Let's Make A Deal: The Incompatibility Of Socialism In A Capitalistic Society
"This law represents a cornerstone in a structure which is being built but is by no means completed--a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the Government against the necessity of going deeply into debt to furnish relief to the needy--a law to flatten out the peaks and valleys of deflation and of inflation--in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness." -President Franklin Delano Roosevelt, August 14, 1935
The desperate state of the United States Social Security system is a popular
topic in the press today. In Washington, D.C., Democrats and Republicans alike
struggle to stay in the good graces of the retired citizens of the United States.
Not unlike the popular game of "king of the mountain" the camera-happy
Congressmen are more interested in making it to the top of the heap rather than
considering whether the game should be played at all. No one asks whether the
Social Security Act of 1935 should remain the plague of American taxpayers,
we only hear the debates that consider how to sustain the life-support of a
long dead government social program.
Where did the idea for the Social Security Act of 1935 originate? We owe the
inspiration for the Social Security system to the Germans. In 1883, sickness
and maternity benefits were provided for industrial workers in Germany. Workman's
compensation appeared in 1884, and by 1889, the German program was expanded
to provide coverage for invalidity, old-age and death benefits. It is believed
that the institution of a social insurance program in Germany and later all
across Europe was to stem the expansion of "socialism". This logic
is like leaving your front door unlocked so a thief won't break into your home.
Why force my way inside when the owner welcomes me in?
This government-sponsored program is a sham. If it were presented in any other
venue other than the floors of the House and Senate, we would dismiss it as
a typical pyramid scheme. No matter what the government may try to portray as
Social Security's good intentions, it is a scam and it reduces the wealth of
many citizens for the meager support it provides our elderly population. If
I were to go onto national television and propose that we tax every minority
and single mother, and then turn the funds over to a large population of elderly
white citizens, I would be branded a racist and a cheat. President William Clinton
spews this same rhetoric for two hours during a State of the Union speech and
is heralded as an expansive thinker, while the only thing expansive about his
ideas are that the government is not presently taking enough of my money.
Social Security is the biggest caper ever pulled off in the United States
of America. Forget the famous bank and train robberies, and dare I say forget
the Savings & Loan bailout of the 1980's. For over sixty-years, Leviathan
has been shoving his hand into our wallets and prying the pennies from our clenched
fists. We know who the thief is; we even praise his spending of our stolen dollars.
The sad part is, he still has not had enough. Leviathan's arrogance and greed
grow exponentially as our economy stretches to exploit even the poorest among
us. We do not fight the repeated thefts we suffer because Leviathan has convinced
us as a nation that we cannot survive without it.
Were the Germans successful in defending themselves against Socialism? The
memories of over one million murdered Jews shriek "no". Our nation
was born of natural laws, among them the right to own private property. Are
we myopically focusing on what is left after Social Security taxes are withheld,
or do we protect our right to every penny earned by voting for men who distrust
Leviathan? As the saying goes, "the road to hell is paved with good intentions."
Some who support the Social Security system regard Thomas Hobbes as a great
philosopher. A life without government is described by Hobbes as, "solitary,
nasty, brutish, and short." He is quoted as saying, "our only security
lies in concentrating all the powers of the sovereign state into the hands of
one man or assembly of men." Interestingly, the man who is regarded as
a major philosophical influence on our nation's Founding Fathers would be in
direct disagreement with Hobbes. John Locke wrote that "in the state of
nature, man is free, and in this condition all men are equal." He continues,
"we each have a right to life, and a right to liberty so long as our actions
do not infringe the natural rights of others, and we have both property in our
own body, and in the product of our own labour." It is evident that the
implementation of the Social Security system is in absolute violation of those
natural laws held sacred by Locke and the Founders. Regardless of the purpose
a government claims when stealing property, it is according to natural law that
the illegal transfer of ownership nullifies any legitimacy touted by Leviathan.
We see a clear example today of ownership of money and treasures stolen from
Jews during the reign of the Third Reich. It is of no significance that various
Europeans and Americans have purchased or acquired the property through lawful
transactions, because the right of ownership rests with the original owners
and not any subsequent possessors. Hobbes would say let the government decide,
whereas Locke would declare, let the government observe natural law.
The loyal comrades who unfailingly support this form of Socialism attack its
detractors as ideologues. I do not understand the criticism. Max J. Skidmore
is such a supporter, he writes, "Who are the enemies? They are the ideologues
and the selfish. The ideologues would eliminate government programs in the name
of ideological purity. The selfish lust after the fortunes to be made if even
a small portion of Social Security were 'privatized.' Neither group is concerned
with the consequences of their actions for others."
Social Security at best is ideological, more accurately it is theft. Who is
selfish, a man who wants to keep his wages or a bloated cleptocracy that is
never satisfied? I do want to eliminate government programs in the name of ideological
purity; without it we would not have the privilege of citizenship in the United
States of America. The selfish that allegedly "lust" after the fortunes
privatization are the same citizens Skidmore claims Social Security will protect!
Skidmore's idea of responsibility is surrendering your wealth to the government
and accepting the portion seen fit for your age and social status. Finally,
in response to the quote that "neither group is concerned with the consequences
of their actions for others", I am reminded of a quote by Adam Smith, "it
is not the benevolence of the butcher that we receive our meat, but from his
own self-interest."
The economic problems with Social Security are "legion". Educated
citizens may disagree with the dueling philosophies, but economic consequences
are reality and are indisputable. As I identified previously, Social Security
is a Ponzi or pyramid scheme. Ida May Fuller was one of the first Americans
to receive Social Security Benefits. Before receiving her first benefits check,
she paid a grand total of $24.75 in taxes. Her first benefit check was $22.54,
and over the course of her retirement, she received $22,888.92 in benefits.
This greedy, lustful, selfish woman earned approximately 92,480% in returns
on her initial investment. Like a pyramid scheme, the first to join are the
biggest winners and remain so, no matter what the return is for any subsequent
investors. Unfortunately for anyone under the age of forty, we are getting negative
returns on our taxes, and it does not require a Ph.D. in mathematics to calculate
what will exist for us at retirement. Regardless of efforts in the early 1980's
by the Reagan Administration to guarantee Social Security benefits for all contributors,
the dismal future is certain.
"The changes in this legislation will allow Social Security to age as gracefully as all of us hope to do ourselves, without becoming an overwhelming burden on generations still to come. . . . Our elderly need no longer fear that the checks they depend on will be stopped or reduced. These amendments protect them. Americans of middle age need no longer worry whether their career-long investment will pay off. These amendments guarantee it. And younger people can feel confident that Social Security will still be around when they need it to cushion their retirement." - President Ronald Reagan, April 20, 1982
We cannot disregard that Social Security is Socialism, and such a faulty economic
system will implode regardless of the efforts of honest men to make the best
of a bad situation.
The economics are simple to understand. When the government compels a citizen
to participate in this program, the need to make a profit from "investments"
no longer exists. No matter what performance is achieved, the revenues remain
constant. It is similar to what history has taught us of banking regulation
since 1933. Once the FDIC was created, a hefty portion of accountability for
bad loans shifted from the individual banks to the taxpayers at large. Basically,
a bank could make a risky loan knowing that each depositor was insured for individual
accounts up to $100,000. Leviathan sold the idea of government insured deposits
to the American people under the assumption that it would protect individual
savers against what it deemed an unpredictable stock market.
The reality is this legislation served as a strand of twine in the rope of
government-sponsored Socialism. Another clear economic faux pas is the creation
of shortages due to a mandatory social insurance premium. Disposable income
is reduced through the heavy hand of Leviathan on the collective shoulders of
American taxpayers. An average-income earning citizen may be able to save in
addition to the FICA taxes withdrawn from each paycheck. A low-income earning
citizen will find it difficult to save in addition to the compulsory taxes he
is paying. His opportunity for investment is limited by a mandatory tax, it
is worsened by the fact that he has no alternative investment offered by the
government. Hobbes would say this man is fortunate to have Leviathan securing
his future through the nationalized retirement fund, while Locke would see this
system for what it is, a twentieth century scam to control private property.
It may be ideology, but my opinion is when you control my future, you control
my present.
Skidmore answers the claims that Social Security is a pyramid or Ponzi scheme,
"Social Security bears no relation to a Ponzi scheme (or pyramid scheme).
Allegations that it does reflect either ignorance or attempts to mislead. Ponzi
schemes are unsustainable because they require a geometric progression. With
Social Security each generation pays benefits to its dependent population. These
payments are sustainable indefinitely." I have included a table that refutes
Skidmore's assumption that Social Security is not a geometric progression. These
data are directly from the Social Security Administration and have not been
altered.
Social Security Trust Funds, Calendar Years 1937-1998 [In millions]
Calendar Year Receipts Expenditures NetIncreaseIn Trust Funds AmountAt End Of
Period
1937..... $767 $1 $766 $766
1938..... 375 10 366 1,132
1939..... 607 14 592 1,724
1940..... 368 62 306 2,031
1941..... 845 114 731 2,762
1942..... 1,085 159 926 3,688
1943..... 1,328 195 1,132 4,820
1944..... 1,422 238 1,184 6,005
1945..... 1,420 304 1,116 7,121
1946..... 1,447 418 1,029 8,150
1947..... 1,722 512 1,210 9,360
1948..... 1,969 607 1,362 10,722
1949..... 1,816 721 1,094 11,816
1950..... 2,928 1,022 1,905 13,721
1951..... 3,784 1,966 1,818 15,540
1952..... 4,184 2,282 1,902 17,442
1953..... 4,359 3,094 1,265 18,707
1954..... 5,610 3,741 1,869 20,576
1955..... 6,167 5,079 1,087 21,663
1956..... 6,697 5,841 856 22,519
1957..... 8,090 7,567 523 23,042
1958..... 9,108 8,907 201 23,243
1959..... 9,516 10,793 -1,277 21,966
1960..... 12,445 11,798 647 22,613
1961..... 12,937 13,388 -451 22,162
1962..... 13,699 15,156 -1,457 20,705
1963..... 16,227 16,217 10 20,715
1964..... 17,476 17,020 456 21,172
1965..... 17,857 19,187 -1,331 19,841
1966..... 23,381 20,913 2,467 22,308
1967..... 26,413 22,471 3,942 26,250
1968..... 28,493 26,015 2,479 28,729
1969..... 33,346 27,892 5,453 34,182
1970..... 36,993 33,108 3,886 38,068
1971..... 40,908 38,542 2,366 40,434
1972..... 45,622 43,281 2,341 42,775
1973..... 54,787 53,148 1,639 44,414
1974..... 62,066 60,593 1,472 45,886
1975..... 67,640 69,184 -1,544 44,342
1976..... 75,034 78,242 -3,209 41,133
1977..... 81,982 87,254 -5,272 35,861
1978..... 91,903 96,018 -4,115 31,746
1979..... 105,864 107,320 -1,456 30,291
1980..... 119,712 123,550 -3,838 26,453
1981..... 142,438 144,352 -1,914 24,539
1982..... 147,913 160,111 239 24,778
1983..... 171,266 171,177 89 24,867
1984..... 186,637 180,429 6,208 31,075
1985..... 203,540 190,628 11,088 42,163
1986..... 216,833 201,522 4,698 46,861
1987..... 231,039 209,093 21,946 68,807
1988..... 263,469 222,514 40,955 109,762
1989..... 289,448 236,242 53,206 162,968
1990..... 315,443 253,135 62,309 225,277
1991..... 329,676 274,205 55,471 280,747
1992..... 342,591 291,865 50,726 331,473
1993..... 355,578 308,766 46,812 378,285
1994..... 381,111 323,011 58,100 436,385
1995..... 399,497 339,815 59,683 496,068
1996..... 424,451 353,569 70,883 566,950
1997..... 457,700 361,100 88,600 655,550
1998..... 489,200 382,300 106,900 762,500
Notes: For the period 1937-1956, includes only the Old-Age and Survivors Trust
Fund. For the period 1957-1997, includes Old-Age and Survivors and Disability
Trust Funds combined. Table does NOT include transactions to the Medicare Trust
Fund.The annual net increase in the funds is the change in the assets from the
end of one year to the end of the next. In 1982, the Old-Age and Survivors Trust
Fund borrowed money from the Hospital Insurance Trust Fund, and repaid the borrowed
amounts in 1985 and 1986. For each of these years, the net increase in the funds
is equal to total receipts less total expenditures, plus amounts borrowed or
less amounts repaid.
The specific argument made by Skidmore that Social Security does not represent
a geometric progression is false. He is correct in his statement that Ponzi
schemes are unsustainable. When you put two and two together you see that Social
Security = Ponzi scheme = Unsustainable. In addition to flaws in his specific
argument, he makes sweeping generalizations that can easily be refuted. Skidmore
states, "All objective studies conclude that Social Security represents
an excellent value to the worker for the money paid in and will continue to
do so." Objective must mean anything that agrees with his point of view.
What determines excellent? If excellent value means there is a clear illustration
of diminishing returns, then I hope my private investments are a pathetic value.
If Social Security really is an excellent value, then why do all of these mean,
heartless, selfish capitalists want to side-step such a good investment?
The future of Social Security is bleak. Although the swelling movement for
privatized accounts is easy on the ears, it will likely go the way of the flat-tax.
Leviathan has no incentive improve Social Security because it is a significant
source of votes for elected officials. Until Americans believe that they can
do more for their future than the government, we will continue to hear heart-wrenching
speeches and apocalyptic "what if" scenarios surrounding the retirement
issue. For those who disapprove of Social Security, we have little to fear;
we are preparing for a future without the smoke and mirrors of government-sponsored
Socialism. Every fiscal or monetary issue before Congress can be delineated
to a fundamental disregard of the right to private property. This may seem to
oversimplify the problem, but it is from the seeds of ideology that the trees
of success sprout.
Since no generation of contributors (and I use that word lightly) is willing to pay into a system for the duration of their lives only to forfeit the contributions to their progenitors, we can expect more of the same from pundits, talking heads, and politicians. I will close with a quote from Ludwig Von Mises, a man who knew of what he spoke, "...economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics."