This article is #16 of a weekly series highlighting the former memes of Bureaucrash, an organization once headed by my friends Pete Eyre and Jason Talley of the Motorhome Diaries. The memes were originally authored by Pete Eyre and Anja Hartleb-Parson, and were intended as means of communicating ideas about liberty in catchy and succinct ways.
The current Social Security (aka “socialist insecurity”) system is designed as a pay-as-you-go system, in which current workers’ tax dollars pay for the benefits of retirees. And the system is in serious trouble. With increased life expectancy and a declining birth rate, there are fewer workers to support a greater number of retirees. In 1950, there were 16 workers paying for the benefits of one retiree. Today, there are about three workers per retiree, and by 2025 there will only be two. According to the Social Security Administration itself, if unreformed, Social Security will begin running a deficit by 2017, and by 2060 Social Security and Medicare combined will make up 71 percent of the federal budget.
Social Security violates individual rights. It is predicated upon two ideas. One, that the strong should support the weak: in this case, the young should support the old financially when the old cannot do so themselves any longer. Two, that life entails certain basic risks that people either encounter at no fault of their own, such as economic downturns, or simply fail to prepare for. Now, while these ideas might be true, they miss an essential point. Your life belongs to you. Since it is you living your life, and you have the most interest in it, most likely you know your financial situation much better than any politician or bureaucrat. Therefore, as long as you are not violating someone else’s rights, you should be free to control your life and to make the choices that affect your future, even if you end up making mistakes. You are not violating anyone’s rights by planning for your retirement. So, you should be free decide whether you want to save for retirement and how much risk you are willing to take in investing, reaping the rewards or incurring the losses. As for helping the less fortunate, since Social Security is a bad investment with a poor rate of return (see below), it actually disproportionately hurts poor people because they cannot afford to invest additional funds for retirement privately.
Social Security negates choice. By forcing individuals to contribute to Social Security, the government takes away important choices they should be able to make about their own retirement. If you work, you are forced to pay into it but have no choice about how the money is invested. In fact, your Social Security taxes are not even invested at all; they are paid out to current retirees and to loan the federal government money for other government programs. You have no choice over how many years you work or when to retire in order to collect any benefits. You have no choice about what happens to the accumulated money after you die; you cannot pass it on to your family or your favorite cause.
Social Security is a bad investment. According to the Congressional Budget Office, if you are in your late twenties today, the most optimistic projection for your Social Security return is 0.7 percent! By contrast, historically returns on private investments have been much higher: stock market returns 6.8%; corporate bonds 3.8%; treasury bonds 3.3%; a balanced portfolio (50% stock/30% corporate bond/20% treasury bond) 4.9%. If you were able to invest your money privately, you could choose which type of investment you prefer. Stock markets might be riskier but involve higher returns than money market or plain old savings accounts. And, if you invest your money privately, you have a legal right to any returns on that money.
You have no legal right to Social Security benefits. In 1960 the Supreme Court ruled in Flemming v. Nestor that, “a person covered by the [Social Security Act] has not such a right in benefit payments as would make every defeasance of ‘accrued’ interests violative of the due process clause of the fifth amendment.” Hence, Congress can change or rescind those benefits at any time. For instance, before 1983 Social security benefits were not taxed. Since the 1983 Amendments to the Social Security Act, up to one-half of the benefits received are taxed if the recipient’s yearly income exceeded a certain threshold (generally individuals making more than $25,000 and married couples making $32,000). So, not only does the government forcibly take part of the money you earned out of your control, you also are not guaranteed to derive full benefits. That is legalized robbery.