Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

August 31, 2010

Quote (& Chart) Of The Day

by Brad Warbiany

From Ezra Klein:

“The revenue loss over the next 75 years just from extending the tax cuts for people making over $250,000 — the top 2 percent of Americans — would be about as large as the entire Social Security shortfall over this period,” write Kathy Ruffing and Paul N. Van de Water at the Center on Budget and Policy Priorities. “Members of Congress cannot simultaneously claim that the tax cuts for people at the top are affordable while the Social Security shortfall constitutes a dire fiscal threat.”

There are a whole host of issues with this approach, but I might consider this option… AS LONG as we change the name from “Social Security” to “Welfare From The Rich To Old People”.

Might as well call it what it is, right? Trying to refer to this program as “insurance” is getting tired.

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  • cjs

    I fail to see how Social Security is welfare from the rich to the old people. The vast majority of those old people paid into social security for their entire lives as if it were an insurance plan, with the assumption that when the time came for them to collect that the money would be available just like other insurance plans. FICA taxes are capped at around $100K, so I really can’t see how the rich are paying a disproportionate burden. The program has brought in a surplus for many years, and that surplus has been borrowed against by the government to pay for many programs that I’m sure neither of us agree with. And many of those programs benefited the wealthy! (subsidies, military contracts and so on). Now approximately 30 years from now social security is projected to run a deficit. However the program is still owed money by the government, and rather than find a way to pay back that money (which seems to me to be the fiscally responsible thing to do) we’re trying to come up with schemes to deny old people access to insurance that they’ve paid for their entire lives. The only way we can possibly justify such a scheme would be to re-brand what has always been envisioned as an insurance program as an entitlement or as welfare.

    If I’m mistaken then please correct me, but from what I have looked at the social security “crisis” seems almost entirely manufactured. There are numerous ways that we can make up any future shortfalls, and the shortfalls are mostly temporary due to a larger influx of retirees due to the baby boom. And it is manufactured because regardless of what you think of it, Social Security is a popular program – one that few Americans would get rid of. For people who think that government is always incompetent and even downright evil, a popular and seemingly successful government program must create some major cognitive dissidence.

    As usual I’m open to alternatives. However privatization plans seem extremely risky to say the least. Right now millions have been lost in retirement savings based on the same market that you would put in control of social security. If it wasn’t for social security many of today’s retirees would have nothing. I would love to see a successful alternative to Social Security that isn’t controlled by the government. But a solution that throws seniors under the bus or robs them of money that they’ve paid in for their entire lives isn’t going to cut it.

    As far as the Bush tax cuts trying to turn a planned reversal of tax cuts into a tax raise is far more deceptive than calling a social insurance program a social insurance program. I don’t see a fundamental difference between unfunded tax cuts and unfunded social programs – they are both gross fiscal negligence. This all seems to me like a matter of prioritization – do we want to ensure that certain entitlement programs remain solvent, do we want lower taxes or do we want to continue to have our overly bloated military. There should be no all of the above. Unfortunately since we can’t agree on anything, we end up taking everything and not paying for it – which is the reason why were in this mess.

  • http://thelibertypapers.org/ Brad Warbiany

    cjs,

    Actually, SS today isn’t welfare from rich to old people [for the point you mention regarding income limit of FICA taxes]. It would begin to be so if we made an express decision to tax rich people higher for the express purpose of paying old people.

    But really, that rhetorical flourish is beside the point.

    Social Security is a transfer payment from the working to the elderly. Not from the “well-to-do” working to the impoverished elderly, but rather from all working people to the often well-off elderly. It’s couched in the language of “insurance”, but usually you try to insure against bad things happening, and plan for good things happening. You insure against crippling expensive diseases that may strike in your later years — you don’t “insure” yourself towards living beyond the age of 65.

    My solution, if you want a social safety net, is to make it an actual safety net. Means-test the program so that only the poor elderly qualify. Make it explicitly a welfare/insurance program for old people, not something that everyone becomes entitled to just for getting old. You probably have to sunset this (i.e. everyone above 55 gets the full “promised” benefit, everyone above 40 gets 50% of the promised benefit, and everyone below doesn’t get anything unless they qualify via means-testing), but fundamentally you need to solve the demographic problem that too few workers are supporting too many retirees.

    Essentially my solution is that everyone should be expected to provide for their retirement, and that we should only *save* those who couldn’t or didn’t. Government isn’t a retirement program.

    As for your final point about all of this being gross fiscal negligence, we agree fully. Gross fiscal negligence is common, as Milton Friedman pointed out, when you’re spending money that’s not your own on recipients that aren’t you. That’s one of the main reasons that we libertarians try to restrict how many spheres of the economy the government has access to. Short of anarcho-capitalism, one can admit the government’s role in a true safety net. Many libertarians dispute the government’s efficacy as a charitable organization, but charity as a public good can at least be argued. But Social Security isn’t a safety net or charity, it’s an “entitlement”. And nobody should feel “entitled” to their neighbors income — rather they should feel thankful for the charity.

  • http://thelibertypapers.org/ Quincy

    cjs –

    Even with the battering the stock market has taken the last few years, it is still a much better bet than Social Security. In fact, stuffing your money under a mattress is a better bet than Social Security. (More on this from Coyote Blog)

    As for Social Security being an insurance plan, the administrators would be in jail if they worked for an insurance company instead of the Federal Government. I work in insurance, and would *never* purchase a policy from a company with finances as rotten as those of Social Security.

    Social Security, if one is being generous, is a welfare plan. If one is not being generous, it is the world’s largest Ponzi Scheme and an act of economic warfare directed at the American worker.

    That said, I would love to see Social Security make good on all the promises it made in a financially sustainable fashion, while also allowing those of us who can and will do better on our own to opt out. Frankly, the rate of returns on Social Security is so low that this should be perfect possible.

  • Akston

    Are we talking about a safety net, or a hammock?

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