The Myth of "Wealthier Seniors" and Cutting Social Security and Medicare

June 24, 2010

One of the important untrue items circulating in policy debates in Washington is that we can have substantial budget savings if we cut Social Security and Medicare benefits for “wealthier seniors.” Peter Peterson, the billionaire Wall Street investment banker regularly announces that he doesn’t need his Social Security when highlighting his efforts to reduce the budget deficit.

In fact, everyone in the policy debate knows that there are very few people like Peter Peterson among Social Security and Medicare beneficiaries and it would not matter one iota if we took away their benefits completely. The billionaires or even millionaires are such a small share of the senior population, that it would barely affect the finances of these programs even if we could find a simple way to take back all their benefits (we can’t).

This is why it is incredibly dishonest when the Washington Post puts forth its case in an editorial for cutting Social Security and Medicare benefits for “wealthier seniors,” a change that the paper describes as making the programs “more progressive.” Invariably what the Post and others mean when they use this line is cutting benefits for people with incomes of $50,000 or $60,000 a year. While these incomes would put a senior household way above the $29,700 median for the over 65 population, these incomes would not fit anyone’s definition of wealthy. By contrast, President Obama put the cutoff at $250,000 when setting an income floor on people for raising taxes.

While income distribution is highly unequal, there is not much inequality in the distribution of Social Security and Medicare benefits. This means that very little money can be obtained by cutting benefits for the small number of genuinely wealthy elderly. The only way to save large amounts of money from these programs is by cutting benefits for large numbers of people, including people who are not wealthy.

Everyone in the debate knows this, but since cutting benefits for middle-income families who paid for these benefits with their taxes is not popular, we get nonsense lines about cutting benefits for “wealthier seniors” to make the program “more progressive.”

Of course, the Post has never felt the need to be constrained by the truth in pushing its agenda. In arguing the case for NAFTA a few years ago, the lead editorial told readers that Mexico’s GDP had quadrupled between 1988 and 2006. According to the IMF its GDP had risen by 83 percent. Oh well.

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