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Privatizing Coercion

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Every day, roughly 10,000 baby boomers do the same thing: they retire. And when they retire, the first thing they generally do is apply for Social Security.

There are actually two parts to Social Security (OASDI).

The Old-Age and Survivors Insurance (OASI) program provides monthly benefits to retired workers, families of retired workers, and survivors of deceased workers. The Disability Insurance (DI) program provides monthly benefits to disabled workers and families of disabled workers.

According to the latest annual report by the Social Security Board of Trustees (“The 2018 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds”), “Over the program’s 83-year history, it has collected roughly $20.9 trillion and paid out $18.0 trillion, leaving asset reserves of $2.9 trillion at the end of 2017 in its two trust funds.” In 2017, “51.5 million people received OASI benefits,” “10.4 million received DI benefits,” and “an estimated 174 million people had earnings covered by Social Security and paid payroll taxes on those earnings.” The total cost to taxpayers was $806.7 billion for OASI benefits and $145.8 for DI benefits.

The Social Security program is funded by a 12.4 percent (10.03 percent OASI and 2.37 percent DI) payroll tax (split equally between employers and employees) on the first $128,400 of an employee’s income. Self-employed individuals pay the full 12.4 percent. One must pay Social Security taxes for a minimum of 40 quarters to be eligible.

There’s just one problem. According to the Social Security report,

Social Security’s total cost is projected t0o exceed its total income in 2018 for the first time since 1982, and remain higher throughout the projection period. Social Security’s cost has exceeded its non-interest income since 2010. For 2018, cost for the program is projected to exceed total income by $2 billion and non-interest income by $85 billion. As a result, asset reserves will decline during 2018. Reserves are also projected to decline throughout the remainder of the short-range period.

The conclusion of the Social Security Trustees is grave:

The projected hypothetical combined OASI and DI Trust Fund asset reserves become depleted and unable to pay scheduled benefits in full on a timely basis in 2034. At the time of depletion of these combined reserves, continuing income to the combined trust funds would be sufficient to pay 79 percent of scheduled benefits.

Numerous proposals have been put forward over the years to “save” Social Security. They include raising the retirement age, raising the Social Security tax rate, reducing or eliminating COLAs, increasing or eliminating the payroll tax cap, reducing benefits, or means-testing recipients. Current Social Security beneficiaries and their allies in groups such as AARP would never tolerate lower COLAs, reduced benefits, or means-tested benefits. However, they generally wouldn’t mind if the retirement age was raised, the Social Security tax rate was raised, or workers were taxed on more of their earnings to fund the Social Security system. Those Americans who are not yet on Social Security would generally be opposed to paying more in Social Security taxes. That leaves raising the retirement age as one of the few things the government could do that does not directly affect anyone right now. This last happened in 1983 when the retirement age to receive full Social Security benefits was gradually raised from 65 to 66 (for Americans born between 1943 and 1954) to 67 (for Americans born in 1960 or later).

Although Democrats are united that Social Security needs to be saved, they don’t generally issue detailed plans to reform the program, as the Republicans do.

A couple of years ago, House Ways and Means Social Security Subcommittee Chairman Sam Johnson (R-Tex.) unveiled a plan to “permanently save Social Security, ensuring this vital program continues to work for today’s workers and beneficiaries and future generations.” The Social Security Reform Act of 2016 (H.R.6489) “puts Social Security back on a sustainable path by modernizing the program for the 21st century, rewarding retirees and individuals with disabilities for their years of work, and improving retirement security.” This Republican plan gradually increases the full retirement age, increases benefits for those with lower incomes, slows the growth of benefits for those with higher incomes, and limits the size of benefits for spouses and children of those with higher incomes.

The Heritage Foundation, a conservative think tank, regularly introduces or discusses proposals to reform Social Security.

But it’s not just Republicans and conservatives who put forth plans to save or reform Social Security. To the surprise of some, there are libertarians who have done likewise. Most recent is Zach Lang in his article “Social Security Goes Bust in 2034. Here’s How Free Markets Can Save It.” “We can fix the program,” he says, but not by raising the retirement age. That would “not end the insolvency crisis; it would merely postpone it.” We should look for a “more free-market solution,” a “free-market overhaul.” Here is Lang’s simple proposition:

Instead of the government taking a portion of your paycheck, it would mandate that you invest it privately in a business that manages pension funds. Then, it would be up to you to decide where your savings goes and what is done with it.

A system like this could be phased in, having everyone under a certain age pay into a private pension fund and those who are of a certain age could live off of the dying Social Security program.

As it relates to libertarianism, there is one insurmountable problem with this proposal: it privatizes coercion.

Future of Freedom Foundation president Jacob Hornberger has well contrasted libertarianism and Social Security:

The core principle of libertarianism is the non-aggression principle. It holds that it is morally wrong and illegitimate to initiate force against another person. It holds that a person has the right to live his life any way he wants, so long as his conduct is peaceful and non-fraudulent.

Social Security involves the forcible taking of money from a person to whom it belongs and giving it to a person to whom it does not belong. That constitutes a grave violation of libertarian principles. Under libertarianism, every person has the right to keep everything he earns and decide for himself what to do with his own money.

There is nothing libertarian or free-market about the government’s forcing Americans to invest a portion of their paychecks in a business that manages pension funds. That is because there is nothing libertarian or free-market about the government’s forcing Americans to do anything.

If the government should force Americans to save for retirement, then why shouldn’t it force them to save for houses, medical expenses, new cars, college, vacations, new iPhones, or Christmas presents?

It is neither constitutional nor the proper role of government to have a retirement, disability, insurance, or investment program; provide a safety net; or keep anyone out of poverty.

It is immoral for the government to take money from those who work and give it to those who don’t.

Because Social Security is an intergenerational wealth-redistribution scheme, Social Security taxes should be eliminated, Social Security offices should be closed, Social Security bureaucrats should be laid off, the Social Security Administration should be abolished, and the Social Security should be ended.

Individuals — with the help of family, friends, employers, books, websites, seminars, organizations, investment advisors, insurance companies, and banks — are responsible for ensuring that they have money put aside or invested to retire on or take care of their loved ones in the event of their death or disability.

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