Do not think about, write about or deal with human behavior without determining the effects of incentives. It’s not their money, of course they’ll waste it.
Listening to rival politicians arguing about economics is like listening to two drunks on the Titanic disputing their bar bill.
If you give a man a fish, you feed him for a day. If you teach a man to fish, he’ll get really angry because you stopped giving him free fish.
Social Security Cuts Are Coming
Social Security is known as the "third rail" of politics because of how politically sensitive it is. Democrats accuse Republicans of trying to take away your Social Security every campaign cycle, it seems.
But what politicians don’t tell you is that Social Security cuts are going to come unless the program is reformed, because it is headed towards insolvency. Fast.
Myra Adams writes in National Review that she found an asterisk in her Social Security statement that said the following:
The law governing benefit amounts may change because, by 2033, the payroll taxes collected will be enough to pay only about 77 percent of scheduled benefits.
Adams then looked through some past Social Security statements and found one from March 2009, which also had an asterisk that said:
The law governing benefit amounts may change because, by 2041, the payroll taxes collected will be enough to pay only about 78 percent of your scheduled benefits.
In a six-year span, the Social Security Administration became significantly more pessimistic about the program’s future. What will Social Security look like in the next six years?
A brief history of the program: In "Ameritopia," Mark Levin writes that structure of Social Security came from a man named Henry Seager, a former professor at Columbia University. The SSA even provides links to each chapter of Seager’s book, "Social Insurance: A Program of Social Reform," calling Seager’s book a "classic" and that Seager’s view was "general viewpoint favored by many of the founders of Social Security in America."
This is what Seager wrote in his first chapter: (emphasis mine)
It is the purpose of these lectures to insist that for other great sections of the country- sections in which manufacturing and trade have become the dominant interests of the people, in which towns and cities have grown up, and in which the wage earner is the typical American citizen- the simple creed of individualism is no longer adequate. For these sections we need not freedom from governmental interference, but clear appreciation of the conditions that make for the common welfare, as contrasted with individual success, and an aggressive program of governmental control and regulation to maintain these conditions.
The whole point of social insurance then, to Seager, is all about sticking it to individual liberty and putting more control in the hands of the government.
If the “simple creed of individualism is dead,” then the creed of collectivism will take over and watch what happens.
Social Security was signed into law in 1935, despite public opposition. FDR sold Social Security to the public as social insurance, but his administration argued to the Supreme Court that it was a tax, an argument the court bought hook, line and sinker. The payroll tax, which was intended to fund your Social Security account, is in fact a regressive tax. It was all about politics to FDR: (emphasis mine)
As Mark Levin notes, Roosevelt was emphatic that these taxes had nothing to do with the program’s economic viability or lack thereof. They were, FDR said, “politics all the way through,” enacted “to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits.” Even if the numbers did not add up, the universal sense of entitlement fostered by framing assessments as contributions rather than taxes assured that “no damn politician can ever scrap my Social Security program,” as FDR presciently put it.
That is what Social Security has all been about: politics. It was all about gaining and maintaining control for progressives.
Because the court ruled Social Security as a tax, the payroll tax does not in fact fund your own Social Security. It is instead a pay-as-you-go program where the younger generation (us) funds the older generation, resulting in a demographics problem in driving up Social Security’s deficit. The Social Security fund has also been raided by politicians for years to pay for their own programs. This would be known as a Ponzi scheme in the private sector.
Ponzi scheme–an unsustainable economic structure where investors are paid off with other investors’ money, not the result of investing.
As a result, Social Security currently faces $22 trillion in unfunded liabilities and is expected to be insolvent in 2033, hence why the asterisk on Adams’s Social Security statement said that her benefits would be reduced in 2033. And this is only for the Old-Age and Survivors Insurance (OASI) Trust Fund. The Social Security Disability Insurance Trust Fund runs out of money by the end of next year.
The fate of all Ponzi schemes is that they become unsustainable and one doesn’t need an Ivy League degree to know it. One of the conceits of government is that it is made up of the “best and brightest.” This is what happens when they design things. The libertarian approach is not that they design improperly—it is that designing itself will always be wrong.
By 2039, the cost of Social Security and other entitlement programs will require 100% of our tax dollars- and that’s a conservative estimate.
For all the fear-mongering about Republicans taking away Social Security, the cuts will happen on their own because there won’t be a Social Security by 2033.
We might not be that far away from being Greece after all.
Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies