Biggest Handouts to 1 Percent Are Social Security and Medicare

John Merline of Investors Business Daily has published a fascinating analysis of $10 billion the government annually gives to the dreaded 1 percent:

Using IRS data, IBD found that the top 1% of income earners claimed approximately $7 billion in Social Security benefits in 2009. That year, the program paid super-rich seniors — those with adjusted gross incomes exceeding $10 million — an average of $33,000 each.

Medicare, meanwhile, paid roughly $2.6 billion in health care subsidies for the richest 1% of enrollees, based on calculations using Medicare enrollment, overall Medicare spending and premium data. (Medicare does not track spending by enrollee income.) And if you consider that 5% of Medicare enrollees have more than $1 million in savings, the amount taxpayers spend to subsidize retiree health benefits skyrockets.

It gets worse from almost any conceivable perspective short of a French aristocrat before the Revolution:

The richest 1%, for example, claimed a total of about $400 million in jobless benefits in 2009. The reason for these billions in payments to the wealthy is that many federal transfer programs don't have income limits on benefits.

"This is not an accidental loophole in the law," Sen. Tom Coburn, R-Okla., noted. "To the contrary, this reverse Robin Hood-style of wealth distribution is an intentional effort to get all Americans bought into a system where everyone appears to benefit." In November, Coburn issued a report focused on federal subsidies going to millionaires.

In addition to direct payments, the top 1% claimed about $31 million in tax credits for buying electric cars, $469 million in home energy credits, and $111 million in child care credits, according to IBD's analysis of IRS tax return data....

"Shifts in the distribution of government transfer payments (since 1979) contributed to the increase in after-tax income inequality," according to a recent study by the Congressional Budget Office. The rapid growth in Medicare, for example, "tended to shift more transfer income to middle- and upper-income households."

The CBO also found that while the poorest fifth of households got 54% of federal transfer payments in 1979, they received just 36% in 2007. Several political leaders and policy groups have proposed changes to reduce federal payments to the super rich.

As you begin pondering the coming generational war and think about ways to create a safety net that isn't just one entitlement program to folks who should be paying their own freight more fully, read the whole thing here.

And read this whole post from a month ago to get your Irish up on a chilly (in D.C. anyway) December Monday morn:

For centuries, wealth flowed from the old and relatively rich to the young and relatively poor. Nowadays, the direction has been reversed. Via FICA taxes, the young and relatively poor give money to the old and relatively wealthy (you not only make more money when you're older, you're sitting on all sorts of assets accrued over time). Every study of Medicare and other entitlements that are not particularly means-tested shows that we can't have both a safety net and an entitlement system that sucks in huge amounts of cash and then gives it to people regardless of need. I think it would be a better world and a fairer world - and a richer world - if the government took in enough money to help the poor and indigent (whatever their age) and let the rest of us keep more of our money and make more of our choices for our futures.

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  • Jordan||

    If they have to pay for it, then I can't muster any outrage against them for using it. If that causes it to go bankrupt faster, then all the better.

  • Live Free or Diet||

    So if Charles Ponzi had been in government, he'd be hailed as a hero?

  •  ||

    Yes! A private pyramid scam that fools voluntary investors is exactly the same thing as a mandatory government retirement scheme that eventually issues refund checks to its victims.

  • ||

    Does it? because if you make enough money (top 3 quintiles) you won't get as much out as you put in according to CBO's study called "Is Social Security Progressive?" The difference is, you don't get the oppertunity to avoid being suckered into the ponzi scheme. You are forced in. Is that really better?

  • Maxxx||

    Does it? because if you make enough money (top 3 quintiles) you won't get as much out as you put in...

    Bullshit.

    The country's going to go broke because everybody gets much more back than what they contributed.

  • Facts, Schmacts||

    Even the ones who die before they collect a nickel!

  • Maxxx||

    Are you proposing a final solution to fix SS?

  • Intellectual Drone||

    No way, dude! They are rich! Therefore they are guilty! We should just tax them more, like President Obama wants to do, and screw their promised refund!

  • ||

    Drone: if you believe that to be rich is to be guilty, you will always be a slave to the class of people you haven't the brains or discipline to join. The Constitution was created to protect people from the greedy howls of unproductive haters such as yourself. As the Reagan era proved, tax cuts not only increase total federal income, but also increase the percent of total income paid by the rich.

  • Intellectual Drone||

    Somebody doesn't know sarcasm when he sees it.

  • Fred||

    Well, they did pay for SS, and Medicare.

  • Jose Alvarez||

    If the one perecent shoulld not receive these benefits neither should the money be dedcuted from their peychecks. What goes for Peter goes for Paul.

  • Facts, Schmacts||

    You not only make more money when you're older, you're sitting on all sorts of assets accrued over time

    Total Income for Households Age 65 and Older in the U.S.

    Under $5,000 (2.4 percent)
    $5,000 to $9,999 (7.7 percent)
    $10,000 to $14,999 (13.3 percent)
    $15,000 to $19,999 (11.4 percent)
    $20,000 to $24,999 (9.3 percent)
    $25,000 to $34,999 (15 percent)
    $35,000 to $49,999 (13.7 percent)
    $50,000 to $74,999 (11.9 percent)
    $75,000 to $99,999 (6 percent)
    $100,000 and over (9.3 percent)

    Source: Census Bureau, 2007

  • ||

    Income isn't as important as assets when your over 65 and retired. If you aren't working anymore, you probably don't have nearly as much income. Retired people live off of the wealth they've accrued over time. Income from interest on savings or investments (especially these days) aren't typically a lot.

  • Facts, Schmacts||

    According to the linked article, "total income" is defined as Social Security income, pension income, savings from retirement accounts such as 401(k)s and IRAs, and part-time work, as well as rent income, royalties, insurance products, home equity, and inheritances.

    Looking at the Census Bureau figures, 59.1% of retirees age 65 and older made less than $35,000 a year in total income. Hardly the prosperous (and greedy!) caricatures in the photos.

  • adam||

    Pretty sure the article isn't claiming that all 65-and-overs are filthy rich, but just that, compared to the under-65 population, a higher proportion make more and have more. The numbers you cited don't disprove that assertion.

  • ||

    And median household net worth for those over 65 is roughly twice the median household net worth for the population as a whole, per the Census Bureau (2004 is the most recent data):

    Overall distribution:
    zero/negative: 15.6%
    $1-4999: 9.1%
    $5k-9999: 4.1%
    $10k-24999: 6.3%
    $25k-49999: 7.4%
    $50k-99999: 11.6% (that takes us to 54.1%)

    65+ households
    zero/negative: 7.0%
    $1-4999: 6.4%
    $5k-9999: 3.2%
    $10k-24999: 4.0%
    $25k-49999: 6.0%
    $50k-99999: 12.4% (that gets us to 38.4%)
    $100k-249999: 26.0% (which takes us to 64.4%)

    There's a 62%-ish chance that an over 65 household has a net worth north of $100k, compared to a 54%-ish chance that any household has a net worth less than $100k.

    If we go further and assume that datapoints are evenly spaced in each band (e.g. that 10% of the $50k-99999 net worth have $50k-55k), then the median for the population as a whole is about $82k and the median for the over 65's is $167k.

    Of course, "progressives" like to confuse income and wealth and say that whether one is rich or not is contingent on one's income. Witness their citing increasing income inequality as evidence of "the rich getting richer and the poor getting poorer": a great example of a non sequitur. By this logic, someone with $1 million earning 1% ($10k a year) and not otherwise working or earning income is impoverished.

    (and there are people with $1 million in net assets who earn less than, say, 50k a year: they're generally called retired)

  • Zombie Jimbo||

    "For centuries, wealth flowed from the old and relatively rich to the young and relatively poor. "

    When did this happen. Being young and relatively poor in the last century, I remember none of this.

  • Facts, Schmacts||

    I think he meant to say, "For centuries, wealth flowed from the old and relatively rich to the offspring of the old and relatively rich. And the church. And the king." Almost the same thing.

  • ||

    The CBO also did a report that showed, if you look at the amount individuals pay into social security, the top quintile only gets about 40% of what they put in while the bottom quintile gets 165%. In the short run, yes. It takes money from the young who are not as affluent and gives it to the old who tend to be much more so. In the long run, Social Security transfers wealth to those who were not able to improve their condition in their lifetime.

  • Facts, Schmacts||

    The old used to be the young. They weren't born old and rich. When they were young, they were taxed with the promise of a refund if they lived long enough. Similarly, today's working young are promised a tax refund every year. Most of them do everything possible to get that refund. They look forward to it. Are they evil and greedy for cashing their refund checks? For robbing tomorrow's youth?

  • Momma Shultz's cunt.||

    "When they were young, they were taxed with the promise of a refund if they lived long enough. Similarly, today's working young are promised a tax refund every year. Most of them do everything possible to get that refund. They look forward to it. Are they evil and greedy for cashing their refund checks? For robbing tomorrow's youth?"

    You really are powerfully stupid aren't you?

    Comparing tax refunds to SS and pretending it's not moronic...

  • ||

    Are you serious? Reason you have seriously left the reservation on this one. You have gotten sucked into the Progressive lie that SS / Medicare is a a payroll tax rather than a forced retirement savings account that whoever pays in can claim back during retirement.

  • ||

    Well, it is a payroll tax.

    And its not a forced retirement savings account. There is no account. There are no savings.

    It is a straight-up wealth transfer.

  • ||

    No. Just because Congress has spent the entire "savings" account doesn't mean it isn't still run as a forced-savings retirement program. It is not the 1%ers fault their money was added to general tax receipts instead of being put into a "Trust Fund".

  • ||

    If the tax is spent when it is collected, there are no savings, and thus no forced savings.

    Its a scam, just like any Ponzi scheme isn't really an investment even though its marketed as one.

  • nope||

    "If the tax is spent when it is collected, there are no savings, and thus no forced savings."

    Except it isn't just spent, it's a debt that must (supposedly) be repaid.

    By the way, I appreciate the attempt at pedantry, but it is a forced savings account, and there are savings, they just are represented by IOU's instead of cash.

  • Red Rocks Rockin||

    By the way, I appreciate the attempt at pedantry, but it is a forced savings account, and there are savings, they just are represented by IOU's instead of cash.

    LOL at this.

    There's no savings.

    The money's been spent. It's gone. You can wish that it was savings all you wish, but that's not how the program works. It's been a wealth-transfer scheme ever since Ida Mae Fuller cashed her first check.

    IOUs aren't worth a damn thing--the government has to issue a bond (read: more debt) to cash out the IOU. It's not coming from cash on hand.

    Except it isn't just spent, it's a debt that must (supposedly) be repaid.

    Bullshit. Every single penny is either spent for future obligations, or transferred to other programs and IOUs put in their place. Those IOUs aren't paid back in actual cash, the government has to sell a bond to put the IOU into circulation.

    And if you think that it MUST be repaid, you might want to check out Flemming vs. Nestor. You're not obligated to receive one thin dime of what you pay into the program.

  • Maxxx||

    Except it isn't just spent, it's a debt that must (supposedly) be repaid.

    The supreme court disagrees.

  • Invisible Finger||

    I agree with RC, but I also agree with the gist of Paul's commnet - Reason shouldn't be advocating "fixing" a Ponzi scheme, they should be advocating for it to be abolished.

  • michael||

    RC is right. There also isn't even a legal entitlement to the money you put in. People receive SS checks at Congress' whim.

  • CatoTheElder||

    The Social Security Administration's "compact between generations" propaganda creates the impression that it is a fuzzy compulsory savings retirement program, but this is a false impression. The law regarding Social Security unambiguously states that it is nothing of the sort.

    The Social Security Act itself reserves to Congress the right to alter, amend, or repeal any provision. It levies an "income tax on employees" and "an excise tax on employers." Taxes are forced exactions and do not create property rights.

    In Flemming v Nestor, the Supreme Court ruled that Congress could even exclude repatriated European communists who had worked in the US and paid FICA taxes from receiving Social Security benefits for the simple reason that they repatriated to a communist country. It explicitly reasoned that persons covered by the Act have no property rights to Social Security benefit. One cannot make a claim to property in which one has no property right.

    Also from Flemming v Nestor: "persons gainfully employed, and those who employ them, are taxed to permit the payment of benefits to the retired and disabled, and their dependents. Plainly the expectation is that many members of the present productive work force will in turn become beneficiaries rather than supporters of the program. But each worker's benefits, though flowing from the contributions he made to the national economy while actively employed, are not dependent on the degree to which he was called upon to support the system by taxation. It is apparent that the noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments."

    There you have it: Social Security CANNOT be soundly analogized to a contractual annuity. That's the LAW saying that, not some addled geezer or SSA apparatchik

  • ||

    You guys missed the sarcasm flag this time I think.

  • ||

    The author seems to suggest that people who are compelled to pay into the Social Security and Medicare systems ought to be denied any benefits from those systems, and indeed ought to be compelled by the threat of imprisonment to subsidize people who consume rather than produce. Other theories of social fairness are possible.

  • ||

    That is the nature of wealth transfers, after all.

    While other theories of social fairness are certainly possible, none of them apply to SocSec, Medicare, and other welfare state programs, regardless of how they are structured, as far as I can tell.

    You want a different theory implemented? Junk the welfare state.

  •  ||

    Junk the welfare state

    Just like that? Tomorrow? Serious people will debate how to begin to undo all the damage done over the past 75 years, and not make simplistic statements like "Junk the welfare state." That's a reply more fitting of uneducated anarchists.

  • Apatheist||

    So your an anarchist if you oppose the welfare state? Is this what we've come to?

    That is the problem, the people in Washington keep debating how to begin changing it and either end up doing nothing for making minor changes that they can just undo later. The system needs to be scrapped. At a minimum young people should be able to opt out starting today. Why should I have to keep paying into a system that I know is a scam and I know will be bankrupt before I'm eligible to get some of that money back? Based your entire retirement off of SS? Too bad you've had your entire life to reform the system and you didn't.

  • Apatheist||

    your you're

  • ||

    Serious people will debate how to begin to undo all the damage done over the past 75 years,

    Certainly. Even if I were God-Emperor, I wouldn't junk the welfare state in a day. But that would be my goal, to be accomplished in stages.

    A pretty easy Stage 1 is "Don't pay welfare to people who don't need it."

  • ||

    Not to belabor a moot point, but if I were God-Emperor, junking the welfare state would take about a nano second, right along with eliminating disease, traffic, pollution, pedophiles, dog-murdering cops...

    My God-Emperor is a Mighty God-Emperor

  • Invisible Finger||

    Exactly.

    I realize killing a welfare program in one fell swoop could cause violence and unrest (violating a legit function of govt) but reducing bad programs 1% at a time every election cycle is nothing but a circle jerk.

    Better to eliminate SSA altogether and roll the, say 30% neediest, SSA recipients into other existing welfare programs. And then target those welfare programs for reduction in the next cycle.

  • beowulf||

    actually i suspect the ultimate way to move income from the young and poor to the old and wealthy is to raise interest rates. High rates mean people with money get paid more for the use of it; people without money need to pay more to use it.

    Social Security and Medicare are secondary...

  • ||

    Paul said:

    "Are you serious? Reason you have seriously left the reservation on this one. You have gotten sucked into the Progressive lie that SS / Medicare is a a payroll tax rather than a forced retirement savings account that whoever pays in can claim back during retirement."

    This This THIS. I can't believe what I am reading in Reason this morning...

  • Facts, Schmacts||

    You should believe it. Reason has been on the class warfare bandwagon for quite some time.

  • michael||

    Retirement savings accounts would necessarily require accounts. These accounts do not exist. SS and Medicare are payroll taxes.

  • -||

    These accounts do not exist

    The Annual Statement I get from the Social Security Administration, detailing all 35 years (so far) of my earnings and taxes, as well as my expected benefits if I retire at 70 years, 66.5 years, 62 years, etc., as well as disability benefits and other account information notwithstanding.

    But it isn't an account. It's all imaginary. Even the paper it's written on is fake. Look! I can see right through it!

  • Red Rocks Rockin||

    But it isn't an account. It's all imaginary. Even the paper it's written on is fake. Look! I can see right through it!

    It isn't an account, fool. The Supreme Court already ruled on that 50 years ago.

    Congress is free to buttfuck you on your "benefits" anytime it wishes, and nothing you can do or say will change that.

  • ||

    Here's the disclaimer you get from SocSec's website for their benefits estimator (they no longer mail statements because of teh Austerity):

    The Retirement Estimator gives estimates based on your actual Social Security earnings record. Please keep in mind that these are just estimates. We can’t provide your actual benefit amount until you apply for benefits. And that amount may differ from the estimates provided because:
    •Your earnings may increase or decrease in the future.
    •After you start receiving benefits, they will be adjusted for cost-of-living increases.
    Your estimated benefits are based on current law. The law governing benefit amounts may change because, by 2036, the payroll taxes collected will be enough to pay only about 77 percent of scheduled benefits.

    So, they're not even trying to hide the ball.
    •Your benefit amount may be affected by military service, railroad employment or pensions earned through work on which you did not pay Social Security tax.

  • SkepticalinNC||

    Agreed. Double checked the top of the page to make sure I wasn't mistakenly on HuffPo.

  • michael||

    This "they paid into it" meme is baloney. SS isn't a pension, there aren't accounts, and there isn't a trust fund. It's always been a pay-as-you-go tax scheme. No one "paid into" anything.

    Cut them off.

  • clearer michael||

    HEY EVERYONE!

    THEY DON'T USE MY DEFINITION OF WHAT "PAID INTO" MEANS, EVEN THOUGH THE MONEY WAS DEFINITELY TAKEN!

    I THINK PLAYING DEFINITION GAMES MAKES ME RIGHT AND NOT A MORON!

  • michael||

    "I was victimized by the SSA which gives me the right to victimize others." Is that the definition of "paid into" you're looking for?

  • Franklin Roosevelt||

    "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."

    If damn policy analysts succeed in arguing that some contributors do not have a legal, moral, and political right to collect their pensions, then my social security program will just be another relief program. Then some damn politician will come along and scrap my social security program.

  • ||

    Well, they certainly have no legal right.

    A "political right" is a nice way of saying "might makes right."

    And the "moral right" to take money from people who have less than you seems a little shaky, to me.

  • Franklin Roosevelt||

    Contributors certainly do have a legal right to benefits, and will continue to have that right unless some damn politician comes along and scraps my social security program. And the payroll contributions will keep that from happening. My social security program will last as long as geezers say, "I paid into the program all my life, and I'm entitled to be taking out of it today."

    I have a JD from Columbia Law School. Where did you get yours?

  • Red Rocks Rockin||

    I have a JD from Columbia Law School. Where did you get yours?

    Flemming v. Nestor. Google it, moron.

  • Red Rocks Rockin||

    My social security program will last as long as geezers say, "I paid into the program all my life, and I'm entitled to be taking out of it today."

    Your "benefits" will last as long as other people are willing to pay for it, not as long as you keep demanding it. Your fancy law degree won't change shit about that.

  • ||

    Contributors certainly do have a legal right to benefits, and will continue to have that right unless some damn politician comes along

    Interesting definition of legal right you have there.

    I have a JD from Columbia Law School. Where did you get yours?

    Harvard. Ivy League represent!

  • jtuf||

    Why did the Baby Boomer generation turn from "Don't trust anyone over 30." to "Give me money. I'm old." They aged.

  • -||

    Pssst! The "boomers" didn't invent SS. And they're not the first "generation" to retire with SS benefits. If you have the overwhelming need to play the class-warfare game and blame somebody for SS, blame your grandparents or great-grandparents or anyone else of legal voting age in 1935, not the "boomers" who weren't even born yet.

  • Social Security||

    I wonder what the Social Security ROI is for the 1%.

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