Sunday, April 22, 2012

Social Insecurity

As part of FDR's New Deal, the Social Security program has become a touchstone in nearly every American's life. It has two defining characteristics: first, it is so central to the average citizen's perception of his future income that no politician dare suggest meddling with it in any way; second, it absolutely cannot be sustained and must be meddled with in some way. The simply math of the situation is that, given the lower birth rate of recent decades, there are fewer and fewer young workers, and more and more old retirees. (This is one of many reasons why a higher birthrate is good for the economy; if you reading this, and you are married and of the appropriate age, go have more children!) William F. Buckley sees that a

serious economic case against the federal social security program is based on the certitude of inflation. Given inflation, social security payments would seem to amount, at least in part, to a capital levy, since the dollar paid in when one is twenty-five years old is due to be repaid, forty years later, with a dollar worth only a part of what the original dollar was worth.

The only way to make up the inflationary difference is to tax more young workers at an even higher rate. Other shortcomings of the social security program make it impractical. Social security was instituted as an "insurance" for retirees "in case" they didn't have enough income as they aged. But in reality, people now plan on it and count on it - it's no longer "just in case" but rather viewed as a significant part of financial planning. As Buckley writes,

To the extent the social security program is sold as an "insurance" program, and its "clients" encouraged to think that their employers are paying part of the cost, the program is fraudulent; and let us beware the tolerance of fraud. As we live with it, we do damage to our critical and moral sensibilities.

We are indeed told that our employers are paying a certain percentage toward our social security. In fact, our employers have been forced, by law, to reduce our salaries and wages by exactly that amount which they must send to the federal government on our behalf to fund the program. The fact that this participation is forced - upon employee and upon employer - is also objectionable:

A society has the right to impose negative restraints; but positive acts of compliance it may exact only in extraordinary situations. One may not murder, drive drunkenly, commit libel, undress publicly. But there is not, for each of these prohibitions, a corresponding injunction of an affirmative kind. To require participation in a social enterprise is a fatal habit for a free society to get into. There are times which it must be done. A society may compel its members to serve in the armed forces when that society is clearly threatened. But it must not conscript its citizens except where such a threat is directly posed.

To more directly apply this principle to the social security program:

Assuming that the economic survival of the nation depended on unanimous participation in the social security system: would society then be entitled to require enrollment of all its citizens? Yes. But only if the demonstration could be made; only if it could be shown that the indispensable enterprise, as conceived, could not be executed without unanimous participation; i.e., voluntarily. The argument that the many would, under a voluntary system, find themselves, performing sacrifices in behalf of the few (the alleged injustice on which the case against the right-to-work laws is based) is not applicable here, because social security payment are not "sacrifices." They are payments against a future service. Those who do not enroll in the program do not make the payments, but neither do the benefits inure to them.

One thing is certain: social security cannot continue in its present form - or in anything even similar to its present form.