What Handouts To Cut

As the debate between looters and producers rages on, the titanic government handouts to seniors, many of whom are sitting on quite a bit of accumulated wealth, tend to be overlooked. Why?

Because of failure to heed the limitations of the U.S. Constitution, which has produced runaway federal spending, our nation sits on the precipice of disaster. Former Senator Alan Simpson of Wyoming and Erskine Bowles, White House chief of staff under President Bill Clinton, co-chairmen of President Obama's debt and deficit commission, in a Washington Post article "Obama's Debt Commission Warns of Fiscal 'Cancer'" (July 12, 2010) said that "(A)t present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans — the whole rest of the discretionary budget is being financed by China and other countries."
The commission added the current budget trend is a disaster "that will destroy the country from within" unless checked by tough action in Washington. The tough action required is spending cuts in programs, including the so-called nondiscretionary, eating most of the federal revenues.
According to the Census, around 80 percent of Americans 65 and older own their own homes compared to 43 percent under 35. Twenty-three million households, or 37 percent of all homeowners, own their homes free and clear, and most of these are seniors aged 65 and older. According to the Federal Reserve Board's 2007 "Survey of Consumer Finances," the median net worth of people 65 and over is $232,000, those under 35 years have a net worth of $12,000 and for those 35-44, it's $87,000.
For good reason, older people have accumulated more wealth than younger people; the primary reason is that they've had more time to do it. There is no logical case that can be made for using the tax system to force Americans with less wealth to subsidize those with more wealth. But it's not clear who is subsidizing whom.

Consider an elderly widow, say 70 years old, with a modest retirement income of $18,000 living in a $300,000 house that's fully paid for. She might receive local property tax forgiveness, medical and prescription drug subsidies and other federal, state and local subsidies based upon her age and income.
When subsidies are provided for this lady, whom are we truly benefiting? It's not the lady but her heirs. Conceivably, the lady could make a deal with a financial institution to pay her property taxes, allow her to live in the house for the rest of her life and give her a lump sum cash settlement so that she can live without the handouts.

Upon her death, the house becomes the property of the financial institution, not her heirs. Giving the widow handouts allows her to bequeath to her heirs her assets, a $300,000 house. If her children want to inherit the house, they, rather than taxpayers, ought to take care of their mother.
We can start getting the federal spending under control by ending subsidies to people with high net worth that can be ready turned into cash such as a home or business. While seniors might say that they support reduced government spending, they, like other handout recipients, believe they have a right, through government, to live at the expense of others. What's more, they have considerable clout — they vote in large numbers. Only 50 percent of young people vote, but up to 70 percent of seniors vote.
Political guts have always been in short supply and politicians fear senior retaliation at the polls. Moreover, it's a practical matter for seniors and politicians. The true economic calamity won't hit the country until 2030 or 2040.

By that time, both today's politicians and seniors will be dead so why should they make sacrifices now to prevent an economic calamity decades off into the future? Seniors might protest my cynicism but they can easily prove me wrong by waging an effective campaign to end handouts based on superannuation.

Walter E. Williams is a professor of economics at George Mason University in Fairfax, Virginia. He has authored more than 150 publications, including many in scholarly journals, and has frequently given expert testimony before Congressional committees on public policy issues ranging from labor policy to taxation and spending.

22 comments from readers  

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Forget who has more wealth and who has less. Kill the taxes, kill the subsidies. No discussion of moral relativity is necessary; it is all wrong, and there is no justification for its continuance. The one that disgusts me the most, I think, is the "but I paid into this system for 40 years." As if, because they blindly and stupidly supported a ponzi scheme they knew or had cause to discover was fraudulent, I am now obligated to do the same to protect them from their own inadequacies. The older generation throughout history has always laid their mistakes at the feet of their children; here is a rare chance for the children to say "No thank you, not my problem". Let's have the courage to say no to our parents now so we don't have to stick our children with the same bargain (supposing the thing doesn't fall apart before we have the opportunity).
Social Security is something people have put their own money into, and they deserve to get it back, no matter who they are or how much they have at the end of their lives.

As far as cutting subsidies, I say cut ALL subsidies. Social Security is not a subsidy.
I don't care for your tone at all when it comes to senior citizens. Just end all subsidies, without any discrimination.

That includes Medicare (one of the greates disasters to hit our financial pockets) and Medicaid too. Cut everything, but leave Social Security in place. It belongs to the people who paid into it.
(profile not found)
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They paid into the system their whole lives! And they didn't cause the current financial mess. It's not their problem.

If a restaurant wants to give Granny a break and charge her less for dinner, so be it. Who cares if her house is owned free and clear? Looks like one more person wanting to penalize the responsible folks. I hope he just wrote this article to get a reaction.
My statement from Social Security at the time I applied for it, documented that I had paid some $50,000.00 into "my account" over my working life. I know that this means that my employers paid in an equal amount. Am I not entitled to have that account balance paid out to me in my non-working years? I know that the integrity of my account was just maintained as some ledger entry, since it was borrowed out by the Federal treasury every year, but do I have to kiss that money goodbye? What about the interest on that account over the years, is that just gone too? I am very much in favor of privatizing Social Security for anyone who wishes to actual own their account going forward, but do those of us who were forced to take things as they are just supposed to walk away from the funds that were taken from us by "wonderful old Uncle Sam"?
The true economic calamity won't hit the country until 2030 or 2040.

There is nothing special about that date: that is the theoretical date on which a still functioning(taxing) Treasury will have completed paying back all the borrowed Trust Fund assets, to pay for SS -- via additional taxation in future economies.

The economic stress starts long before that date. The economic stress starts when two things happen:

1] The loss of subsidy for the Treasury, represented by the amount of over-taxation that was immediately spent as Treasury subsidy disappears. The amount of our budget once subsidized by this surplus remains after the subsidy vanishes.

2] The additional drain on the Treasury that represents make-up of the shortfall of revenue and benefits paid out by the Trust Funds.

The combination of the above is a 'double whammy' impact on the Treasury. Loss of subsidy + additional drain. What felt so good for decades -- when an already surplus paying demographic was surplus taxed as a hidden borrowing from the future -- is going to feel bad for decades when the future is here.

Well, Timmy G. spilled the beans last week on when the future was going to get here. Last year, we thought that future was getting here in 7 years, and this year we've discovered that the future is already here. The Trust Funds have already inverted, the pizza party is over.

The Boomers, who labored their entire working lives under a 15% FICA/MEDI tax, purportedly to 'pay' for this easily predicable coming rainy day, are about to get sheared, byt the following Quadruple Government Whammy.

Not only the 'double whammy' shortfall outlined above, but the additional consequence of laboring under a lifelong additiopnal 10% FICA surcharge on earnings means that same 10% of earnings was not available to set away for self-pension assets, making those same Boomers more dependent on a government program that was run in such a manner to guarantee that it was broke when they needed it most.

Finally, the fourth impact is the combined mismanagement of the nations deferred spending/income. In normal economies, that deferred income is invested in the future economies via the mechanism of focused personal risk. No such thing was done with all of that deferred spending, for an entire generation. The government took it and spent it immediately on buying votes long cast, not on investments in the future economies.

It was p'd away.

When politicians find a way to rob the future, things are great until the future arrives.

The future is here, and it has been robbed.
I am sixty years old and I say bless you for putting into words what needs to be said. The politicians are too weak kneed to utter the words. Also, I get letters nearly every week wanting me to join AARP and they go directly into the trash.

There is one sad reality that needs to be addressed and that is the hyperinflation looming on the horizon that will wipe out most seniors savings. Real inflation has pushed the cost of living to an all time high even though the government won't admit it. When anyone fills there tank, pays a utility bill or buys groceries they are well aware.

The homes once worth maybe $300,000 are now possibly valued at $200,000 or less. This happened because of a meddling congress getting involved in the loan business and results in a loss of equity to seniors.

The decades of giveaways highlighted by FDR and LBJ have brought us to our knees. I wish everyone with a brain to understand and eyes to see would read Atlas Shrugged. We are just a bowlegged camel waiting for the last straw.
The problem will then become one of discovery. Seniors will hide their assets by giving them to their heir before they die or selling them bolow market and then renting them back.

How will we prevent asset hiding and other schemes to become a pauper allowing them to live as a looter?
Outstanding! ...and what fierce retaliation will come when this is proposed in any serious manner. Yet, it is critically needed. Why should taxpayers subsidize net wealthy and independent seniors indeed!

I will take this idea, mull it over and propose it to my government levels. If capitalism is to have any sway, the rubble must start to be cleared in a practical manners such as this.

What does freedom mean if not hands off our economic throats, here and now?

Lets see, Governments increase taxes according to increased income levels, and are pretty strict about the implementation of that, so the same strictness can be made for seniors above a certain net worth level for subsidies to be cut off. This would also include the city economic index factors involved, none of it undermining the idea.
I think many seniors feel they paid into Social Security and are entitled to get their money back. We may know that it's a pyramid scheme that would be illegal if you or I did it, but that is not what seniors have been told. So I would place them among the least odious of recipients of handouts. Most seniors worked hard to build up their SS account while other folks collected handouts earlier in life. It's going to be very hard for the government to own up to its con game and tell the country that our leaders have already spent all the money that was supposed to go for all the things we were promised. When private con persons are exposed their assets are usually seized and distributed among those they conned. Let's hope this happens to the government and the politicians.
Excellent arguments if they had been applied in time to stop the Social Security system before it ever started. At this time, the best idea I've heard is (if I remember right) from a woman who suggested allowing young people to either opt out of the Social Security withholding and benefit scheme, or to subscribe at half the current level with half the withholding.

There doesn't seem to be any equitable way to repay seniors in inflation adjusted dollars for amounts they have had withheld from their pay. This wasn't something they chose. It was government imposed. If someone could detail a scheme which would eliminate Social Security, I'd be for it. But it would have to reimburse in an inflation adjusted way, all amounts withheld for medical and social security.
2nd review

The word "handouts" was overlooked in my previous review. Handouts should be completely eliminated. The involuntary investments people were required to make to Social Security and Medicare must be paid. Making them voluntary, with increasingly limited benefits to be expected with the idea of entirely eliminating them in another 120 years makes the most sense. Getting congress to repay the trillions stolen from the trust funds should get attention also.
I know 16 people who are drawing Social Security. Every one of them has already received back more than they, plus their spouses, ever paid (not counting inflation). My Grandmother's generation set up a sweet deal for themselves.

Surprisingly, several of these acquaintances said they wouldn't mind if their Social Security was limited to what they paid plus interest. And, my grandmother's SSI goes straight to a savings account where it hasn't been touched in years.
Jeff O
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Hi Walter,

Your math is good, your logical is OK up to a point. You are talking about Reform. This situation is beyond that. There is a general lack of Respect for Property Rights in the United States of America. It is the first thing we need to address. Without Property Rights, no other Rights are possible. It isn't really a percentage thing, either we have Property Rights or we don't. Talking about better ways to cut up the pie isn't going to work. We are well on our way to Miss Rand's apocalypse. If anyone wants to fix they better get started.
Mr. Williams;

I never thought I'd disagree with you, but I do here.

Social Security, Medicare and Medicaid benefits are not HANDOUTS when paid to those who paid into the system throughout their productive years. Giving them to people who haven't earned them is a handout.

These programs should not exist in the first place, because it's not the government's job to take care of us. However since they do exist, older people generally are MORE entitled to receive the benefits, because they are the ones who paid the most into the system under the promise that they would get the benefits they PAID for when they retired.

The government's commitment wasn't conditional on whether they NEEDED the benefits when they grew older. Social Security payments are made based on one's contributions to the system, NOT their need. Those who were more productive & more frugal during their working years, EARNED the right to a better lifestyle in their retirement years, and that includes their right to pass down THEIR property to their heirs.

Suggesting that they shouldn't receive them because they donâ??t NEED them isn't consistent with Objectivist principles.

Those who didn't pay into the system and EARN those benefits, are the ones who should not receive any.


What the other letter writers who are slamming Prof. Williams fail to realize is that he isn't suggesting "taking" senior citizen equity and wealth that they have built up--only that they not try to "take" from the rest of us in the form of numerous subsidies. Some may argue that the seniors have paid in all these years and are entitled to get their money back. However, let's not forget that it was these "responsible" generations who voted in (and continue to vote in) legislators that created (and continue to create) all the entitlement programs for lots of people who haven't paid anywhere near what it has cost to fund these give-aways (like welfare, social services, questionable SSI claims, drug programs, public housing, bailouts, etc.) Why should we, and our children, pay to subsidize the lazy thinking, irresponsibility, and/or laziness of previous generations?
Not much detail. I have proposed for years to make SS a means-tested welfare system which would only be available to those whose only asset is their home. The benefits provided would then be returned from their estates. You are absolutely correct. There is no reason that wage earners should be required to fund the estates of the elderly.
I never thought I would hear this from W.E. Williams.

He seems to forget that those over 65 all paid into these social programs! They deserve the payouts, it is their savings account. They can do with it as they please no matter how well off they are. How dare he call them "handouts". It is not their fault that government in their infinite wisdom decided to put SS funds into the general fund. That is the reason it is going bankrupt, not because the elderly demand what's theirs.

How about stopping REAL handouts. Payouts to those who never paid in? Why is it that my wife who worked and paid in, off and on for part time seasonal work gets $300 a month and someone I know, instantly receives $1,200 upon entering this country?
I'm 34. I can barely make ends meet. If it weren't for the tax dollars that the government takes from me to give to my mother so that she can re-allocate them to help me, I would be in serious straits right now. I am morally and ethically opposed to begging. But regulations have a de-humanizing effect on a society. Obviously, not all people in my age bracket are so lucky as me. We need to end all entitlements, not just those for seniors. The age of entitlement is destroying America even now. 30, 20, 10 years is too long to wait. Everything happens faster in this technological age, including collapse.
(profile not found)
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I like your original thinking on the subject!

At the local level we could make big changes happen-- cut public housing subsidies in the long run, bust up gangs, stimulate the housing market and put more people back to work-- if only we had the guts to say:

"Nowhere in the Constitution does is it writ that government must supply housing for the poor. Public housing should not be a subsidy for life, with the only requirement being that you remain in poverty (or pretend to.) Public housing should limited, a one-time hand up, a two-year opportunity to live very cheap and to save up money for the down payment on a home or the first-last-deposit on a market rental."

Currently we have "dynasty occupants," generation upon generation of the "privileged poor" who have a reduced incentive to hold a job or buy a home. Their gang-banger kids (why should they work? Their parents didn't) are ruling the projects and making life miserable for the rest. If everyone had to move out in two years it might provide the focus to get a real life, and provide the vacancies for government to help other deserving people over a rough patch.

Politicians think they can get votes promising "affordable housing" but when you look at history, the only group who have ever really been given Affordable Housing... were the slaves.
While a practical solution to the issue of further senior subsidies, it fails to address the more costly issues of social security, medicare & medicaid.

It is the "current seniors" that were forced to forgo monies at a time in their lives when income was dear, to fund social security and medicare for those that preceded them. It was and continues to be the greatest Ponzi scheme ever contrived and since it the monies were added to the general fund, it will never be self sustaining.
Marlize V
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Thank you for writing this.

I graduated college young and I'm now in my early '20s, working in a job in my chosen career and living in one of the most expensive parts of the United States (southern California). The cost of living here is astronomically high, partly because it's a gorgeous place to live, but also because the accumulation of well-to-do retirees who live here spend their entire existences figuring out how to keep their property values up by limiting new development, particularly of affordable homes and apartments. It's ironic, especially because my tax dollars fund their Social Security checks.
Walter, for the first time I strongly disagree with you.

This woman is/was a taxpayer like everyone else. Just because she has been prudent, industrious, and fortunate is no reason for the state to steal her property. Nor to deny her the same benefits that everyone else her age is entitled to.

This just "means testing," which punishes such individuals.

And why should younger people "get off the hook" if they are not so hard-working? It takes time to build up assets...which is probably what this woman did.
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