One of the principles of a free society is that people are governed with a minimum of state coercion. When in doubt, liberty should always be the default option.

The goal of most social policy should be to leave people alone because each individual knows his or her needs better than any government official. And, in the case of people needing help, policy should enable them to help themselves. The best government, the philosopher Kant said, is the one that helps people to govern themselves. And the paternalism of the welfare state through programs such as Social Security—which like many government programs builds dependence not independence—should only exist for those who want government help.

Let Me Choose

Those who don’t want these social insurance programs—-those for instance who can save on their own for old age—should be left alone and allowed to make their own choices. People should have choices precisely because government programs designed to achieve old age security are often less effective compared to private sector alternatives.

Indeed, in F.A. Hayek’s “Constitution of Liberty,” published in 1960, he summed up the futility of forcing people into social insurance/Social Security programs in Western welfare democracies:

“Does anyone,” Hayek wrote, “really believe that the average semi-skilled worker in Italy is better off because 44 percent of his employer’s total outlay for work is handed over to the state or, in concrete terms, because of the 49 cents his employer pays for each hour of work, he receives only 27 cents, while 22 cents are spent for him by the state? Or that, if the worker understood the situation, and were given the choice between this and having his disposable income nearly double without social security, he would choose the former?”

Here Hayek struck a nerve. Like it or not, most workers in advanced welfare democracies don’t understand these social insurance programs, which take lots of their earnings. Indeed in France, Italy or the United States, most workers who “contribute” to Social Security haven’t a clue how much they pay or how much is being paid on their behalf by employers.

What’s the Tax Rate?

Walk into a room of average Americans and ask them to list the amounts and kinds of payroll taxes they pay. Most will not know the numbers. They pay a lot, but they don’t know the exact numbers and who pays what. They often don’t know that payroll taxes are double what they think they are. That’s because the employer pays half for them (However, the independent contractor, must pay the entire Social Security tax himself or herself).

Hayek brilliantly summed up the problem of Social Security and all social insurance programs: People have no choice, yet, allowed a choice, they could often do better. He wrote, “Can it be seriously denied that most of those people would be better off if the money were handed over to them and they were free to buy their insurance from private concerns?”

Fifty five years after “The Constitution of Liberty” was published the answer is clear: no. Most workers would be better off if they controlled more of their earnings.

Pols Pillaging

Forcing people to pay into a social insurance system called Social Security isn’t working as millions of Americans are entering old age without significant savings and investments. Meanwhile Social Security’s “trust fund” has been pillaged over the past few generations. Its surplus assets were spent by money hungry governments. Those assets were replaced by IOUs. However, no one knows if they will ever be paid and at what rate.

Once again, pols of both major parties over the past 50 years or so, pols seeking election or re-election, spent the surpluses. They, in effect, said, “let’s win elections today with grand promises and let the next generation figure out how to keep our pie in the sky promises.” (For more on this, please see my “The Disastrous Deal of 1972” at

An economist, speaking at a retirement conference I attended some years ago that discussed Social Security warned: “Whenever this program (Social Security) has had big surpluses, Congress couldn’t avoid spending it.”

Lester Thurow, a well known economist, once wrote of the questionable mathematics of social insurance that over promise to recipients who are depending on these programs: “The first generation does very well. The second generation doesn’t do as well. By the third generation, they’re trying to figure out how to pay for these programs.”

We’re in the third generation.

This series has documented how Social Security—with its poor returns and its taxes disguised as “contributions”—is hurting the ability of millions of Americans to save for retirement and achieve financial independence, two subjects that are the focus of It is leading many citizens to think they don’t have to save or invest for old age because they have their programs, which are flawed, inadequate and often run on dubious accounting principles.

So, while I have neither the resources nor the space to offer a Social Security transition program, I will now offer a set of principles that I hope would be part of any transition.

1) Everyone Must Get Every Cent He or She Has Been Promised

Here I may surprise some of my friends who love liberty and believe the best strategy is to immediately end Social Security and other welfare state programs. I agree with them in many cases, but here it is important to take into account individual circumstances: Millions of Americans, lulled to sleep over generations by the promises and propaganda of Social Security, wouldn’t want their freedom even if it was offered to them.

They are depending on Social Security. And, since they were forced into the program, they are depending on the income so they can’t, or possibly don’t want to, change. They must get every cent they were promised.

2) The Next Generation Must Have Choice and Even the Older Generation Should Have Options

In approximately eight years, by waiting to the last moment, I will get a maximum Social Security payment. In the year 2023, I may be receiving about $2,000 a month.

Big deal.

What will $2,000 or so a month be worth in 2023. Given inflation, not much. Thank God my wife and I have accumulated private resources.

I say may receive Social Security because, as we have seen earlier in this series, a major presidential candidate is proposing that millions of us who have saved should receive nothing to make up for the billions, possibly trillions, of dollars in Social Security surpluses that were spent by previous governments. I’d love to get nothing. That is provided the government could make me whole.


Take the years of my “contributions” I have made to Social Security from age 16—I’m now 62—and pay me the money compounded at say six or seven percent a year (Which is about three percent less than the long-term return of the stock market). I’d receive about $1 million.

I would be much better off managing my money than some government bureaucracy that is trying to run a program for tens of millions of people. Obviously, if the government made all the people whole who wanted to opt out of Social Security, we would be talking about trillions of dollars; maybe more. I will discuss paying our way out of this mess later on.

And, by the way, those who love Social Security, should be able to stay in the program. The program, bad as it is, should be maintained for them, if that is what someone wants. I never argue with people who like inflicting pain on themselves. They have as much right to live their lives as anyone as long as they respect the rights of others.

3) The Next Generation

Every young person entering the work force should have a choice: Twice in his or her life, say at ages 21 and 41, the worker should have the choice to opt in or out of Social Security. The worker should also have the option of starting a private retirement account that can never be taxed; not during his or her work life and not when the worker starts drawing on the account in retirement.

This would give workers an incentive to save and invest more. That would likely create much more in savings for the American economy, something that has been a problem for decades. More savings can lower the costs of capital. And also those who stay in Social Security should have the option to control at least half of their “contributions.” They—not some government bureaucracy in which money gets siphoned off for other things—should be able to privately invest their money.

4) How Can the Government Pay for This Giant Tax Break that Will Help Millions of Americans Save and Invest More?

The government—-like a drunk that can’t stop himself—has to go cold turkey: It’s called spending self control, the same discipline that is practiced by tens of millions of Americans along with countless successful businesses led by men and women who understand that the road to success means self-discipline.

Besides controlling new spending, the government should sell off assets and dramatically cut back on its functions. The sale of assets can contribute to the transition costs away from Social Security. We should get out of hundreds of military bases around the world. If the host nation doesn’t want to buy back the land, that’s fine. Not having to maintain hundreds of military will save the government hundreds of billions of dollars each year.

And also, by the way, it would mean the United States would be less likely to blunder into more superfluous wars. The latter is the ultimate in the money wasting operations of government, an entity that seems to exist only to tax and spend endlessly. And in arguing for a more pacific foreign policy we are not even considering the greatest benefit of all: Ending the moral depravity of sending our young people into useless conflicts in which the vital national security interests are not at stake.

The government should also sell off every “government enterprise.” Government should never run businesses. Indeed, the words government and enterprise should never be used in the same sentence. The government—any government left or right—no more knows how to run a business than I know how to play goal for the Boston Bruins.

Problem plagued Amtrak, Sallie Mae, etc should all be sold. Again, the funds from these sales should be used to pay the transition costs of those who want out of Social Security. And not having to run various government entities—just about all of which run in the red each year—-will save the taxpayer hundreds of billions of dollars each year. Over a decade, we are talking about trillions of dollars that overtaxed citizens will not have to shell out. That means people, not the government, will have more money in their pockets; more money to save and more money to consume.

It will not be easy to make these reforms; to devolve the welfare state’s premier program, Social Security. Warren Shore, in his 1975 book, “Social Security: The Fraud in Your Future,” warned that, “It will not be easy for most Americans to accept the fact that Social Security no longer works. For nearly forty years the program has grown steadily in the public consciousness to a point where it seems to represent government itself—a vast and unknowable collection of laws and men that seem to promise ‘everything will be all right’ if we simply demonstrate good faith by paying and voting.”

Forty years late everything isn’t right for millions of people in my generation who are facing hard times, or at the least a reduced standard of living, in old age. It will also be better for the next generation if radical Social Security reform is put in place as soon as possible.

For many, their ability to achieve financial independence hinges on it.


Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post.