Socialist Security
Social Security is the third rail of US politics. President Biden has recently made great hay out of Representative Scott daring to even hint that this sacred program could be altered in any way, manner shape or form. Nor have the Republicans dared to challenge our one and only president on this matter. Instead, they have contented themselves with utter and total denial that they had any plans in the offing along these lines. Social Security changes are not on the table, they aver. They have no plans of altering even a jot or tittle of this holy program.
Well, there is no compunction on this score, at least not from the present quarter. This socialist nostrum should never have been started in the first place, and it should now be torn down, root and branch, and salt sown where once it stood.
Why?
There are two main reasons. First, it conflicts with an even more important third rail in our political system: democracy. Social Security states, in effect, that the American public is either too stupid, or too short-sighted, to save not only for a rainy day, which may or may not ever occur, but for their old ages, which will indeed take place, God willing.
But if they are so flighty, so unreliable, so un-mench-like, as to not be able to save, on their own, how, ever, in the name of all that is holy, can we trust them to the ballot box vote? On the other hand, we do endow the general public with this sacred privilege. Even obviously low information voters are allowed to pull the lever in the voting booth. In so doing, we are undermining our other basic premise: that the brains of the public are deader than the proverbial doorknob when it comes to saving for eventualities.
You just simply cannot have it both ways. You cannot, logically, state, in the same breath that the electorate is too short-sighted to save for their retirement and yet, should indeed be allowed within 100 miles of a voting booth. Who says logical contradictions cannot exist in the real world? If this is not one of them, there is no such thing.
Second, Social Security is a Ponzi scheme. Bernie Madoff, properly, went to jail for this crime of his. The people in charge of the Socialist Security program should join him there, since their acts are indistinguishable from his. The payments made to present retirees are not predicated upon their own past contributions to this system. Rather, they went to finance the retirements of the previous generation. Instead, their benefits are financed by the following generation, those still in the labor force. If that is not the exact definition of the classical Ponzi scheme, then nothing is.
A third difficulty, a relatively minor one, is that under present institutional arrangements, this program will become bankrupt in a matter of a handful of years, not decades. The New York Times estimates this as of 2033. This is due to demographics. The present generation is too large compared the one which comes afterward. The program could be “saved” by lowering payments to the levels of money coming in, raising the age of retirement, or some combination of both. There are riots in France over one attempt to ameliorate this threat: postponing retirement payments from the age of 62 to 64. Another possibility is to claw back some of the payments, via taxation.
Presumably one or the other or all three of these alterations will soon be implemented, notwithstanding the current fracas between Biden and the Democrats and Scott and the Republicans. For the last thing our masters in the ruling class want to do is preside over the bankruptcy of this evil system.
Why evil?
This is because it is paternalistic. It is an insult to compel people to have regard for their futures. Paternalism is justified only for children. They must be made, for their own good, to brush their teeth, drink their milk, look both ways when crossing the street, etc. But to treat adults in this cavalier manner is simply beyond the pale, at least for a civilized society, which we, patently, are not. At least not as long as this abominable system persists.
Originally published here.
Vincent: Excellent points. Where were you when I needed you? When I wrote this essay!
But it gets even worse. Once you relieve people of the responsibility of providing for their own future economic security, they lose interest in personally investing in future productivity. Why bother saving when you know that the government will take care of you? Of course, this deterrence of thrift comes at the expense of real capital goods formation.
Even worse, the Ponzi scheme hasn't been taking in enough cash lately to fund current benefit payments, so the "trust funds" have been selling off Treasury securities to make up the difference, which is in addition to the increased quantities of Treasury securities that have to be sold to fund the already ginormous official Federal deficit. However it is funded (either by the market or by the accelerated creation of money and money substitutes by the global banking system), it also comes at the expense of real capital goods formation.
With the brief exception of the COVID lockdowns, there has been an almost perfect inverse correlation between the share of GDP allocated to private sector investment spending and the share of GDP allocated to government expenditures over the past sixty years, the latter share being driven upwards relentlessly since the passage of Medicare in the mid-1960s by the growth of Social Security and Medicare. The price we pay for this Ponzi scheme is that the economy deindustrializes, labor becomes less productive in real terms, standards of living of most working people (and just about everyone else who is not on the Federal Reserve fiat money gravy train) go down, and the federal government must rely more and more on fiat dollar creation to pay its bills.
This will not end well.