GOP presidential contender Mitt Romney is now trying to recast off-the-cuff comments he made earlier this year, where he claimed 47% of Americans get government benefits and don't pay federal income taxes.
Governor Romney is now saying he was talking like a pollster/strategist, when he said he "doesn't worry about those people" and that they see themselves as “victims.”
In the aftermath, Romney is now saying his controversial remarks were an attempt at a policy debate about the size of government and entitlements. He says he doesn’t want the U.S. economy run by the government. The U.S. federal deficit at $16 trillion is now more than the size of the entire U.S. GDP.
However, take a closer look at the 49% of the population who live in households that get some type of government benefit. The government handouts are the result of a terrible recession, an intractably weak economic recovery, and baby boomers retiring in droves, thus drawing down Social Security and Medicare benefits they paid for in payroll taxes.
What’s missing in the debate is this: Are retirees getting more than they put in? The Associated Press has found just that (see below).
Ok, first off, based on Census Bureau data, as of mid-2011, about one in seven households gets food stamps, the fallout of the Great Recession. About one out of seven gets Medicare and/or Social Security benefits. Many of the 49% get government help from unemployment checks, Medicaid, or tax breaks like the earned income tax credit. And many of the poor pay payroll taxes, and state and local taxes.
But the tax-cutting conservatives are not saying "hike the poor’s federal income taxes," either.
The argument is, take a closer look at who shoulders the tax burden in this country -- 10% of Americans fork over 71% of federal income tax revenue, according to IRS data. So naturally the "tax cuts for the rich" argument falls apart, because logically they’d get cuts because it’s the upper brackets who shoulder the federal burden.
America does try valiantly to take care of the poor, the sick and disabled.
But who benefits from the payroll tax has been subject of much debate flying under the radar.
Last month, the Associated Press said: “Spouses can get (Social Security) benefits even if they never earned wages. Children can get benefits if they have a working parent who dies. People who are too disabled to work can get benefits for life.”
The Associated Press took a hard look at Social Security and reported last month that retirees today getting Social Security checks will be among the first to pay more in payroll taxes versus what they get out in the form of benefits over the rest of their lives.
The AP says it found that a married couple, both of whom worked, who retired in 2011 and paid total Social Security taxes of $598,000 can expect to collect less, $556,000, in Social Security benefits, if the man lives to 82 and the woman lives to 85. Only if you factor in a chunk of Medicare benefits will the couple break even or get a positive return, meaning they get more in retirement than they paid in.
But what about the baby boomers, what can they expect? A negative return, analysts note. They won’t do as well as their parents or grandparents. And “for high-income workers the return went negative two decades ago,” AP says.
That’s largely because ensuing generations paid more in payroll taxes. The rate was only 2% in 1937, AP reports, “the first year Social Security taxes were levied. It did not surpass 6% until 1962.” Today, the payroll tax is 15.3% on income up to $110,100 as of this year (employees pay half, employers pay the other half).
Also, Social Security didn’t figure people would live longer in retirement; it figured life expectancy was 65, not 82 or higher.
Back in 1940, when Social Security started making payments, there were 42 workers per retiree, versus about three today. That ratio is expected to fall to two to one by 2035, says the Congressional Budget Office.
Elizabeth MacDonald joined FOX Business Network (FBN) as stocks editor in September 2007 and is the author of Skirting Heresy: The Life and Times of Margery Kempe (Franciscan Media, June 2014).
Follow Elizabeth MacDonald on Twitter @LizMacDonaldFOX.