You’ve got to hand it to the ladies at the Older Women’s League (OWL), they know how to buck a trend.
With articles appearing almost daily recognizing that Social Security is on a doomsday path to insolvency, including Time magazine’s recent cover "The Case for Killing Social Security," these OWLs say they want payouts increased.
To make its point, the report relies heavily on a single standard: yearly benefits based on the woman’s own income. Using this standard, it notes that this year women will receive $538 on average compared with $858 for men. This may disturb you if you know enough about how Social Security works or about male-female demographics to read between the lines.
One problem is that according to the report itself, 25 percent of women collecting Social Security don’t collect benefits based on their own income. Rather, since the system allows them to receive an amount equal to half the benefit level of their husband’s (who still gets his full payment), they choose the higher amount. So if a woman would qualify for only $300, but her husband takes in $1,000, she can forego the $300 and take in $500 instead.
As such Social Security is one of those rare government programs that actually rewards marriage. It contrasts with, say, the tax code — with the onerous "marriage tax" — and Aid to Families with Dependent Children which pays women to have babies so long as they keep a man out of the house. (Yet a divorced spouse can also collect half of the amount of her ex-husband’s earnings — again, without penalizing him — so long as they were married at least ten years).
Similarly, the report’s standard ignores widows’ earnings. Under the system, a widow over 65 can forego her own earnings in favor of 100 percent of what her late husband would have coming.
Men can take advantage of either of these programs, though they rarely do because the wife’s earnings are usually less than the husband’s and because there are so few elderly widowers compared to elderly widows. Indeed, almost six million widows collect their husbands’ earnings, which total $3.6 billion a month, while a mere 300,000 widowers collect their wives’ earnings of $137 million per month.
All this makes OWL screech: "The structure of the Social Security system means that decades of contributions will translate into no more retirement benefits than they (women) would receive if they never earned wages or paid Social Security taxes."
Imagine a car dealer telling you, "Even though you only paid for a Chevy Cavalier, we’re giving you the option of foregoing that and taking a Cadillac instead," whereupon you fly into a rage and shout, "You mean you’re asking me to give up that Cavalier!" Oh, the inequity of it all! Another major problem with the OWL report is that it looks at yearly benefits as opposed to lifetime ones.
That’s because women on average live almost seven years longer than men, and 15 years past 65, while men live only eight years past 65. Moreover, men are almost twice as likely as women to not reach the age of 65 at all. Almost 23 percent of men will be dead by age 65 as opposed to less than 13 percent of women.
Thus, while it’s true that women on average bring in less through their own earnings per year (because while they worked they paid less into the system), over the course of their lives they are far more likely on average to take back more than they put in. Somehow that makes them victims.
As for the real victims, OWL doesn’t give a hoot about them. "This is basically a program that taxes black men and gives it to white women," says the CATO Institute’s Stephen Moore. Indeed, black male life expectancy is slightly below the age of 65, while the average white female will live 15 years beyond that point.
Are there poor women on the Social Security roles? Absolutely. Social Security makes nobody well off and never was intended to. We could turn it into just another means-tested program, thereby reneging on the government’s promise to pay regardless of income, but the OWL report expressly rejects this. Or we could hike Social Security taxes for yet the sixth time. Since these taxes disproportionately hit the working poor, who already pay out far more for Social Security than for the income tax, this would mean robbing the working poor to pay the non-working poor. That leaves paying out even more from a system that is already destined to go broke within three decades.
If it’s inequity that OWL seeks, how about the inequity of paying into a system your whole life and finding there’s nothing left for you when you need it? Then we’ll all be playing the victim game — except it won’t be a game.
If OWL were really wise, it would join the call for phasing out Social Security in favor of a mandatory IRA system, as has been done with tremendous success in Chile. Ultimately, everyone will lose if we simply hand more money over to the constituents of whatever group shouts the loudest or prepares the most deceptive report.
Read Michael Fumento’s additional work on economics.