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Social Security Is Definitely Welfare


After posting my article yesterday, I received several emails from a FFF supporter, with whom I often engage in very enjoyable exchanges, telling me that I am wrong about Social Security. Attempting to distinguish Social Security from food stamps and other welfare programs, he steadfastly insists that Social Security is not a welfare program or a dole program but instead a savings-retirement-insurance program.

As I stated to him in my response, he remains a victim of self-deception. The reality is that Social Security is just another welfare program, no different from food stamps, farm subsidies, education grants, or foreign aid to dictators. If Congress decided to repeal Social Security today, which it has the prerogative to do, no one could sue for recovery of his“investment” or “insurance premiums.”

The trickery that induces or reinforces people’s self-deception comes about because of the FICA tax that is imposed on people to help fund Social Security (and Medicare) payments to seniors. When people see that tax being taken out of their paychecks and also see that their employer is being forced to match it, they get the impression that produces the popular mindset that holds, “I put it in and therefore I have a right to get it back.”

But the FICA tax is nothing more than political trickery designed to reinforce a mindset of self-deception. Such trickery is magnified by oral pronouncements by public officials and written statements by op-ed and editorial writers in the mainstream press that refer to Social Security as n “insurance” or “retirement” program.

But it is nothing of the sort. What ultimately matters is what the law says, not what people think the law says, not what people wish the law says, not what public officials have promised in campaign speeches, and not what op-ed writers and editorial boards have written in the mainstream press or on the Internet.

All that matters is what the law itself says. And ignorance of the law is no excuse. If people decide to believe what they read in the newspaper (or on the Internet) or what they hear from politicians and bureaucrats, that’s their choice. But it’s not going to change reality. Reality is what the law says.

From the very beginning, the Social Security law established nothing more than a federal welfare program. The law provided that the federal government would give money away to seniors. No one was required to pay anything “into the system.” There was no insurance premium. There was no savings requirement. It was just a welfare program, pure and simple, one that gave money away to seniors for “free.”

Think of the first Social Security recipients. Obviously they had not “put their money into the system.” They hadn’t paid any insurance premiums. They just started receiving free money from the government. That’s because the law established a program by which the federal government would give money away to seniors for free. That’s what all welfare-state programs are all about, whether it’s Social Security, food stamps, farm subsidies, aid to dictators, or any other welfare program.

While there have been various changes and modifications to the Social Security law over the decades, the basic principle has remained unchanged: Social Security gives federal money to people for free, just like food stamps, farm subsidies, education grants, and aid to the arts.

Of course, we all know that all that free money being doled out to seniors isn’t free at all. The government doesn’t have a fountain of wealth to dole out. In order to give out all that free money, it has to first collect it from people in the form of taxes. In fact, that’s what the government has to do to make any other welfare payments to people — i.e., farm subsidies, education grants, etc. To pay out $1 million in welfare, it must collect $1 million in taxes.

That’s what ultimately happened when the Social Security program was enacted. In order to collect the additional taxes needed to pay all that free money to seniors, federal officials had to raise taxes (or decrease spending in other areas). It could have just increased the income taxes that people pay. Or they could have increased tariffs. Or excise taxes. Or they could have imposed a new tax called “the supplemental tax revenue tax.”

But that’s not what they did. Instead, they imposed a new tax and called it the Social Security tax. That’s where the trickery came into effect. By calling the new tax a Social Security tax, public officials were able to deceive people into thinking that Social Security wasn’t really a welfare program but instead was a savings-retirement program or a “social insurance” program.

But the reality is that it is neither of those things. It remained a welfare program. The FICA tax was just another tax, one that was intended to augment the government’s tax revenues to help cover the increase in federal expenditures caused by the Social Security program.

It would have been no different if the federal government had simply raised income taxes or other existing taxes. But that would not have been as tricky has imposing a new tax and calling it a Social Security tax.

Under the Social Security law, there has never been a fund in which people’s FICA taxes have been deposited. Like all other tax revenues, they have been spent on receipt for welfare-warfare state programs. All the money that was collected from today’s seniors during their work lives by the FICA tax (and the income tax) is gone — poof!–spent on welfare-warfare programs. Today, the reality is that all that “free” money that Social Security recipients are receiving is coming out of the pockets of young people and middle-aged people, many of whom are struggling to raise families and make ends meet, in large part because of the enormous federal taxes they are forced to pay to fund the welfare-warfare state, including Social Security.

In a sign of what Social Security and the welfare state have done to people’s consciences, few seniors give a whit about the fact that their money is being forcibly extracted from the pockets of others or that it is causing massive economic suffering to others. In the minds of many seniors, since others did it to them when they were working, they believe that they now have the “right” to do the same thing to young people. The moral and economic consequences are considered irrelevant. While recipients of welfare doles favor cutting or abolishing the dole for others, most of them fight vehemently for the continuation and even expansion of their particular dole program, no matter how high the cost to others or to the country.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.