Robert Samuelson, a distinguished economist
, has set off a firestorm of criticism by writing the uncomfortable truth: In the 1950s and '60s, many beneficiaries received 10 or more times the amount their payroll taxes would have returned if invested in U.S. Treasury bonds and kept for retirees (they weren't). Indeed, most beneficiaries who retired before 2000 have received -- or will receive -- a surplus in benefits over what their taxes would have returned if similarly invested, write Sylvester Schieber and John Shoven in their history of Social Security, "The Real Deal." This surplus now has a present value of almost $16 trillion, says Schieber, head of research for the consulting firm Watson Wyatt Worldwide. (Shoven is a Stanford University economist.)
Naturally, the elderly don't see themselves as freeloaders. They think they've "earned" their Social Security benefits by paying payroll taxes. As Schieber and Shoven note, the term "social insurance" dates to Bismarck in 19th-century Germany. But applying it to Social Security involved much political license. In normal usage, insurance suggests protection against something you don't expect to happen -- a house fire, a car accident. By contrast, most people expect to grow old. Using the "terminology of insurance . . . [was intended] to mask the huge welfare payments being made," they write. People falsely believe they're "only getting what they have paid for." That is even less true of Medicare. In 2006 the Congressional Budget Office expects Medicare to cost $383 billion. Medicare premiums (paid by recipients) pay 12 percent; payroll taxes, 49 percent; general taxes and borrowing provide the rest.
They're not freeloaders: they're on welfare. And that fact is precisely why stories of old ladies buying catfood to eat plucks the heartstrings: they are supposed to be taken care of by the welfare checks they receive. If they were just the results of investment, would we, as a nation, have to care that they weren't as big as they anticipated?