In an op-ed in the Washington Post Elizabeth Bruenig complains about federal transfer payments made to people who aren’t poor:
The lion’s share of poor people are elderly, children or disabled persons; another chunk are caregivers. And while caregiving isn’t compensated as market labor, parents looking after children and people caring for elderly or sick family members are hardly shiftless layabouts. Being both a mother and a writer, I am well aware that the less compensated of my two jobs is the more demanding one.
But what about that small number of people who could work but, for whatever reason, don’t? Shouldn’t they have to? Well, before deciding whether it’s morally right for them to receive income without working, consider a far larger group that takes in far more money without toil: the idle rich. They soak up plenty of unearned money from the economy, in the form of rent, dividends and capital income. Salaries and wages — that is, money paid for work — only make up about 15 percent of the income of Americans making $10 million per year or more; the rest is capital income from simply owning assets.
And yet rarely do politicians inveigh against the laziness of the well-off. In fact, the government shells out huge sums of money to the rich every year through tax breaks and subsidies. As Syracuse University professor Christopher Faricy points out in his book “Welfare for the Wealthy,†the federal government is hardly generous with the poor alone. In 2016, for instance, Social Security kept 26.1 million people out of poverty to the tune of $911.4 billion paid out in disability and old-age pensions; during that same year, federal tax subsidies for the pensions of the more affluent totaled $179.9 billion. Faricy observes that the same pattern holds in health care and education: While the government spent some $200 billion on Medicaid that year, it also spent $120 billion subsidizing employer-based health insurance; and while students whose families make under $20,000 per year are the main beneficiaries of federal Pell grants, households that earn between $100,000 and $200,000 receive roughly 50 percent of the benefits of college tuition-and-fee tax deductions.
In principle I’m in agreement with her implied point. Public charity should be limited to the poor. Benefits like Social Security and Medicare should be means-tested.
As it turns out they are. Social Security and Medicare benefits are taxed on a progressive basis. That’s a de facto method of means-testing, explained in full here. I would go farther. I think that the ceiling on wages on which payroll taxes are levied should be raised, at least to the income level of those earning more than three standard deviations above median income, presently around $250,000. The same approach should be used with respect to the subsidies paid for employer-based health care insurance and Pell grants (if they aren’t already—I’m not an authority on either system). The same should be the case for the home mortgage interest deduction. Reducing the cap on the deductibility of home mortgage interest is one of the features of the tax reform bill recently signed into law and it’s an aspect of it of which I approve.
But the big ticket items are Social Security benefits, Medicare benefits, and home mortgage deduction. In other words Ms. Bruenig is arguing in favor of reforms which are mostly already in place. They just don’t show up in the way she’s doing her accounting. That’s one of the problems in having a system as complicated as ours.
We haven’t even touched on other important questions. There are public employees receiving million dollar public pensions. Shouldn’t those be capped at a much lower level? Medicare checks aren’t cut to beneficiaries—they’re “reimbursements” paid to providers. Should there be a cap on those, too?
