Libertarians Against Liberty: How Not to Criticize Social Security

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Libertarians Against Liberty: How Not to Criticize Social Security

by Ari Armstrong, April 12, 2005

One of the consequences of pretending that one's political prescriptions are compatible with any and all philosophical foundations is that one tends to focus on activism and salesmanship and excuse shoddy argument. This problem is readily apparent in the April, 2005, edition of LP News, the official publication of the Libertarian Party (LP). I discuss much of that publication elsewhere. But one Libertarian article about Social Security is so horrid that it deserves a distinct critique.

The article, by Wm. Donald Tabor, Jr., page 9, contains numerous errors and leaps of logic. It is a perfect example of what Peter Schwartz calls the "utter scorn for ideas" demonstrated by many Libertarians (Voice of Reason 315). (It is worth pointing out, though, that a number of self-identified libertarians have addressed Social Security intelligently.)

Tabor begins by promising to tell Libertarians how they can be "pre-positioned to take advantage" of the "coming collapse of the Social Security system." He never accomplishes that goal.

Tabor correctly explains that the "Social Security Trust Fund" consists of "IOU's from the Congress, to be paid back from the general fund." But then Tabor incorrectly asserts, "Inevitably, Social Security obligations are going to squeeze out a great deal of general fund spending and the size of government will be reduced whether Congress wants to do so or not." But there's no reason to believe Tabor's prediction will come true: Congress can merely raise taxes and/or cut benefits to close the gap.

Then Tabor suggests to Libertarians that "there are actions we can take to help the crisis along." Woa! Isn't the goal to solve the crisis in a way that increases liberty?

Tabor explains that Bush's "plan for Social Security reform is to gradually phase out Social Security with compulsory personal investment for retirement. Of course, compulsory anything is anti-libertarian, but it still serves our purposes." Tabor's remarks don't make any sense. Tabor purportedly wants to help Libertarians achieve libertarianism. Compulsory personal investments are anti-libertarian. How, then, do such investments serve the purposes of Libertarians?

Tabor's case rests on the notion that it's a good thing to "help the crisis along." He continues: "The diversion of FICA funds into these personal accounts... will bring the day of reckoning much closer... The borrowing necessary for the transition will use up all of the federal government's ability to borrow. Congress will be forced to live within its means. Government is going to get a lot smaller. We should hold our noses and support Bush's Social Security plan as a step in the right direction."

Tabor's position is complete nonsense. There's no such thing as using up the "federal government's ability to borrow." One possibility is that Congress will simply borrow more. Besides, if "compulsory" accounts are "anti-libertarian," then how is government "going to get a lot smaller" by mandating those accounts? Apparently under Tabor's proposal government will remain the same size, at best, or increase in size if Congress borrows more. (For Tabor, the only stated political standard is smaller government.)

In his final paragraph, Tabor argues that Bush's reform would "transform the country's retirement system from a tax-supported entitlement to private investment," which would help lead to "a world of Libertarian opportunity." Obviously this is at odds with Tabor's previous statement that the investment accounts are "compulsory" and thus "anti-libertarian." Either they promote libertarianism or they don't, yet Tabor argues for both positions simultaneously.

Tabor offers advice of similar caliber for reforming the general tax system. He writes, "We can support real tax reform by replacing the largely invisible income and payroll taxes with the much more visible National Retail Sales Tax (www.FairTax.org), in order to make American taxpayers more resistant to any attempt to put off the collapse of Social Security with higher taxation." (But what about Tabor's previous assertion that "Congress will be forced to live within its means?")

Tabor continues, "The only reason people currently tolerate a combined federal, state and local tax bite of 48 percent of the GDP is that the magnitude of their taxes is largely hidden from them, buried in the price of goods and services."

But wait. If taxes are "buried in the price of goods and services," then how could changing from a payroll tax to a sales tax make taxes "much more visible?" Tabor's argument is totally incoherent.

A quick glance at www.FairTax.org reveals that the supporters of the plan believe, "The FairTax is a voluntary 'consumption' tax... Everyone pays their fair share of taxes..." But the tax is not "voluntary" in any sense relevant to economic liberty and free markets, and the claim that the tax is "fair" is unsupported.

The web page also states, "Like all federal spending programs, Social Security operates [after the proposed reform is enacted] exactly as it does today, except that its funds come from a broad, progressive sales tax, rather than a narrow, regressive payroll tax. Employers will continue to report wages for each employee, though, to the Social Security Administration for the determination of benefits." So the "fair tax" appeals to egalitarianism, promises to keep federal programs exactly as they are today, and also promises to force people to continue to report their income to the national government. Elsewhere, the web page reveals that everyone will automatically get a tax "rebate" -- whether they pay any tax or not. The proponents of the tax set the rate at 23%, expressly intended to keep over-all tax revenues the same. So the "fair tax" is obviously unfair if one takes seriously the notion of individual rights. And it seems unlikely that taxing goods and services would be more "visible" than taxing income.

But Tabor writes as though a transition from an income tax to a pure sales tax is possible if only Libertarians would agree to the change. Obviously that's not the case. (An advertisement directly beneath Tabor's article indicates that 22,000 people read the publication, though it's probably more accurate to say that 22,000 people receive it.) The usual appeal for a sales tax includes keeping the income tax, too (at least for Social Security). A likely outcome would be the addition of a sales tax to the income tax, not the replacement of the income tax.

Tabor totally ignores the role of ideas in changing people's beliefs and behaviors. The "only reason people currently tolerate" high taxes is that taxes are "hidden," asserts Tabor. Similarly, Libertarians can supposedly heighten the crisis of Social Security in order to force Congress "to live within its means." Tabor sees people as pawns of political forces outside their control and comprehension. The solution he sees, then, is to mechanically manipulate the political system, to apply force and increase visibility, such that the end result is a more Libertarian world.

It is true that incentives matter, and it is true that different systems of organization can help or hinder the flow of information. But it is also true that ideas matter and that tax policy is mostly the result of ideology, not political mechanics.

Tabor's article is the worst I've ever read about Social Security, and it's in the running for the worst article I've ever read about any matter of policy. Yet it's good enough for Libertarian work.

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For additional analysis about Social Security, please see Social Security: Collected links.

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