Social Security, Medicare not welfare 02-25-2011

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Guest column by Mabel Ryan

It has become customary today to think of and speak of Social Security and Medicare payments as being the same as financial assistance given to the impoverished and destitute. Nothing could be further from the truth. These payments are made to individuals as payouts no different than any other insurance policy payout. The only obvious difference is that employed persons have no choice in whether to buy these insurance policies.

Financial assistance (known as welfare) to those lacking food, clothing, housing, and other necessities of life, is the hallmark and the responsibility of any civilized society to its citizens. The USA has long been known for its sensitivity and largess in this regard. Some would say, and would be correct in saying, that the USA has been oversensitive and, in many cases, have become enablers to habitual welfare recipients who refuse to take responsibility for their own and their families’ well-being. But that’s another subject for further discussion.

The Federal Insurance Contributions Act (FICA) was established by The Social Security Act of 1935. Medicare law was enacted in 1965. These “Acts” were contracts drawn up by the U.S. government which specified certain actions that must, by law, be taken by each individual entering into these agreements.

On the one hand, the employee was mandated to turn over to the U.S. Treasury a percentage of their wages each pay period. This percentage was set in 1935, but with the stipulation that this percentage could be increased at any given time by the U.S. Treasury, a demand that has been exercised many times since the original contract was enacted.

In addition, the employer was mandated to pay to the U.S. Treasury the same percentage of wages as that required of the employee. When the percentage increased for the employee, the percentage also increased for the employer.

If one wanted to provide employment, or to be employed, these became offers by the government that couldn’t be refused.

In other words, the insurance premiums required by the U.S. Treasury for these two insurance policies, Social Security and Medicare, would be paid equally by the employee and the employer. The insurance policy for Social Security has been in effect for 75 years, and the insurance policy for Medicare has been in effect for 45 years.

The money collected by the Federal Insurance Contributions Act (FICA) by way of these premiums, is used for retiree benefits, disability, children of deceased workers, surviving spouses, and to pay Medicare hospital insurance benefits for the elderly. No where in this contract will you find mention of financial assistance to the indigent, albeit life being what it is, many times these insurance payouts are made to persons of limited financial means. These conditions do not in any way contradict the terms of the insurance policy called FICA.

It is simply insurance policies demanded by the U.S. government and which the insured have no choice other than to purchase and pay for these policies, and to comply with the government terms.

Now some will argue that the FICA paid over the years is greatly exceeded by payments made to policy holders by way of Social Security and Medicare payments, and that these recipients are receiving far more from FICA for the premiums paid than they would receive from any other investment. That argument is without proof since that would depend on where the employee, given the opportunity, would have invested the money that was demanded by FICA. Some personal investments would have produced more funds, some less.

Also, an employee and his/her employer could pay for 40 or more years into the FICA fund, only to have the employee die before being old enough to collect any benefits, or die soon after beginning to collect. In such cases, the FICA fund retains the premiums paid.

The argument that the surviving spouse would then benefit from the Social Security insurance is only true if this living spouse had never been employed themselves. If the survivor has sufficient employment history and is collecting Social Security on their own, that income is deleted before paying survivor benefits. In these cases, two employees and their two employers contributed funds to pay for these insurance policies, but only one benefit is paid by FICA. Again, the FICA fund retains the premiums paid.

Let’s look at a similar scenario of two young fathers, each buying a multimillion dollar life insurance policy payable to his family on his death. One of these young fathers expire after a short time, his family collects on the insurance policy, while the other father may live to be a hundred years old before his family collects the insurance. However, unlike FICA insurance for the employed, neither of these families were forced to buy either one of these life insurance policies, it was their free choice.

The point is that insurance, be it government mandated insurance (FICA) or privately purchased insurance, is an unpredictable crapshoot, since none of us know the period of our life span, or what medical problems will be encountered in the future. However, if employed, FICA does not give one any choice in whether to buy or not buy Social Security or Medicare insurance—it is mandated by the US Treasury Department.

The unlearned, found in both the US Congress and the media, continue to call Social Security and Medicare “entitlements.” Unfortunately, although not supported by the dictionary, in society today, the word “entitlement” is spoken of as a government handout, free of charge to the recipient.

Social Security and Medicare recipients are indeed entitled ---- they are entitled to be paid that which was guaranteed in the insurance policies which they were forced to buy and pay for with FICA premium payments.

These insurance policies are no different than the insurance we voluntarily buy on our homes and cars --- if our home and/or car is destroyed or damaged, we are entitled to collect damages according to the insurance policy we purchased. Identifying Social Security or Medicare insurance payouts as free-of-charge government handouts, are misnomers used only by the ignorant.

Mabel Ryan is president of Life Education Ministry, Inc. She lives in Southwest Ocala.