See: Congress and Social Security
What is Social Security?
The Social Security system is the American way of administering a general levy under
the guise of a social insurance program that provides old-age benefits for retirees and
their survivors, disability insurance for workers and survivor benefits for
The Social Security tax is the largest single tax the average American pays. It is not
a flat tax, though it appears to be. All flat taxes are regressive--that is, they take a
disproportionate share of disposable income from the average wage earner than as opposed
to the high wage earner. Social Security exacerbates regressivity by adding a cap instead
of a floor to the tax.
We classify Social Security as an entitlement program. Congress has set eligibility
criteria. If you meet the criteria, you are entitled to the benefits.
As social insurance, the system does more than provide a base of income for the retired
worker. It purposefully redistributes wealth from productive members of society to those
who are less productive. The idea is to adjust for distributive injustices and other
inequities in society. It's also supposed to provide financial relief to many who might
otherwise have to provide full support to aging or disable relatives. Because it is a pay
as you go system that relies on an ever-increasing body of people to pay into it, Social
Security has a natural limit to its ability to meet any of the goals set forth for it.
And, because it creates a significant drag on the power of current wage earners to save or
invest, it perpetuates dependency. It is a bad plan. The United States Government has
passed laws against any individual, corporation, or other non-government organization that
attempts the same kind of Ponzi scheme. The Federal Racketeering laws grant an exception,
by fiat, to the Social Security System.
How do we finance Social Security?
We don't. Social Security payments go directly into the general treasury. From there,
payments go out to beneficiaries. There is no Social Security fund. The general treasury
writes IOUs against the money collected for Social Security, and then counts the money as
though it were still in the general treasury. This results in a false "government
surplus," which is--in reality--a deficit.
Social Security tax is slightly lower for wage earners than it is for the
self-employed--by a fraction of a percent. The common myth is that an employer pays half
and the employee pays half, but this simply is not true--that half and half method of
accounting simply hides the fact that the employer has so many dollars to allot to a given
position, taxes included. The Social Security tax "paid" by the employer is just
a component of the overall wage package. The Social Security tax diminishes the earnings
of the wage earner twice as much as stated. Whether those earnings would have gone toward
savings and investment is a matter of conjecture, but savings rates were far higher when
the Social Security tax was far lower.
As bad as Social Security is, it does have some good points that merit rolling over
into a plan that would fit within the boundaries of both our laws and rational thought.
For example, it is the primary source of income for a small portion of our elderly and the
very poor. For many families facing hardship following a death, disability or
unanticipated retirement, the program lightens their burden. Social Security also protects
nine out of ten workers and their families and provides benefits each month to more than
three million children.
So, while it would appear the sane thing to do is simply end Social Security and
continue to pay those who now depend on it, there are complications to that course of
action. Whatever system replaces Social Security will need to address those complications.
The government should not direct any sort of investment program with these funds, as
that would lead to abuse. Privatization does not provide the non-retirement benefits. So,
what kind of system should we come up with?
Perhaps such a system will consist of a social responsibility tax (5%) and a mandatory
401k contribution (10%), which would result in more disposable income for each worker. It
would also result in far cheaper capital for businesses in America (and others who borrow
from American banks). The resultant increase in wealth would contribute to shorter working
hours and fewer social ills in our country. The Social Security system as it is now is
anything but social, and anything but secure.
Information on Social Security is readily available. Dial (800) 772-1213 to reach a
representative, or visit http://www.ssa.gov/SSA_Home.html