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Sunshine Exposes Some Bureaucratic Rot

With government bureaucracy, the old saying proves true: Sunshine is the best disinfectant.

The Washington Post recently reported on a practice that had cropped up while no one was looking. The U.S. government - specifically the Social Security Administration - was seizing taxpayers’ refunds on the grounds that the money satisfied an outstanding debt. The catch: The debt might have been incurred decades ago, and not by the person whose money was being grabbed but by the person’s relative.

This is exactly what happened to Mary Grice, with whom The Post spoke. Grice’s federal and Maryland tax refunds were intercepted to satisfy a debt supposedly incurred in 1977. The government could not even tell Grice which of her family members Social Security claimed to have overpaid. She had no prior notice and no way to contest the government’s claim of overpayment.

Cases like Grice’s have proliferated since a line in a farm bill passed three years ago rescinded the 10-year statute of limitations on the federal government’s ability to collect outstanding debt. The Post reported that since the measure was enacted, the Treasury Department has collected $424 million in debts that were more than a decade old. Taxpayers have won only about 10 percent of the more than 1,200 appeals filed on such cases, according to Social Security spokeswoman Dorothy Clark.

The response to The Post’s article was immediate and incredulous. Jordan Weissmann, writing for Slate, pointed out, “Even if a whole family benefited from a Social Security check, the idea of seizing money from a child to pay the debts of a parent would probably make most a bit queasy.” In the private sector, it is generally not allowed at all except in a few particular cases, as the Federal Trade Commission notes on its website. Weissmann also criticized the logic in pursuing such cases when the amount of money is large by the standards of the taxpayers affected but small from the government’s point of view.

Walter Olson, at the Cato Institute’s “Overlawyered” blog, wrote of The Post’s story, “Need it be added that many of the methods the government is using would be deemed unlawful if asserted by creditors trying to collect private debts?” A Mother Jones headline characterized the practice as “Big Government Run Amok.” Reportedly, many taxpayers whose refunds had been intercepted also complained to their congressional representatives, prompting lawmakers to allege that Social Security went further than Congress intended in pursuing older debts.

The Post article provided enough sunshine, it seems, to nip this particular practice in the bud. Four days later, the Social Security Administration announced it would immediately stop trying to collect debts incurred more than 10 years earlier.

In a statement, acting Social Security commissioner Carolyn Colvin said, “I have directed an immediate halt to further referrals under the Treasury Offset Program to recover debts owed to the agency that are 10 years old and older pending a thorough review of our responsibility and discretion under the current law.”

People will do things as part of an anonymous bureaucracy that they would never do if anyone was looking at them, let along identifying them. The original Post article observed that no government agency was eager to take credit for the statutory change that authorized Social Security to pursue ancient debts. Apparently it was Martians who inserted the line into the 2008 farm bill that eliminated the 10-year statute of limitations. Maybe it was deposed Ukrainian President Yanukovych who actually intercepted tax refunds due to people who had no idea that Social Security thought it was owed money, who had never personally received any money from Social Security, and who received no explanation, let alone proof, of the alleged debt.

Of course, Social Security would never miscalculate what someone owed it, or vice versa. Those sorts of errors just don’t happen in government, right?

We can call Marc Fisher’s article for The Post public service journalism. All it took was a little exposure for the people responsible for this outrage to throw up their hands and say, “Not me, I would never do such a thing.” And, more important, to put a stop to it.

Bloomberg’s Megan McArdle wrote, in the wake of the government’s decision to halt the practice of pursuing such debts, about the importance of imposing statutes of limitation in the first place. “The government should care more, not less, than normal businesses about helping people to close the books and move on. It should be more scrupulous about procedural legitimacy, not less so.” I am not sure I agree that government has a greater obligation to be careful and considerate of other people’s rights than anyone else, but its responsibility certainly is not less.

Social Security has real financial issues, but those issues do not have anything to do with benefits that may have been erroneously paid decades ago. Nickel and diming the adult children of deceased beneficiaries is not what will fix the program’s problems, which are attributable to America’s aging population and the refusal of policy makers to do anything constructive to come to grips with that reality. Solutions will require real change and difficult choices, not simply plucking refund checks out of taxpayers’ fingers.

This sort of high-handed treatment of law-abiding citizens does nothing to build support for Social Security’s benefit programs - or the increasingly urgent need to fix them.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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