President Clinton has announced that the precarious Social Security system can be saved by giving it first claim on future federal surpluses. His top priority, he told the nation, is to ensure that “Social Security will be there when you need it.”
But Mr. Clinton was addressing the wrong question. The fundamental issue is not whether Social Security can be salvaged — but whether it should be.
Imagine that you are 25 years old, and a salesman offers you the following: In exchange for 7.5 percent of your salary for the rest of your working life — plus a matching premium from your employer — you will receive a monthly retirement pension. Upon further questioning, however, you learn that the total payments you could reasonably expect to get would be much less than what you paid in (and substantially less than what you could have gotten through a simple savings account).
Further, you discover that your money will not even be invested, but will be “loaned” to the salesman’s brother-in-law to buy a car, to his neighbor to pay for college, to the local YMCA to renovate its basketball court. You will thus be paid, you realize, not from any returns generated by your funds, but directly from contributions by new “investors.” And what if there aren’t enough new “investors”? Simple, the salesman explains: Your benefits will be cut.
No rational person would buy into this Ponzi scheme. Yet that is precisely what Social Security is: The payout on retirees’ “investments” is made directly from fresh premiums coming in.
This is not news to most people. The destructive fraud inherent in Social Security has long been observed by numerous commentators. Nonetheless, Washington refuses to consider any fundamental alternative to it. Why? Why is such a dishonest program — one that would result in a prison sentence if launched by a private citizen — viewed as untouchable?
It is surely not for economic reasons. Like any scam, Social Security is clearly a financial disaster for its alleged beneficiaries. Its “trust fund” is a fiction, with the money being spent as soon as it comes in. Today’s middle-aged workers will, upon retirement, receive negative returns on their money. For example (in terms of constant 1993 dollars), a worker born in 1955, who makes just over $24,000 a year, will receive Social Security benefits totaling $268,000 less than what he and his employer paid in.
Economically, therefore, Social Security represents only a colossal loss of wealth. What keeps this program alive is something else: the morality behind it.
Consider the main argument leveled against any attempt to privatize Social Security. If we were left to manage our retirement savings on our own, it is claimed, some would fail to plan at all (or would invest foolishly), and would have nothing left for old age.
What this really means is that, in order to protect the irresponsible investors from their own folly, the responsible ones must have their savings ravaged. It means that those who are capable of planning for their future must be sacrificed for those who, supposedly, are not. This is an egregious injustice.
Social Security rests on the dictum that you must surrender your interests for the sake of others. It is a system of altruism, under which all are sacrificed to all. It is not your retirement that you are paying for, but your neighbor’s — or your neighbor’s parents’ — just as your neighbor’s children will be forced to pay for yours.
This viciously patronizing dictum regards people as essentially feeble-minded and helpless, unable to anticipate the requirements of old age. The government, therefore, must save them from themselves. How? By not allowing anyone to make his own decisions.
On this premise — one must ask — what area of life would be exempt from the intrusion of paternalistic government planners?
The tragic irony is that Washington, the epitome of blind short-sightedness, is “rescuing” us from our presumed stupidity — with a scheme so ruinous that only an outright idiot would willingly participate in it.
With the collapse of Social Security looming, now is the time to start privatizing. It is time to reject the premise of self-sacrifice and to assert the individual’s moral right to pursue his own self-interest. It is time to move to a voluntary system under which each individual is allowed to plan his own financial future with the money he himself has earned.
Only then can we look forward to genuine retirement security — the security that comes from relying on our own thought and effort, not on the dishonest promises of a bankrupt, parasitic government program.
