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Bush’s Social Security Sham


GOP presidential hopeful George W. Bush wants to let working people invest some of the money now taken by the Social Security payroll tax. The principle is sound. Money taken by the tax is not invested, but consumed. It pays benefits to current retirees, with anything left over going to pay the government’s creditors. Thus workers being robbed by the tax have nothing tangible to show for it. All they get for their money is the politician’s promise that when they retire, another group of workers will be taxed to provide them retirement benefits. Such promises are, to put it diplomatically, subject to change.

Investment, on the other hand, is something real. The money would be dedicated to producing things people want. Profits would accumulate over the years, providing more retirement income than Social Security promises, as well as a nice sum of cash that workers could leave to their children. That doesn’t happen with Social Security.

So in principle investing a portion of your income for retirement makes a heck of a lot more sense than Social Security. But before we give Governor Bush the Boldest Candidate of the Year Award, we should look closely at what he’s saying. Any amount of freedom from the burdensome Social Security system would be welcome. But we have to ask ourselves whether Governor Bush’s proposal would actually free us.

Suspicion is immediately aroused at the beginning of the speech in which he unveiled his plan. It begins, curiously, with a paean to Social Security, which is odd considering that it was the centerpiece of the big-government administration of Franklin D. Roosevelt, who was no Republican. Bush began by saying, “Social Security is the single most successful government program in American history. Without it, more than half of all seniors would live in poverty. For millions-for parents and grandparents with little or no savings-it is the difference between destitution and dignity.” That may be true, but it is woefully deceptive. The real issue is what shape the elderly would be in today had the government not consumed a growing portion of their earnings over the years and had instead left them free to invest in their own futures.

Bush also said that “Life before Social Security could be harsh.” Life before 1935 was undoubtedly harsher than it is today. But to credit Social Security for the progress makes no sense. The American people, lured by the profit motive, have created an unprecedented amount of wealth in the last 65 years. Government has usually impeded that heroic effort through taxes, regulation, inflationary monetary policies, and war.

By what standard, then, is Social Security the most successful government program in American history? It has managed to transfer a huge amount of money from productive workers to retired consumers. Many Social Security recipients have received more in subsidies than they paid in. (The system is less kind to black people, who don’t live as long as whites.) But that will come to an end because of intrinsic flaws of the system. It will go broke before long.

Social Security has also robbed Americans of their independence. When government ensures people “security” in retirement, they become virtual wards of the state. As workers, they have no freedom with respect to how much and in what manner they will save for their own futures. As retirees they are helpless pawns of scheming politicians who care only about reelection. This is called “social security.”

In light of this, isn’t Governor Bush’s plan an improvement? Hardly. He will permit workers to invest only a small portion of what is now taken in taxes. His plan will leave it to all-knowing bureaucrats to dictate how the money can be invested: “We will establish basic standards of safety and soundness, so that investments are only in steady, reliable funds.” The money won’t be available until retirement, the age of which government will set. And workers will still have to pay taxes to support retirees!

What’s this have to do with freedom? Nothing. But then, Governor Bush didn’t say anything about freedom. He promised only a better financial return. That’s the Republican Party for you.

Sheldon Richman is senior fellow at The Future of Freedom, author of its forthcoming book, Tethered Citizens: Why We Must Abolish the Welfare State, and editor of Ideas on Liberty magazine.

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    Sheldon Richman is former vice president and editor at The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.