One Friday I made a big on-air mistake. I attempted to, in answer to criticism on another blog, offer possible solutions to the overreaching big government expansion and its assault on individual liberty. My error was in not being prepared well enough to defend my points. It was the first, and hopefully last, time I will ever underestimate my audience.
The caller questioned my stand on Social Security and, while time constraints did not allow me to construct a quality answer, better preparation in defense of my views would have answered much of the caller’s concern. Social Security is the single biggest political issue in our country. I say that because a majority of Americans are effected by it, and I say it because support for Social Security is the single best summation of citizenry’s role in allowing the growth of our federal bureauracracy. I will make my case:
The Social Security Act was drafted during Franklin Roosevelt’s first term by the President’s Committee on Economic Security, under Frances Perkins, and passed by Congress as part of the New Deal. The act was an attempt to limit what were seen as dangers in the modern American life, including old age, poverty, unemployment, and the burdens of widows and fatherless children, (http://en.wikipedia.org/wiki/Social_Security_(United_States)
By dollars paid, the U.S. Social Security program is the largest government program in the world and the single greatest expenditure in the federal budget, with 20.8% for social security, compared to 20.5% for discretionary defense and 20.1% for Medicare/Medicaid. Social Security is currently the largest social insurance program in the U.S., constituting 37% of government expenditure and 7% of the gross domestic product. (wikipedia)
I believe it meets the criteria of an “entitlement program”. It is, as Milton Friedman opined, a regressive tax which actually provides less benefits- on average – for the poor. A single individual who dies before age 62, who is more likely to be poor, receives no retirement benefits despite his years of paying Social Security. In the book How Social Security Picks Your Pocket other factors affecting Social Security net benefits are identified: Generally, people who work for more than 35 years get a lower net benefit – all other factors being equal. People who don’t live long after retirement age get a much lower net benefit. Finally, people who derive a high percentage of income from non-wage sources get high Social Security net benefits because they appear to be “poor,” when they are not. The progressive benefit formula for Social Security is blind to the income a worker may have from non-wage sources, such as spousal support, dividends and interest, or rental income.It also meets the criteria in that wealth is redistributed from working Americans to illegal immigrants and some non-working Americans who never paid into the system. It is purely a collectivist scheme, as the dollars earned by an individual are not owned by that individual – despite the nice little “benefit analysis” mailings the Social Security Administration sends out.
The saddest part of this is that many Americans believe that the monies they have paid into Social Security is safely tucked away into a “lock box”.
The trouble with all this fulmination about lock boxes is that it just isn’t true. There is no lock box. There never has been. Lock boxes are meaningful only so long as someone has a clear property right to the key. Lock boxes require private property, and politics is all about converting private property to political uses. If you invest your money in a bank or mutual fund, that money is yours, and you are rightfully entitled to the resulting earnings according to the contract between you and your financial institution. Your money is in a lock box, in that the financial institution is bound by its contract with you. (http://www.virginiainstitute.org/viewpoint/_vvwagner.html)
Even with the current massive build-up of surpluses, it is widely acknowledged that by 2030 the trust fund will be gone and payments will be hugely in excess of revenues. In other words the political promises that were made to beneficiaries are inconsistent with the commitments that were made to taxpayers.
Under the current system, once a worker pays his or her Social Security taxes into the system, the worker no longer owns that money. Most workers assume that because they pay Social Security taxes into the system their whole working lives, they have some sort of legal guarantee to the system’s benefits.
Unfortunately, exactly the opposite is true. In two landmark cases, Flemming v. Nestor and Helvering v. Davis, the U.S. Supreme Court ruled that workers have no right to receive Social Security benefits. Congress and the president may change, reduce, or even eliminate benefits at any time. Retirees must ultimately depend on the good will of 535 politicians to determine how much money they will receive in retirement.
The basic problem is that the way Social Security is currently set up, workers don’t own their Social Security funds. Because workers don’t own their money, Congress treats that money like its own: free to spend on whatever the members choose. And spend it they do, on everything from the war in Iraq to the International Fertilizer Development Center. In return, the Social Security Trust Fund is given a bond, essentially an IOU, which will eventually have to be repaid out of future taxes. (http://www.cato.org/pub_display.php?pub_id=3970)
There is no question in my mind that it must be ended. I prefer a graduated approach. Privatization, along the lines of of Galveston County, Texas where several thousand employees were allowed to opt out of the Social Security program in the early 1980s, and have their money placed in a private retirement plan instead. While employees who earned $50,000 per year would have collected $1,302 per month in Social Security benefits, the private plan paid them $6,843 per month. While employees who earned $20,000 per year would have collected $775 per month in Social Security benefits, the private plan paid them $2,740 per month, at interest rates prevailing in 1996. George W.’s attempt at privatization was lambasted, and for the very reason that Social Security must go. Social Security embodies the sacrifice of individual liberty for the sake of security that is the high octane fuel of big government statism and collectivist ideals.