News Item: Republican Chris Christie—expected to run for president and citing the financial problems of the Social Security system—advocates “means testing” Social Security.
What does it mean and how would Christie’s proposal work?
Those defined as “well off” would receive nothing even though they “contributed” tens of thousands of dollars into Social Security over decades of work. (By the way, calling these payments “contributions” is an example of Newspeak, the language of Big Brother in the novel 1984. They are in fact taxes paid into the system by almost every worker from day one. And, like all taxes and unlike all contributions, they are mandatory).
Pay and Pay and Then Pay Some More
Taxpayers make these payments in the expectation of lifetime income beginning in old age. Retirement payments that, I may add, are today chintzy to begin with and would have provided a better return if the money had been privately invested, even in low interest long-term bonds.
And it is even a worse deal than most people think. Until the 1980s—when the Social Security system was going through one of its periodic crises—people paid into the system for, perhaps, 40 years or so, then collected their payments. There was no tax on the payments. You paid taxes for 40 years so why should there be more taxes?
However, since the early 1980s, most people who receive Social Security pay tax on their payments. They, in effect, pay it both as workers and retirees. Talk about double taxation!
But that’s not enough in taxes for governor Christie. Christie says his nothing for years of payments proposal is necessary to save this government retirement system. That prompts the question: Why is Social Security in trouble? The answers are multiple: Mismanagement, theft and a declining birth rate.
Red Ink and Lawless Governments
Social Security is now running deficits—more people are collecting than paying into the system. That’s because people now live longer. So ultimately they collect more than their parents.
And, owing to a declining birthrate that is affecting almost all Western countries, our nation is producing fewer workers coming into the system and paying the Social Security taxes. However, for many years, the system ran huge surpluses.
So isn’t this the time that we can rely on all those years of trillions of dollars of Social Security surpluses?
Show Me the Money!
No. Governments, both left and right, spent all those surpluses and then some.
Pols in the 1960s and 70s, many of whom are now long gone and forgotten, approved using system surpluses for any other spending programs. They approved arrogating the Social Security Trust Fund for other purposes, often using Social Security money to pay off political debts. This was illegal except for the government, which apparently can do anything it wants because it is the government. You cannot legally “borrow” from a private trust fund without the approval of the people who own and pay for it. Still, the government can and has been doing it for decades.
This is a practice that, if duplicated in the private sector, will have you sent to the slammer for many years along with steep civil penalties. Nevertheless, there’s seems to be no way to stop governments from breaking the same laws that they expect the rest of us to obey on pain of being sent to the caboose.
Help, Police! Someone Is Stealing My Property!
New Jersey Governor Chris Christie’s presidential effort should be derailed immediately for advocating a form of “legal” theft. How can a prominent official like Christie, a former prosecutor supposedly devoted to upholding the law, support taking away money from millions of people?
We are people who worked through the decades, had a large part of our pay forcibly deducted for a Social Security system. But now, years later, we are, in effect, told: “No, we are going to penalize you for your thrift. You have private savings. You don’t need government retirement income. You don’t get any Social Security.”
This is nothing less than the government illegally putting its long arm into my pocket and stealing. It is the breaking of a coerced contract with millions of workers (Coerced because workers must “contribute” (sic) to the system). We expect to receive Social Security, even though the payments are quite low. However, now, if Christie has his way, many of us will get nothing.
It is outrageous. It is the destruction of property rights. It is a Louis XIV mentality of “I am the state” and I can do anything I want. It is the rape and pillage of decades of work and savings. And it goes back to each worker’s beginning. Let’s look at one such person: Me
“Hey, Boss. What Is this FICA Thing?”
I began paying Social Security taxes when I was 16, working as a messenger in high school. I continued to work through college and the rest of my life. Through a large part of my life I have made small salaries. Hence, I paid little in income and investment taxes.
But I paid a hell of a lot in sales and FICA taxes. The latter are the taxes used to pay for Social Security and Medicare, which have gone up in dozens of ways over my lifetime. I would ask my bosses about “this FICA thing” that seemed to eat up lots of my earnings. FICA stands for the “Federal Insurance Contributions Act. FICA is the legal justification for so much of our money getting eaten up by a ravenous government, always hungry for more and more of our earnings.
So I have been paying—not contributing!—into the Social Security system for a little over 45 years. Today, both my wife and I are certainly comfortable through hard work, fat stock markets and, for many years, imposing a lower standard of living on ourselves. We did that in the expectation that saving would reward us with a higher standard of living in the future.
The principle is one that was embraced by our grandparents. We give up something today to get what we hope is a better tomorrow (This is what the Austrian School of Economics calls “time preference.”).
Still, because my wife and I, along with millions of other Americans worked to develop private savings, Christie and other politicians want—once again—to pick our pockets. However, it didn’t all begin with a pol trying to think up a compelling way to sell his presidency. The problem of social insurance, the term used to apply to all government retirement systems, has been with us for decades.
And we will discuss the problems of social insurance—which are common to almost every advanced welfare state democracy— some more in this space in the next segment in a few days.
See you soon, Dear Readers. And, until then, keep an eye on your wallet and your valuables, many hard up governments are leering at them like hungry wolves.