I will start with Social Security because I recently read that more people believe in UFO’s than that social security will be around when they are ready to retire. There are two primary groups who are the targets of social security benefits, children and the elderly. The statistics regarding the impact on children surprised me. 5.3 million children under the age of 18 live in families receiving some form of social security payments, either survivor benefits, disability benefits, or retiree benefits to someone else in the house. After the earned income tax credit Social security lifted more children out of poverty that any other program, responsible for getting 1 million children out of poverty. In Alabama, for example, the poverty rate among families with children would have been 16.9% instead of 14.6% if there were no social security benefits. For New York the poverty rate for the same group was 15.3% instead of 16.8%, and here in Florida, 14.3% instead of 15.6%. This doesn’t even explore the impact social security benefits for children has had on reducing the severity of poverty or in paying for college or other important outcomes, but only on the direct poverty rate.
The picture for seniors is far more startling. Census data shows that nationwide, Social Security benefits lift nearly 13 million seniors age 65 and older above the poverty line. These figures reflect a three-year average for the period from 2000 through 2002. The data indicate:
- Leaving aside Social Security income, nearly one of every two elderly people — 46.8 percent — has income below the poverty line.
- Once Social Security benefits are taken into account, just one in twelve — 8.7 percent — is poor.
In other words, without social security, half of the seniors in America, the greatest country in the world, would be living in poverty. This analysis looks at disposable income (which, as with children, includes any other type of public transfer payment – food stamps for example - or private income) and compares it with the federal poverty line, which is now $9,060 for a single elderly individual, or $11,418 for an elderly couple. So it’s not as though grandma is exactly living high on the hog with her monthly check. In Alabama the poverty rate among seniors would be 53.1% without social security instead of 13.2%. In New York, without social security the poverty rate would have been 44.4% instead of 8.4%, and here in Florida, 50.2% instead of 8.7%. How do you spell success?
But wait just a minute there Robby, all that may be fine and good, but Social Security is facing a catastrophic shortfall that will bankrupt us all and undermine the US economy forever, leaving the Chinese and French to pick over our bones, won’t it? Actually Bubba, that’s not quite the case. The most recent Social Security trustees’ report estimates that Social Security faces a total shortfall over the next 75 years of 0.56 percent of Gross Domestic Product (GDP). This is slightly less than the estimated cost over that same period of extending the 2001 and 2003 (Bush) tax cuts just for the top 1 percent of households: 0.6 percent of GDP. (Currently, households in the top 1 percent make more than $450,000 per year.) Extending all of the tax cuts (not just those for the top 1 percent) would cost 1.95 percent of GDP over the next 75 years, if their cost is not offset through spending cuts or other revenue increases. That is three and one-half times the size of the Social Security shortfall over that period. And of course, it must be pointed out that the projected shortfall is not, in any way, the result of mismanagement by the “bureaucracy” but rather, a result of all of our parents getting “jiggy with it” after the war. If not for the demographic imbalance resulting from the baby-boom there would be no concern about the financial future of social security whatsoever.
So, if one is looking for an example of government failure and bureaucratic abyss-ness, one had better look elsewhere. When it comes to lifting children and seniors out of poverty, social security has been a spectacular success.
