Why Progressives Support Welfare for the Rich

Democrats' counterintuitive resistance to means-testing Medicare and Social Security

Since Republicans are pushing entitlement reform and Democrats like taking money from rich people, you might think they could agree on means-testing Medicare and Social Security as part of a deficit reduction deal. Yet many Democrats are surprisingly hostile to the idea of tailoring these programs to help people who actually need them.

There are two main reasons for this resistance—one strategic, the other ideological. Neither is persuasive, even from a progressive point of view, at a time when trillion-dollar deficits are the norm and publicly held federal debt is projected to reach 150 percent of GDP within two decades.

"I don't want to see Medicare turn into a welfare program, which is what it would be if wealthier people didn't benefit from it or had a significantly reduced benefit," Rep. Keith Ellison (D-Minn.) told ABC's George Stephanopoulos on Sunday. "It needs to be something shared that Americans are all in, that we all participate in and we all contribute to." Ellison is co-chairman of the Congressional Progressive Caucus, which opposes any cuts to Medicare or Social Security benefits.

The strategic rationale for this position is that reducing or eliminating retirement subsidies for people who can easily get by without them would spoil the illusion that all of us are "entitled" to those benefits because we have "earned" them through our "contributions." In reality, Medicare and Social Security are funded through intergenerational transfers from relatively poor workers to relatively affluent retirees.

That does not sound terribly progressive, but left-leaning opponents of means testing worry that narrower versions of these programs would be politically vulnerable. "If Medicare turns from an earned benefit into a welfare program," warns Max Richtman, president of the National Committee to Preserve Social Security and Medicare, "you will see support dissipate."

There is not much evidence to support that prediction. In a 2010 Heritage Foundation report, Katherine Bradley and Robert Rector counted "over 70 different means-tested anti-poverty programs" and noted that spending on such programs "has grown faster than every other component of government over the past two decades."

Furthermore, Medicare and Social Security already are transfer programs; they are just poorly targeted. If the aim is to prevent the elderly from sinking into poverty or to ensure that they can obtain the medical care they need, it hardly makes sense to use payroll taxes extracted from middle- and working-class employees to cut monthly checks to Michael Bloomberg or subsidize prescription drugs for Ross Perot.

Both programs do include some modest means tests. The monthly premiums that help fund Medicare are higher for wealthier beneficiaries, for example, and the share of Social Security benefits subject to tax is larger for retirees with higher incomes—functionally equivalent to reduced benefits.

But with Medicare and Social Security facing unfunded long-term liabilities of $42.8 trillion and $20.5 trillion, respectively, they need to move much further in the direction feared by Ellison and Richtman. As Andrew Biggs of the American Enterprise Institute observed last year in National Affairs, "It is inevitable that Social Security, Medicare, and other government programs will become less generous toward the rich than they are today."

If progressives are having trouble adjusting to this reality, it is not only because they (mistakenly) believe means testing will jeopardize these programs. As William Voegeli observes in his 2005 book Never Enough: America's Limitless Welfare State, progressives' counterintuitive resistance to means testing also stems from a communitarian vision that sees universal participation in tax-funded social services as inherently good.

Voegeli quotes Robert Kuttner, co-editor of The American Prospect, who in his 1987 book The Life of the Party argued that "there is immense civic value to treating middle-class and poor people alike." According to Kuttner, "a common social security program, or medical care program, or public school program" fosters "social solidarity."

You may or may not find this vision appealing. Either way, we can no longer afford it.