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6 Reasons Joseph Stiglitz and Other Top Economists Think Means-Testing Medicare & Social Security Is a Destructive Idea

Means-testing is a back-door strategy for taking away benefits earned by hard-working Americans.
 
 
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In Washington-speak, “means-testing” is a scheme to deny or reduce Medicare and Social Security benefits for people who are “too wealthy” in the name of saving money. It’s a counterproductive, harmful idea, but one that well-intentioned liberals often end up embracing.

It’s easy to see why. Economic inequality has exploded to dangerous levels, and the argument for means-testing seems to appeal to a powerful sense that the rich are getting more than their fair share at the expense of everyone else. Combine this with the deficit hysteria promoted by conservatives, and the trap is set.

Don’t fall into it. The truth is that means-testing is a sneak attack on vital programs meant to weaken and eventually destroy them. There’s a reason why an ultra-conservative like Paul Ryan pushed means-testing during the presidential campaign. And there’s a reason why private equity billionaire Pete Peterson, enemy of Social Security and Medicare who served in Richard Nixon's cabinet, makes a special point of bringing up means-testing when he is talking to liberals.

Conservatives push means-testing because it’s a highly effective political strategy for getting liberals and progressives to act against their own values and interests -- so effective that some economists billing themselves as liberal, such as Jared Bernstein, a former adviser to the Obama administration, sometimes promote means-testing as a reasonable idea. Bernstein recently went on CNBC and said that means-testing “sounded like a good idea” and characterized people opposed to it as “fringe.”

Bernstein’s assertion that means-testing opponents are “fringe” is nonsense. Does that include Paul Krugman of the New York Times, who describes means-testing as "an even worse idea, on pure policy grounds, than even most liberals realize"? In researching this article, I communicated with several highly respected economists, including Nobel Prize-winner Joseph Stiglitz, James K. Galbraith, Dean Baker, and Thomas Ferguson. All of them expressed their concerns about means-testing and provided a variety of sound arguments against it. (Bernstein, after being roundly criticized, backtracked in a blog and admitted that means-testing is a bad policy idea and a questionable way to address income inequality. He just forgot that when he was on TV!)

Here are six reasons why you should be on high alert any time you hear the phrase "means-testing" -- whether it comes from government-hating conservatives or liberals who wish to appear “moderate.” The truth is that there is nothing moderate or reasonable about means-testing – or any other plan to weaken Social Security and Medicare.

1. Means-Testing Undermines Progressive Values

At their heart, programs like Medicare and Social Security are about fairness, equality and shared citizenship, values that progressive Americans hold dear.

Medicare and Social Security are not welfare programs. They are benefits that people pay for as they work. They are also smart social insurance programs that spread risk across society in order to protect everyone at rates no private insurance scheme, with its much smaller risk pool, could touch .

When I spoke to Joseph Stiglitz, he discussed the idea that “means-testing is mean.” Programs like Medicare and Social Security, he explained, are matters of political economy. They are important to social cohesion, where support comes from the fact that everybody is participating. “We don’t means-test public education,” explained Stiglitz, “because we believe that we want people to have the same opportunities and we lose out on that with means-testing.” The same is true of our belief that everyone deserves a dignified retirement and adequate medical care in old age.

Medicare and Social Security are not handouts to the needy. They are not even intended to be a safety net. In their design, they promote the fundamental notion that dignity and good health in old age are not special privileges that can be bestowed or taken away. They are fundamental rights that every working American who has contributed productively to the economy can expect to enjoy. As James K. Galbraith told me in an email, “It’s insurance, not charity.”