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L. Neil Smith's THE LIBERTARIAN ENTERPRISE Number 303, January 23, 2005 "I am very serious about this offer."
Social Security Must Die
Special to TLE For decades ideologically pure libertarians, especially on the intellectual battlefield, have consistently charged at the left and the right in the Democratic and Republican aisles for egregiously committing violence against the principles of individual freedom, free enterprise, private charity, personal responsibility, limited government, civil society, federalism, and the rule of law. Purist libertarians have, for years, rightfully argued that the left and the right—namely, the Democrats and the Republicans—are responsible for and guilty of slapping Americans with all sorts of statist schemes, which have led to the ultimate evisceration and diminishment of all the liberties that our nation has enjoyed since its inception. The state, directly controlled by spendthrift conservative Republicans and liberal Democrats (even "moderate" Republicans and Democrats), is, as many principled, non-compromising libertarians in the ideological arena have correctly concluded for many years, responsible for imposing unconstitutional and immoral populist machinations across the board. Aside from the welfare-warfare state and many other unconstitutional, perverse, and immoral schemes that have been successfully foisted upon American society gradually within a period of nearly more than 90 years, there is no bigger welfare program than Social Security. President Bush and his entire cadre of collectivistic stalwarts in his administration have just announced their plan to "save" America's crown jewel by altering the formula employed to dole out benefits to the wealthy via the use of inflation rates in lieu of increasing wages over the course of an employee's lifetime and paring down "promised" benefits by 33 percent. The stated purpose of this "reform" is to retard the growth of the benefits, although it would be implemented at a slow rate in its initial stage, but then sped up by the middle of the century. Moreover, Bush officials express their blind faith in the plan so much that they hope that either some or all of the benefit reductions would eventually result in the creation of capital gains generated by private retirement accounts in which individuals would invest to reap a rate of return on stocks and bonds. Apparently those who favor this ploy are convinced that it will "save trillions of dollars" in projected costs and "solve" the program's impending long-term deficit, even though it would be so at a considerable cost. The CATO Institute's Michael Tanner, who serves as the Director of Project on Social Security Choice and is an ardent supporter of the president's "partial privatization" scheme, was quoted in the Washington Post as saying: "No decision has been made, but the administration is clearly leaning in that direction. I don't think anything else is seriously on the table." The administration will even employ "price indexing," which would, for the first time of the American presidency, furnish details of the costs that would eliminate the gap between the benefits guaranteed to future recipients and the taxes required to fund the program. As David C. John, a Social Security research analyst at the Heritage Foundation and a fervent Bush backer, told the Post, "This is going to be very much like sticking your hand in a wasp nest. And the reaction will be similar." Of course the left has been galvanizing to counter the arguments advanced by the right. The top reason for their opposition to the Bush scheme, they say, is that the new formula calculations, if passed by Congress and signed into law, would subject current seniors living on the entitlement boondoggle to a lifetime of a third rate standard of living. Robert Greenstein, an executive director at the liberal Center for Budget and Policy Priorities, seconds that sentiment. "It's like saying elderly people today should live at a 1940 standard of living," he said. "Part of our social contract has been to allow seniors to participate in rising standards of living rather than consigning them to some second-class status in retirement." Naturally, this entire nonsense does not end there.
On Wednesday, December 29, 2004, the left's most powerful senior citizen lobbying organization, AARP, launched a $5 million two-week advertising campaign to derail the so-called partial privatization scheme. It would run full-page ads in more than 50 newspapers, saying the following: "There are places in your retirement planning for risk, but Social Security isn't one of them." Another ad showcased a couple in their 40s, glaring at the reader. "If we feel like gambling, we'll play the slots," it said. "Winners and losers are stock market terms," the message said. Another one unveiled a group of traders in a pit of a commodities exchange, noting: "Winners and losers are stock market terms. Do you really want them to become retirement terms?" The organization's president Marie F. Smith and its chief executive William D. Novelli, in a letter submitted to legislators and members, say that they oppose Bush's scheme, asserting that private retirement accounts would worsen the Social Security mess. "Taking some of the money that workers pay into the system and diverting it into newly created private accounts would weaken Social Security and put benefits for future generations at risk," said the letter. "AARP is opposed to private accounts that take money out of Social Security." Of course the organization claims that it would the plan if the accounts were offered with the system. Henry J. Aaron, a senior fellow of Economic Studies at the Brookings Institute, recently echoed AARP's view in a similar fashion. "Saving in private accounts in addition to Social Security should be encouraged," he said. Furthermore, he states: "But carving out payroll taxes to deposit in inherently risky private accounts would undermine the assured income that Social Security provides."
The left, of course, is right in saying that privatizing Social Security would be a mess. But they are wrong in saying that Social Security can and should be "saved" by, as Aaron suggests, increasing the tax rate for an individual's wage to pay into the system from 85 percent to 90 percent, adjusting the benefits "more accurately" than the standard methods do, and levying a tax on estates valued at more than $3.5 million whose revenue would be pledged to the so-called trust fund. And here's why. AARP, The Brookings Institute, and other liberal think tanks and special interest groups that oppose the program's "privatization" but supports the program itself fail to understand this one central point—the point being that the so-called Social Security trust fund is a lie and a scam. To put it more accurately, it is a Ponzi scheme, as the American Institute for Economic Research (the first group to challenge Social Security's legitimacy) correctly identified it as such. How is this so? It's very simple, considering it can be examined in several ways: First and foremost, let's dispense with the claim that the system is an "insurance program"—that is, "I placed all my eggs into the Social Security basket, and I have a right to withdraw it when I retire." The thing is that the left refuses to acknowledge this simple, irrefutable truth that all the money that workers have paid into—or "put into"—the system for years is gone. How can it be gone? Easy. It's been spent. There is no "I-placed-all-my-eggs" money that is accruing interest in some investment account. Second, a majority of the tax revenue provided by from Social Security and is coming from the program's taxpayers is allocated to its recipients. It is the only reason why Social Security, America's best-loved crown jewel, is a wealth redistribution program and not a retirement fund. Money earned by the young and productive American employees is taken from them—at gunpoint—by the state and then allocated to the recipients of the system. Third and finally, the excess—the amount of funds by which the amount collected surpasses the amount paid—no longer exists. The federal leviathan has has taken those funds and spent them as they are now a part of the standard welfare-state expenditures. After that the government appends its own "IOUs" into the so-called trust fund. In other words, government officials promise to reimburse people of their Social Security funds, along with the interest that they are accumulating, that they are spending. The question is this: how do they plan to reimburse those IOUs that they created in the first place? The answer: to levy more taxes directly on the American people when it's time to pay them back.
Another devastating truth about the scheme is that no one has a legal property right to the benefits collected from Social Security. This was epitomized in a 1960 Supreme Court case—designated as Flemming v. Nestor—in which the federal government denied Ephram Nestor, a Bulgarian man who immigrated to the United States in 1918, his right to his Social Security benefits. (Nestor later filed suit against the government, asserting that he had a right to collect his benefits because he paid his Social Security taxes.) Nestor was deported from the U.S. back to Bulgaria on the grounds that he was discovered to have been a member of the Communist Party. (Incidentally, he stopped receiving his Social Security checks due to a 1954 law which mandated that deportees would be losing their SS benefits.) Despite the fact that he paid his Social Security taxes from 1936 until his retirement in 1955, the court thus ruled that SS recipients do not have a legal property right to their benefits. "To engraft upon the Social Security system a concept of accrued property rights would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands," said the ruling. In 1937 the court ruled earlier in a case—now known as Helverigh v. Davis—that Social Security was not an insurance program but a welfare program. The ruling, in part, stated, "The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way." These decisions prove that Congress can alter the rules at any time by raising the tax rates or cutting benefits. And they have, forty times over the years. And those rules are still subject to change at any time, whether anyone likes it or not. And it doesn't end there.
The left, as always, just doesn't understand the problems with the inherent socialism of Social Security. But what is even more troubling is the fact that the right—and even some so-called libertarians in the GOP—believe that the scheme can be "saved" by "privatizing" the system—that is, by "allowing" employees to place 2 percent of their Social Security money into the stocks and bonds market. While they are dead on target on the problems and evils of the legalized pyramid scheme, they are dead wrong on "privatizing" it. It has everything to do with this nonsense about the "ownership society," the belief that the government should subsidize your retirement by redistributing wealth from those who are productive and dole it out to those who aren't, thus securing those unproductive individuals' ownership of those funds. It gets worse though. Bush's plan to cut benefits after calculating them via inflation in lieu of standard wage rates is not even indicative of the free market. In fact, there's nothing that can be considered free market about it. It's all fascist because Bush wants the federal beast to subsidize the commodities and stock market to subsidize the retirement of all senior citizens. And the use of inflation—meaning the imposition of new taxes on today's younger workers via artificial increases in prices—further proves that Bush is a defender and protector of legalized plunder as well as the pyramid scheme itself.
Once upon a time, Republicans held the high moral ground on the belief that the state should stay out of the economic and social affairs of the American people. That even includes their belief that government ought to get out of the retirement business. But that was only an aberration. By and large, Republicans have never supported economic and personal liberty on a grand scale, and they never will. If people haven't caught on by now, they ought to understand that Social Security must die. Along with many other government programs, departments, and machinations, retirement is the responsibility of an individual—not the state. Whether Americans want to acknowledge it or not, it's time to get back on the fast track to individual liberty, personal responsibility, free enterprise, private charity, limited government, federalism, and the rule of law. It's time for Americans to jettison the ever-growing amount of socialism here in America and bring back the principles of libertarianism, which made this country so special and revered. And Americans will continue to do that in the years to come.
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