What Social Security Means To You

The Social Security Administration helpfully sent my wife a statement explaining "What Social Security Means To You." Because, you know, we cannot possible figure that out for ourselves; we need the federal government to tell us.

Unfortunately, but not unexpectedly, Michael J. Astrue, the Commissioner whose signature appears on the letter, is a liar.

He claims that the statement "can help you plan for your financial future." Not so. Instead, it merely reminds us that we cannot plan for our own financial future to the degree that federal politicians force us to pay payroll taxes.

Astrue claims that "Social Security is a compact between generations." Not so. A "compact" is "a formal agreement between two or more parties, states, etc.; contract." But a contract implies mutual consent. We never consented to paying the Social Security tax. Indeed, we have asked repeatedly not to have to pay the tax, in exchange for not receiving any benefits. Forcing children, including our unborn children, into this socialist Ponzi scheme is not a "compact." It is generational theft.

Astrue does helpfully point out, "In 2017 we will begin paying more in benefits than we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted and there will be enough money to pay only about 78 cents for each dollar of scheduled benefits." This is a half-truth. The full truth is that this alleged "Trust Fund" is merely a claim on general government revenues, dependent on tax receipts.

Michael J. Astrue, Commissioner, claims to know what Social Security means to us. Not that he cares what Social Security actually means to us, but I'm going to explain it anyway.

My wife's statement summarizes that she alone has paid $51,474 in Social Security taxes (employer plus employee side), plus $12,022 in Medicare taxes. So my wife has paid a total of $63,496 in payroll taxes, so far. (And she's only 31. She gave me permission to post these numbers.) So what does Social Security mean to us? The payroll taxes mean:

* That we are just now climbing out of debt, when we could have built a positive net worth many years ago.

* That we just bought a house last year, when we could have afforded a house years ago.

* That we have put off having children. This alleged "compact between generations" has prevented us from even meeting the next generation of our family.

* That we have considerably less money saved up for emergencies, health expenses, and retirement.

* That we have scrimped and cut budgetary corners when we could have spent more on food and entertainment. While we would have put only a small fraction of the funds toward entertainment, a little goes a long way. We could have gone out to eat more, seen more movies in the theater, taken more vacations, and purchased higher-quality groceries.

Social Security is horribly unjust, particularly harmful to the working poor, and a gross violation of individual rights. What, then, is the solution?

As I've argued, it would be wrong (and politically infeasible) to cut benefits for current recipients. However, the further someone is away from retirement, the better the person is able to adjust to changes in the system. Thus, the best and easiest reform is to phase out Social Security, by increasing the pay-out age by a few months every year until, after a period of decades, nobody is collecting benefits and the tax is completely eliminated.

But I don't think that will be the reform that Congress pursues. Instead, what seems to be on the agenda is for the Federal Reserve to inflate the money supply, such that all the promised dollars for Social Security are paid out, but those dollars are worth much less, even as the federal government is taxing larger monetary incomes to cover the tab. Neat trick, inflation. Because we must preserve the "compact between generations" by ensuring a devalued economy for our youth.

Balko Misfires with 'Private' Social Security Accounts

Radly Balko argues that the government should implement "private" Social Security accounts, despite the recent financial difficulties. The subtitle of the article (as it appears at Reason) reads, "Why the market meltdown doesn't negate the case for privatizing Social Security." The meltdown itself does not negate that case; it was negated long ago, and the meltdown only reinforces the negation.

The first problem is that Balko calls them "private" accounts. They are no such thing. Under the Bush/Cato plan, people are forced to contribute to these accounts, and, as Balko hints, the accounts are controlled by federal politicians and bureaucrats. The plan wells from fascism, not the free market. It is perfectly in line with Bush's partial nationalization of the financial sector with his bailout and buyouts. Federally directed investment in the stock market via Social Security would automatically expand federal control over the market, and it would invite ever more controls to "protect" people's money. (I feel a blunt assessment is in order here, despite the fact that I'm usually a fan of Balko's work.)

The Bush/Cato plan relies on an accounting fraud to gain initial plausibility. The key problem is that money directed toward the accounts would in no way reduce the existing liability for Social Security, until those with the accounts started to retire. The result is that those with accounts would end up paying the same amount into Social Security, directly or indirectly, in addition to the money they'd be forced to spend on the accounts.

To get a better sense of this, consider the simple fact that the accounts are inessential. If people could spend less directly on Social Security, they could simply be allowed to keep that money, rather than forced to invest it in federally-controlled accounts, and their Social Security payoff could be reduced commensurately. But, as noted, that would do nothing to address Social Security shortfalls in the interim, so that money would have to be raised somehow, whether through direct taxes or more deficit spending. Alternately, Social Security benefits could be reduced, but if so they could be reduced without creating the federally-controlled accounts.

There is certainly a transition problem with Social Security. Many people in and near retirement rely on that money for their basic needs. It would be unjust as well as politically infeasible to cut off those benefits. As I've argued, the best way to phase out the system with the least amount of pain for all involved would be to slowly raise the retirement age. This would leave the benefits of those already on Social Security unchanged, and it would give those far from retirement many years to adjust their plans.

The central political problem of our day is that the failure of federal controls in the financial markets is being blamed on nonexistent free markets. By pretending that federally mandated and controlled accounts are somehow "private," Balko et al contribute to the charade.