WASHINGTON — In a recent column, I noted that Social Security is often "middle-class welfare" that bleeds the country. This offended many readers. In an e-mail, one snarled: "Social Security is not adding one penny to our national debt, you idiot." Others were more dignified. Some argued that Social Security, with a $2.6 trillion trust fund, doesn't affect our budgetary predicament.
Wrong. Recall that Social Security, Medicare and Medicaid, the main programs for the elderly, exceed 40 percent of federal spending. Exempting them from cuts — as polls indicate many Americans prefer — would ordain massive deficits, huge tax increases or draconian reductions in other programs. That's a disastrous formula for the future.
We don't call Social Security "welfare" because it's a pejorative term, and politicians don't want to offend. So their rhetoric classifies Social Security as something else when it isn't. Here is how I define a welfare program. First, it taxes one group to support another group, meaning it's pay-as-you-go and not a contributory scheme where people's own savings pay their later benefits. And second, Congress can constantly alter benefits, reflecting changing needs, economic conditions and politics. Social Security qualifies on both counts.
Let's start with its $2.6 trillion trust fund. Doesn't this prove that people's payroll taxes were saved to pay for future benefits, disconnecting them from our larger budget problems? Well, no. Since the 1940s, Social Security has been a pay-as-you-go program. Most benefits are paid by payroll taxes on today's workers; in 2010, those taxes covered 91 percent of benefits. The trust fund's $2.6 trillion would provide only 3.5 years of benefits, which totaled about $700 billion in 2010.
The trust fund serves mainly to funnel taxes to recipients, and today's big surplus is an accident. It will disappear as the number of retirees rises.
Similarly, Congress has repeatedly altered benefits. From 1950 to 1972, it increased them nine times, including a doubling in the early 1950s. In 1972, it indexed benefits to inflation. People didn't complain when benefits rose, but possible cuts now trigger howls that a "contract" is being broken. Not so. In a 1960 decision (Flemming v. Nestor), the Supreme Court expressly rejected the argument that people have a contractual right to Social Security. It cited the 1935 Social Security Act: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to Congress."
All this makes Social Security "welfare." But we ignored these realities and encouraged people to think they "earned" benefits and that Social Security is distinct from the larger budget. Politicians, pundits, think-tank experts and journalists engaged in this charade to spare Social Security's 54 million recipients the discomfort of understanding they're on welfare.
A relatively small elderly population sustained these fictions. Now, this is no longer possible. Contrary to the Obama administration's posture, Social Security does affect our larger budget problem. Annual benefits already exceed payroll taxes. The gap will grow. The trust fund holds Treasury bonds; when these are redeemed, the needed cash can be raised only by borrowing, taxing or cutting other programs. The connection between Social Security and the rest of the budget is brutally direct. The arcane accounting of the trust fund obscures what's happening. As important, how we treat Social Security will affect how we treat Medicare and, to a lesser extent, Medicaid.
It is because these programs involve middle-class welfare that cuts could occur without inflicting widespread hardship. No doubt people would be outraged. Having been misled, they'd feel cheated. They paid their taxes, why can't they get all their promised benefits? But the alternative is much worse: imposing all the burdens on younger taxpayers and cuts in other government programs. Shared sacrifice is meaningless if it excludes older Americans.
Robert J. Samuelson is a Washington Post columnist.