Against means testing

By Kathy G.

Over at TNR's The Plank, Josh Patashnik remarks in passing that entitlement programs should be means-tested. I strongly disagree; in most cases, I think means testing is a bad idea, for reasons of equity as well as efficiency.

On the face of it, a means test for a program like Social Security seems reasonable. Why should Warren Buffett be getting a Social Security check, anyway?  Shouldn't a program like Social Security go only to those in need? The "fairness" argument in favor of means tests may seem even more compelling when the program in question is one in which the benefits accrue mainly to the middle and upper classes, such as higher education, which is free and non-means-tested throughout much of Europe. Why should working class taxpayers be funding college education for sons and daughters of the rich?

But ultimately, the case against means testing seems much stronger to me, for both equity and efficiency reasons.

I'll deal with the efficiency arguments first. Means tests always require bureaucracies to vet and investigate applicants to make sure they meet program qualifications. In practice this can be quite expensive, and leads to a much higher percentage of program funds going to administrative costs, which of course is less than ideal from an efficiency standpoint.

Secondly, means tests can create perverse economic incentives. Whenever there are means tests, some people are inevitably going to work less or stop working altogether, so that their income does not disqualify them for the benefit. Again, that's not terribly efficient, and it's morally problematic as well.

There are also very strong equity arguments against means tests. Means tests create transaction costs which increase the price of accessing programs and services. Once you start requiring people to fill out forms, provide proof of income, etc., you will discourage some people who qualify for the benefit from applying for it. This makes it harder for some of the people who need the program most to take advantage of it.

The biggest problem with means tests, though, is that they make the relevant programs a lot more politically vulnerable. A program or service that is for the poor only quickly becomes stigmatized, and once it becomes stigmatized, it's easy to cut funding or end the program altogether (see: AFDC). As the saying goes, a program for the poor is a poor program.

The New Dealers knew this lesson well, and it's one of the reasons they made Social Security universal. Because the middle class benefits from Social Security, it enjoys strong political support. If it was means-tested and only low-income people benefited from it, the Republicans would have finished it off long ago. And btw, that's why many Republicans do support a means test for Social Security -- as a back-door way of killing of it. Or making it small enough that it can be drowned in the bathtub, as it were.

Even the strongest card the supporters of means tests hold -- the "why should Warren Buffett collect Social Security?" argument -- falls apart once you look at it more closely. The answer to the Warren Buffett problem is to create a progressive tax system, so that the amount that the wealthy pay in taxes is greater than the amount of the benefits they receive. Easier said than done, I know, but it's not an insurmountable problem.

Comments

[namvetted]

Means testing is just another Republican talking point to back-door the killing of Social Security. Just like the death tax nonsense, it's another example of their attempt to control the language of the argument, then divide those to be conquered, and finally marginalize anyone who isn't them. Your arguments are spot on.

[jlr]

Making people stand in line for hours to get their government cheese is, in itself, a remarkably effective means test. No paperwork or vetting needed.

[nihil obstet]

The means test is an ideological mechanism to reinforce the atomization of society for the benefit of the powerful. It says all your actions should be based on what's most profitable to you as an individual competing against other individuals.

When education, for example, is means tested, a significant proportion of the people who could otherwise be educated will not be. The U.S. experience with universal public education through high school, with the establishment of land grant colleges, and with significant expansion of the ability to go beyond high school in the G.I. bill explains why Europe has adopted free postsecondary education -- an educated public is necessary for national strength and prosperity. The rising cost of college education in the U.S. is likely to mean that the future won't happen here anymore, unless we can keep importing educated talent.

We could go through most social programs for similar results. When you means test factors necessary for a strong society, you weaken the society.

[nihil obstet]

The means test is an ideological mechanism to reinforce the atomization of society for the benefit of the powerful. It says all your actions should be based on what's most profitable to you as an individual competing against other individuals.

When education, for example, is means tested, a significant proportion of the people who could otherwise be educated will not be. The U.S. experience with universal public education through high school, with the establishment of land grant colleges, and with significant expansion of the ability to go beyond high school in the G.I. bill explains why Europe has adopted free postsecondary education -- an educated public is necessary for national strength and prosperity. The rising cost of college education in the U.S. is likely to mean that the future won't happen here anymore, unless we can keep importing educated talent.

We could go through most social programs for similar results. When you means test factors necessary for a strong society, you weaken the society.

[Paul W]

The supporters of Social Security in the Roosevelt administration and Congress knew that you had to include everybody in order to avoid political splintering over the issue. It is also why they didn't propose a graduated tax to support it: it amounted to creating the same problem.

[Chris Hammond]

Means testing also I think promotes social inequality through stigmatization. If we means test social security, those collecting social security will be identifiable, branded as "poor" and stigmatized. A similar situation already, to a certain extent, exists with state universities.

It's interesting to think that non-means testing programs can actually be equalizing, but when thought about, this truth becomes obvious. Free universal university education provides no exceptional benefits upon the rich, but the current system, with Ivy League schools costing upwards of $50,000 a year, certainly does.

Social equality is practical as well, in that it will foster growth. Obviously universal university education will provide for a more educated and thus more productive populace, but I think it goes further than that. Having a feeling that you are on a similar standing as everyone else, and not grievously disadvantaged at the onset, will result in less despair and a more can-do attitude. It's this attitude that has powered American growth, but it is waning due to gross inequalities and a perceived sense that improving one's lot is impossible.

[arbitrista]

The argument against means-testing reminds me very much of the argument about lifting the income cap on social security payroll taxes. Which is one of the reasons I was so happy that Obama brought it up.

[Linden]

I agree with Obama on lifting the Social Security payroll tax cap. I disagree with him when he says Social Security is in a crisis. It isn't.

[Melvin]

I really agree with this essay. I am getting to be a geezer. I have paid the maximum into Social Security each year since the early 70's. I have a 401k and an IRA. I have over a half million dollars equity in my house. I am in my 60's and I work at least five days every week, usually six.

If the government were to means test Social Security, I probably would be declared to be ineligible. (Let's face it, they don't save money just by disqualifying Warren Buffett and Bill Gates.)

But I have a DEAL with this government. If I pay money into the Social Security system, they'll pay me a benefit when I get old. It is absolutely the case that if I hadn't had to pay the money to Uncle Sam, I would have been able to save some of it and my 401k would be much bigger by now. (And by the way, because I have been self-employed for thirty years, I have been paying TWICE as much as those of you who are employees.)

When I consider when I can call it a day, and what I'll have to live on, the SS benefit is on the table. It's not enough for me to live on, but it's not a poke in the eye either.

[Melvin]

I really agree with this essay. I am getting to be a geezer. I have paid the maximum into Social Security each year since the early 70's. I have a 401k and an IRA. I have over a half million dollars equity in my house. I am in my 60's and I work at least five days every week, usually six.

If the government were to means test Social Security, I probably would be declared to be ineligible. (Let's face it, they don't save money just by disqualifying Warren Buffett and Bill Gates.)

But I have a DEAL with this government. If I pay money into the Social Security system, they'll pay me a benefit when I get old. It is absolutely the case that if I hadn't had to pay the money to Uncle Sam, I would have been able to save some of it and my 401k would be much bigger by now. (And by the way, because I have been self-employed for thirty years, I have been paying TWICE as much as those of you who are employees.)

When I consider when I can call it a day, and what I'll have to live on, the SS benefit is on the table. It's not enough for me to live on, but it's not a poke in the eye either.

[Joyful Alternative]

No one's mentioned self-stigmatization. People do not take means-tested benefits for which they qualify because of their pride; they do not want to see themselves as losers or parasites. Benefits that are available to everyone--Social Security, universal single-payer health insurance--remove that sense of shame and enable decent, self-respecting, stubborn people to accept what should be theirs as part of our society.

(And I also have been self-employed and paying double FICA for 30 years, but I didn't get rich on it or intend to. I needed to be at home to care for a spouse who'd become disabled--and who refused to apply for Social Security disability until I convinced him he was entitled to it because he'd been paying into the program since high school for disability insurance as well as old age insurance. He was not alone; I've known people who'd rather go hungry or let the roof keep leaking on their heads than accept "charity.")