Means-Testing Deal?
by Chuck Warren
Issue 180 – May 25, 2011

Rand PaulTeam Obama, perpetual spin-masters empowered by the mainstream media, is working to characterize the Republican budgetary proposals as ineffective, disingenuous, and generally lacking in compromise.

This could not be further from the truth. In recent weeks, Republican leaders have put forth several policy proposals that would have die-hard conservatives rolling in their graves, in light of what major concessions the plans make to the Left.

In particular, the media seems to have glossed over completely the fact that a reform package put forward by Senators Lindsey Graham, Mike Lee, and Rand Paul (the latter two being Tea Party candidates, no less), calls for means testing of the Social Security program, in which Social Security payments would be doled out based on need.

As entitlements schemes go, Social Security already has built-in favoritism toward lower income Americans. Currently, while the wealthiest pay the most into Social Security (the program’s tax is a percentage of income), they receive the same amount when they retire. This is the sort of needs-based system that Americans seem to generally accept. But means testing represents a new phase in entitlement schemes. Now means testing will be occurring on both sides of the equation—in taxable income over one’s career, as well as in one’s retirement.

Admittedly, conservative economists seem to increasingly agree that means testing is an inevitable aspect of Social Security programs in the future. This entitlement program has grown so vast that there is no other way to keep Social Security intact. This year is the first year that the Social Security program will disburse more money than it takes in—and that pattern is bound to continue as the Baby Boomers retire en masse in coming years.

However, although means testing seems to be inevitable, Republicans ought not to let the train move forward without acknowledgment from the Left that this represents a concession and that some subsequent concession on the part of Democrats is necessary to make a deal.

The issue with means testing is not the money: Under a means testing system, America’s wealthiest retirees are not going to miss the monthly peanuts payments when those checks are diverted to lower-income citizens. The issue is rather that means testing fundamentally grows the culture of entitlements. And it is the culture of entitlements that is the underlying cause of much of our budgetary crisis.

Consider history. No doubt the creation of the Social Security program during the New Deal fundamentally changed the way people think about their retirement—savings is still important, but it is not essential. This sort of scheme allows for a family with an annual income of $40,000 to live in the manner of a family with a higher income, because Social Security programs ensure that Americans are at least somewhat supported in their retirement—no one is forced out on the streets. In fact, many of America’s retirees live quite contentedly on the modest Social Security payments they receive each month.

However, because those payments are so modest, many Americans are still induced to save: Uncle Sam may take care of you in your retirement, but it’s certainly not going to be the Ritz (and the payments you receive will be the same as everyone else’s).

Means testing runs the risk of further decimating any semblance of a culture of savings in America. In a means testing scenario, if two people in their thirties are each making an annual income of $50,000 and one is spending to his limit while the other is saving, the one who is spending suddenly has far less incentive to save, because he’s going to get more in his social security payment than his saving-counterpart. Entitlement programs traditionally punish people with higher incomes—in contrast, means testing literally punishes saving.

In short, Republicans ought to insist credit is paid where credit is due: Means testing is a huge concession to the Left. For Republicans any such concession  means conceding a fundamental point.

Republican leadership must demand a similarly large concession from the Democrats. We are in a budget crisis that requires ideological generosity from both sides to solve.  To put this meltdown in perspective: If the government seized the assets of every American billionaire, we could not cover the costs of this year’s deficit alone. As our national debt grows beyond $14 trillion and our national deficit hurls beyond $1.4 trillion, Democrats ought also to consider what concessions they can bring to the table, such as a federally mandated balanced budget amendment or an agreement to cease the continued cries for never-ending spending.

If Republican leaders do not demand offsetting concessions, it will be impossible to restore our nation to fiscal sanity,

Chuck Warren is a Partner with Silver Bullet, LLC, a Nevada-based public affairs firm specializing in initiative qualification, grassroots and crisis communication. He is on the board of Pass The Balanced Budget Amendment (www.PassTheBBA.com)