security outlays.
Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.