Sunday, October 07, 2012

What's wrong with Social Security?

I have been aware since the early '80s of the idea that Social Security is a Ponzi Scheme . . . and why. I have understood how the government has played games with the Social Security "fund"--counting the Social Security tax as a supposed "insurance premium" if (and only if) and when (and only when) it was convenient, but, yet, then, treating it as a general source of current government income if and when that was more convenient . . . and so the Social Security "fund" is really composed of government IOU's that future taxpayers will have to pay off if current recipients of Social Security payments are to receive what is their promised "due." . . .

I have understood that. And because I have understood that, I have realized that I ought never to figure I would receive a penny in benefits from Social Security. It is a forced Ponzi Scheme, a tax, and the government will do with those funds what it will, but it will, most likely, not be paying me whatever it pretends it is promising.

But this morning I saw a new perspective on Social Security that I had never seen or thought of before. And I thought it was worth sharing.

From Jeff Opdyke of the Sovereign Society:

I agree that society must deploy safety nets to catch the fallen. [My opposition to the idea that society, collectively, has a responsibility to provide a lifestyle to any particular individual or group of individuals] has nothing to do with people who, through no fault of their own, find themselves in need of society’s munificence. But the safety nets should not be so large that they encourage reliance among those who see falling as the easier path – which is precisely the effect our safety nets have today.

Worse, they’re ill-designed and over the decades have spawned among Americans a warped sense of entitlement. Social Security is, perhaps, the best example. In a recent note, reader Lee S. wrote to say that, because he and his wife have paid into Social Security for years, “we are entitled [his emphasis] to what was removed from our salaries.”

To which I say, no – absolutely not.

Government – under [Franklin D.] Roosevelt – originally designed the system as social insurance. And insurance in its purest form pays out only as a failsafe, when a monetary need arises. Homeowners and drivers do not expect their policies to provide a source of income just because they pay premiums. They expect a payout only when, in an emergency, the cost of replacing or repairing a house or car exceeds the policyholder’s financial capacity.

Social Security should follow an identical principle.

For those without a meaningful source of income to draw on in retirement because of factors beyond their control, Social Security should ensure a certain level of economic wellbeing. But to believe that everyone should access the system just because they paid into it is ludicrous; it’s the reason the program is structurally unsound today. It’s a question of fairness, ultimately. If my assets generate, in retirement, an annual income of $30,000 or more – roughly double the poverty line for a family of two – am I entitled to even more money from a government that must, through increased taxation, dispose of the estates of others?

Without question, no!

Before the entitlement mindset ran amok in this country, Americans once felt a sense of personal shame falling into a government safety net. In a personally responsible society, Americans would purposefully be more frugal – instead of purposefully more consumerist – to build up a nest egg over the years. The personally responsible would see reliance on Social Security as a personal failure and the pathway to a diminished lifestyle that they would want to avoid at all costs.

In that world, the liberty of the individual, as encouraged by the state, would supersede the desire of others to live a life unearned. As it stands now, though, it is an immoral system that requires government to take from the individual a penny more than is needed to provide a basic standard-of-living to those unable to provide for themselves. It is an immoral system when government taxes the individual to provide anything to those fully capable of providing for themselves.

I think he's hit something on the nose!

Clearly, Social Security is not (and never was) set up as an investment vehicle. It was not--and is not--set up to acquire and/or produce assets that can generate income. No. Almost from the very beginning it was (and is) an income redistribution plan--taking from current earners to make payments to people who used to earn. (Even as the earlier earners made payments into the "system" to cover payments made to even earlier participants.)

Insurance policies and plans don't work that way.

So where do we go from here?

And when will either the Democrats or the Republicans begin to "talk straight" about what it is we are up against?
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