Commentary

Social Security: Bad for the Democrats

By Brooke Oberwetter
A version of this article appeared in Reason Online on June 13, 2005.

When he broke ranks with his party’s leadership last month and proposed an alternative to President Bush’s push for personal retirement accounts, Rep. Robert Wexler of Florida said, “I have the largest amount [sic] of Social Security recipients of any Democrat anywhere in the country. My allegiance to seniors is greater than my allegiance to the Democratic Party.”

Wexler seems focused on preserving the legacy and structure of Social Security, which he calls “the most successful government program in history.”

His plan certainly suggests that keeping the system solvent in its current structure is worth almost any cost. He has proposed the largest marginal tax increase this country has seen in decades: a 6 percent tax hike on all income over the current $90,000 payroll tax cap.

Let us pass over the discussion of how ever-rising marginal tax rates lead to tighter labor markets, reductions in productivity, and declines in reported income. Let us forget in their entirety the issues of tax revenue and solvency and instead try to figure out why, exactly, Democratic lawmakers are so hell-bent on preserving the basic current structure of Social Security.

As Wexler noted in his press conference, his party should be looking for “alternatives that are true to our Democratic values.” But is Social Security’s current structure consistent with Democratic values, as Wexler—and the Democratic leadership—has declared, or are the Democrats falling all over themselves to defend a legacy of discrimination?

As it has evolved, Social Security has attempted to provide American workers and their families with three things: retirement benefits, disability insurance, and survivor benefits. Those are solid liberal goals. But because of the program’s age, aspects of Social Security discriminate against many modern families, particularly gay couples, unmarried couples, dual-earner couples, and divorcees.

Fully one-third of all marriages end before the 10 years necessary for spousal benefit eligibility—among blacks, nearly a half of all marriages end in divorce within 10 years. Considering that many women take time off from work to raise children during those first 10 years, they are unable to make Social Security contributions of their own yet not eligible for spousal benefits upon divorce. Women who do remain married beyond the eligibility period but divorce later not only have a lower earnings record (if they raised children) but are forever tied to the earnings of their ex-husbands and are ineligible to receive the possibly higher benefits available from a subsequent marriage that doesn’t last a full 10 years—this feature can be particularly harmful to older Americans who wish to marry.

Even on the rosier side of marriage and commitment, Social Security discriminates. Dual earning couples, for example, often end up subsidizing the benefits of single-earner families. This is because workers are entitled to either their own benefits or the equivalent of one-half the benefits of a higher earning spouse—but not both. Women who work for a number of years but who would do better by accepting one-half of their husbands’ benefit level don’t see any increased benefits for their payroll taxes; those women lose the 12.4 percent of income that was taken from them during their working years. The money goes to subsidize the benefits of a single-earner couple.

Consider also the bias against couples who for whatever reason are unmarried. Gay couples and heterosexual co-habiting couples are unable to share the benefits of their status as workers protected by the Social Security system. An unmarried couple that has decided on a single-earner structure cannot take advantage of survivor’s benefits or spousal retirement benefits in the same way a government sanctioned married couple can.

The overwhelming support for the status quo from the political left is shocking, and should be appalling to members of the Democratic Party or anyone who holds the liberal values that Wexler extols. Bringing the system into solvency through tax hikes on labor and productivity will do untold damage to America’s economic growth in order to protect a system that systematically discriminates against core constituencies of the Democratic Party, a system that disproportionately benefits white women who have never worked a day in their lives over all other groups. Is that a status quo that the Democratic Party wants to be associated with?

While the Democrats demand that Social Security’s current structure be maintained through plans like Wexler’s, millions of women remain tied to their husbands’ earnings and millions of non-traditional families are denied access to the system. It doesn’t seem out of line to ask, why aren’t the Democrats taking the lead on transforming one of America’s most discriminatory programs into a program that treats individuals as equals?

Brooke Oberwetter is a research assistant for the Cato Institute’s Project on Social Security Choice.