Posted on 01/18/2005 12:36:09 PM PST by hinterlander
In the Social Security debate, the one thing that every politician and media analyst seems to agree upon is that however Social Security is eventually saved, benefits for each retiree must not be reduced. To do so is unthinkable, because it would break the “promise” of Social Security. People have done their part, it is argued. They’ve paid their odious payroll taxes for decades and done so with the confidence that it was for a reason -- that in the end they would be provided for, at some humble level, in the twilight of their lives.
But what, exactly, was the “promise” that is now the most sacred cow in all of politics? It’s a very strange promise indeed that would seem to require us to eventually consume unthinkable portions of the economy just to keep it. And why have we been able to keep the promise for 70 years now, only to have it seem so untenable today? Did the promise change?
Let’s examine the promise as it was originally made to America by the New Dealers in the depths of the Great Depression. Social Security promised people who had not been able to provide for their individual retirements with their individual funds that -- were they to simply pool their resources -- they would be able to provide for their common retirements with their common funds. Essentially it promised that what was insufficient for one, when multiplied by ten, would somehow then be sufficient for ten -- or perhaps even eleven. Lacking the power to recapitulate the miracle of the loaves and fishes, the government pulled this trick off by adding an extra ingredient: theft.
The theft took several forms; one was income redistribution (shortchanging those who paid most to give to those who paid least). Another was a form of involuntary insurance in which everyone would be required to pay into the system, but anyone who died before retirement would get little back out, thus leaving more money for those who could still vote, i.e. the living. But the most important theft was intergenerational theft. The original recipients had paid little, if anything, into the system, yet received benefits. This was possible through the innovation known to prosecutors as a “Pyramid Scheme”. While people like to think they are paying for their own future retirement with their Social Security taxes, they are in fact paying for the current retirees. The money is taken from the young and given to the old, who “deserve” it because they paid for the old back when they were young -- all except for the original benefit recipients, who deserved their money for having voted for Roosevelt. The scheme worked, despite the fact that the average retiree received more in benefits than he paid in taxes, because there were always more young than old.
This was especially true at the outset of the program, when the retirement age was suspiciously near the average lifespan of the day. Thus, about half of all people would die before ever receiving a penny, and most of the rest could be counted on to die within a few years of retirement. Additionally, the system was created at a time when sex had a surprisingly direct correlation with pregnancy -- the birth control pill having not yet been invented, but sex having been known for some time. So the promise of Social Security, as originally offered, was something along the lines of “Have lots of kids and die young, and we’ll pay for your brief golden years by stealing from your kids, who’ll all think it’s ok, ‘cause later we’ll steal from their kids too.”
Looked at this way, it’s easy to see why the Social Security system is regarded as the greatest accomplishment of the Democratic party, and why it is the most hallowed of our government programs. That’s why the people that broke the promise should be so ashamed. These people include anyone who had fewer than five children or lived past 65. The prolific and dead are the bedrock upon which the system is built and deserve a round of applause. The rest of you, however, should stop whining about any proposed cut or alteration in benefits, because you have already failed to live up to your part of the promise, as originally agreed upon. Having unilaterally altered the contract in your favor, you should not be surprised when the whole system then needs recalibrating to take into account your selfish ways. You should be ashamed. But special blame must be heaped upon the drug industry, which as usual, is costing society billions. Were it not for Sulfa drugs, Penicillin, artificial estrogen and the like, the Social Security system would still be solvent as far as the eye can see. It’s easy to see why Michael Moore has singled the industry out as the target of his next Crockumentary.
But what is the poor government to do now that you have broken the promise? Obviously, it will have no choice but to raise the retirement age since you insist on living so long. (You can still retire whenever you want, you just can’t expect Social Security to subsidize your prolonged inactivity.) Additionally, it will need to decrease the rate at which benefits are slated to grow. Other common sense measures would include private accounts, as the President has proposed, not paying benefits to amnestied illegal immigrants, and as Phillip Longman has suggested, making it more affordable for people to have children, which are the only investment upon which future prosperity is really based. It is the poverty of children that will actually bankrupt the system, after all.
The only alternatives to such measures are to allow the system to continue to consume a greater and greater portion of our national productivity every generation -- or go back to dying early.
One of the best analysis I read so far about the subject. Great post!
ping
Actually Medicare is the more frightening monster. The sum of the cost of Social Security plus Medicare will continue to consume an ever-increasing share of GDP until benefits are cut. Exactly when that will happen is an open question. We'll be able to look at other countries with worse demographics (i.e. European countries & Japan) for a preview.
I can't tell you his name, but his initials are "Ted Kennedy". :)
This post fails to place the blame back on our politicians who heralded only two children because of a supposed population explosion. It also fails to address the theft by the politicians through spending the monies leaving IOU's that can not be met. Further, it fails to address the politicians that changed the rules to receive SS.
I do not believe the common man was at fault for any part of the plan not working. It could have worked if our former presidents and politicians had left it alone. But then they can't leave the Constitution alone either and look what has happened.
I sure wish I could find a series of articles I once read. I can’t even remember where I originally read them – probably some newsletter/magazine or something.
Anyway, the author went into painful detail concerning every little thing you’d ever want to know about SS.
It was a series of six or eight articles. By the time he was through and concluded the series, he had “demonstrated” that the U.S. government had absolutely no legal obligation to ever pay you a single cent. (At least as of that time, maybe 15 years ago or so.)
That was his determination after looking into the legal particulars concerning how it was originally set up, what changes had been made over time, and more importantly, what glaring loopholes were in the language.
That’s what his verdict was anyway – that if you think they made a “promise” that they (legally) have to keep, or if you think they are obligated to return a single cent to you, you are simply mistaken.
I’ve looked around trying to locate an on-line version but haven’t been able to. I can’t even remember the authors name… something will jog my memory eventually.
Unfortunately, early recipients did not pay in the system and our elderly are living longer because of new medical breakthroughs. The promise was simple enough: you pay into the system and you can withdraw upon retirement. That was later amended to include people like spouses who didn't pay into the system could draw a percentage based upon the working spouse even though the non-working spouses never paid into the system. Amendments like these are tended to bankrupt the social security system. Then on top of that problem comes SSI. Every jane, joe, offspring and illegal alien can figure out a way to draw SSI. Further draining the social security system. And this list keeps on getting bigger and bigger thanks to our Washington politicians and bloated bureaucracy.
Bingo! And Medicare was never a part of the SS plan.
I do not believe the common man was at fault for any part of the plan not working. It could have worked if our former presidents and politicians had left it alone. But then they can't leave the Constitution alone either and look what has happened.
6 posted on 01/18/2005 12:49:39 PM PST by Trout-Mouth
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Fine. Keep your SS dollars but stop taking my 'share' out of my pay and let me do what I will with it.
The Supreme Court has already ruled that you are entitled to exactly jack squat from SS.
.......................the 'CFR'....?
It's an insurance arrangement. One could argue the "theft" between all sorts of classes of premium payers and ultimate recipients. By far the largest "theft", or disparity, is between those who die early versus late. Morbid, but already attempted by the Bush Admin. It has expressly floated the idea to the black community that since blacks averagely die earlier than whites they should climb on board the privatization plan.
SS is incredibly advantageous "investment" if you live long. What the median age for receiving more than paying I don't know. Someone does, but it probably doesn't help their position so I guess we won't hear it.
Now women live longer than men, should men be courted with this wedge issue?
What Promise?
I never heard one, I have heard over my lifetime the Wailing demands of the gimme crowd.
In my opinion the most fair thing to do is return all money, with compound interest to people who've paid it. Current retirees are an issue. Converting their balance, as calculated above, less payments and converting it to annuity would be straight forward.
My system is "you get what you earned, nothing more". Then of course we could have another program called "Gift of Current Taxpayers to Old People who Did not Earn Enough to Live Comfortably". All contributions to is (whether voluntary or involuntary) should be tax deductable as it is clearly charity, and should be identified as such.
SS is incredibly advantageous "investment" if you live long. What the median age for receiving more than paying I don't know. Someone does, but it probably doesn't help their position so I guess we won't hear it.
Now women live longer than men, should men be courted with this wedge issue?
14 posted on 01/18/2005 1:00:20 PM PST by Shermy
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the national 'vested-interest'......?
/'CFR'
There are "conservatives" on this site who defend this Ponzi scheme.
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