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Words and phrases have a powerful impact. They motivate and mislead. They’re subject to perceptions and preconceived notions. They come and go in fashion. Whatever happened to the word “gobbledygook”? OK, I admit it, I’m also a fan of “curmudgeon.”
Today, there are several words and phrases in fashion that pack an emotional punch, but sometimes they’re misunderstood or go unquestioned. When you hear the following 10 words and phrases, I’d advise you to put them under a magnifying glass:
1. Affordable. A simple word, right? But what if I added health care, as in “affordable health care.” You’ve heard that phrase a lot over the past decade, but have you ever seen it defined? When we buy a car, we may define affordable as the ability to make the monthly payments. But if we applied those same dollars every month to health care, the amount would likely be deemed unaffordable. Indeed, paying any amount for health care is often perceived to be too much.
2. Paycheck to paycheck. This phrase is usually preceded by the word “living.” Together, the words trigger empathy and paint a picture of inadequate income and struggling financially. While that may be true, we often fail to consider that—like affordable—this, too, is a relative term. In fact, it can apply at any income level: Consider the deep-in-debt Johnny Depp.
3. Earned. I hear this term a great deal in reference to Social Security. “I earned my benefits,” people will say. “I paid for them.”
That’s a misconception. If it were true, your monthly Social Security checks would stop once you had been repaid all of your and your employers’ contributions, plus interest. The fact is, how much your family receives in Social Security benefits is essentially unrelated to the total taxes you paid, thanks in large part to spousal and survivor benefits.
4. Fair share. When we were kids, we’d use this notion when dividing up candy. Now, it comes up with reference to taxes. I suspect it would be difficult to find people who think they don’t pay their fair share.
But what counts as a fair share? In 2016, the top 1% of earners paid 37.3% of income taxes, more than the bottom 90% combined. But that statistic doesn’t persuade many people—who instead point to the regressive nature of Social Security payroll taxes.
Social Security payroll taxes are based on earnings up to the taxable wage limit, which is $132,900 in 2019. The benefit formula also gives greater weight to lower income workers and hence provides a higher income replacement percentage. Nonetheless, a worker earning $200,000 pays a lower percentage of total income in Social Security taxes than a worker earning $30,000—and, according to many, the higher-paid worker isn’t paying his or her fair share.
5. Wealthy. Another relative term—and another notion subject to much debate. To be in the top 1% of income earners, you must make at least $421,926 a year, but that varies widely by state. In Mississippi, you need $254,362. When we use the term “wealthy,” we generally think of the other guy—and the other guy thinks of someone else. Yes, there’s somebody out there who thinks you’re wealthy.
6. Quality. Today, quality—like affordable—often pops up in conversations about health care. It’s a term frequently thrown about, but difficult to define. There are some frequently cited measures, like hospital infection rates and readmissions. But maybe we should also consider other data. What about the billions spent on unnecessary care or estimates that medical mistakes are the third leading cause of death in the U.S.?
7. Surplus. Once again, this seems like a straightforward term. According to the dictionary, a surplus is “the amount that remains when use or need is satisfied.” But when there’s talk of the Social Security surplus, what folks really mean is the reserve—money set aside because revenue at one time exceeded current payments.
Social Security, like a pension plan, has accumulated liabilities—benefits that need to be paid in the years ahead. According to the latest Social Security Trustees’ report, the unfunded liability for Social Security is $14 trillion. The current reserve, which is being depleted, holds about $2.9 trillion, or some $11 trillion less. Sorry, no surplus.
8. Equal pay. It’s been the law for more than 50 years: No pay inequality can be tolerated based on any form of discrimination. No doubt some outright discrimination still exists.
But beyond that, it gets tricky. Do we really mean or want equal pay in the literal sense? The law permits pay differences when a merit system is used or when one person has a higher education level. But defending the accuracy, fairness and applicability of these factors in any given situation is tricky—and it often gets employers in trouble.
9. Free. A wonderful word. I have a friend in England who assures me that, once he turned age 65, his health care was free. He didn’t even have to pay premiums. When we hear the word “free,” we should immediately wonder: Who’s footing the bill?
10. Paid for by the government. The government may arrange payment. But ultimately, the money paid out comes from somewhere else. Where? More often than not, that would be you and me.
This column first appeared on Humble Dollar. It was republished with permission.
