Warren’s Profligate Sop to Seniors

She promises to lift Social Security beneficiaries out of poverty—at a price tag of $70,000 apiece.

By John F. Cogan. He is a senior fellow at the Stanford University’s Hoover Institution.

"Ms. Warren proposes to give every current and future Social Security recipient an additional $2,400 a year. She plans to finance her proposal, which would cost more than $150 billion annually, with a 14.8% tax on high-income individuals."

"But the plan’s main component is its $2,400 permanent annual benefit increase. It’s hard to imagine a costlier and less efficient means of achieving her goal. Only 7% of 46 million senior citizens who receive Social Security live below the poverty line. So the majority of Ms. Warren’s proposed Social Security bonanza would go to middle- and upper-income seniors. About $51 billion would go to the 21 million seniors who are in the top half of the U.S. income distribution. Seniors with income in the top 20% would receive $17 billion; more than twice what would go to seniors in poverty.

I estimate that the $2,400 Social Security handout will lift above the poverty line only about 1.6 million seniors who are currently living below it. The plan would cost taxpayers about $70,000 for each senior citizen lifted out of poverty. Limiting assistance to impoverished elderly Social Security recipients to the amount needed to raise their incomes above the poverty line would cost taxpayers far less—about $4,000 for each recipient."

"Ms. Warren’s plan calls for additional taxes on wage earnings, capital gains, and dividends paid to those with high annual incomes: $250,000 or more for individuals and $400,000 or more for families. But in a major break from one of FDR’s main Social Security principles, the plan provides no additional benefits in return for the new taxes. The Warren plan’s new taxes would account for about a quarter of future revenues flowing into the Social Security system. Such a large revenue stream to fund unearned benefits, aptly called “gratuities” in FDR’s era, would put Social Security on a road to becoming a welfare program."

"As a result of Social Security’s automatic wage-indexing for new beneficiaries, the average monthly benefit for someone retiring this year is nearly 50% higher than it was nearly 50 years ago, after adjusting for inflation. The median inflation-adjusted income of U.S. families has increased by only 30% during that time."