The Social Security Deception

I have seen a lot of people sharing “memes” about how Social Security is not an entitlement (in the political sense), how they paid into Social Security, that it’s their money they should be getting back as part of their retirement, and how any attempt to cut/reduce social security is stealing their money.

Unfortunately, nothing could be further from the truth.  Yes, Social security was sold first as a way to insure that poor old people wouldn’t starve once they became too old to work in a society which, at the time, still relied quite a bit on manual labor.  Then it was sold as old-age insurance; your money is set aside and used to fund a retirement once you are too old to work.

Both of these sales pitches were lies.

The thing about preventing poor people too old to work from starving?  I am generally not a fan of the federal government being responsible for public charity, preferring instead that being handled locally and ideally privately.   Still, that is a subject on which reasonable people can disagree and if one does accept a governmental responsibility for aid to the poor then some program to assist those rendered destitute due to age has a certain logic to it.  Only Social Security has never worked that way.  Being destitute has never been a requirement for receiving Social Security.  And, if it’s really to help poor people, why are “poor and out of work due to age” any more worthy of that help than “poor and out of work due to other reasons”?  No, the “starving grandmothers” sales pitch was nothing more than an attempt to gin up emotional support for a program that was supposed to work otherwise.

The second pitch, that the government is putting aside your money to provide for your retirement, that it’s in a “trust” to be returned to you when you retire, is equally false.  First off, the “trust” is, and has been, held in government bonds–which basically means it provides funds for the rest of government to do with as it will.  But the big thing is that Social Security has never just set aside the money (even in the “trust”) to pay individuals back what they have put in.  The first person to receive Social Security is illustrative.  Ida May Fuller, after paying into Social Security for 3 years after paying a total of $24.75 (from 1937 through 1939) began receiving monthly checks of $22.54 in January of 1940.  She lived to the age of 100 drawing a total over that time of $22,888.92, more than 900 times as much as she paid into it.  That money wasn’t from “investing” her contribution.  That money, like all the Social Security payments to follow, was from current workers “contributions” being used to pay current retirees.

In the private sector a “business model” in which the investments of new investors are used to pay off earlier investors is called a Ponzi scheme and it’s a crime.  Such schemes usually fail quite quickly as the supply of new investors dries up.  The only real difference in Social Security is that the legal mandate to pay into it ensures a supply of new “investors” as people are born and grow into the work force.  Older “investors” are removes as they die.  Currently changing demographics–people living longer so more Social Security is being paid combined with falling birthrates after the end of the Baby Boom–are straining a system which is inherently unsustainable in the first place.

The upshot of this is that Social Security is not money being taken and set aside for your retirement.  It’s money being taken from you and given to someone else for their retirement.  And it always has been.  The “theft” isn’t in any possible future failure to pay you.  The “theft” has already taken place.

Look, if someone breaks into your house and robs you, that does not give you license to break into your neighbor’s house and rob him.  I think most people would agree with that.  Likewise, that you have had your money taken via the Social Security tax to pay for people currently retired does not give you the right to insist that future workers’ money be taken to pay for your retirement.

It sucks, I know.  Believe me.  I’ve had plenty of money taken from me too, but that still doesn’t make “turnabout” right.  It’s not even punishing the folk responsible for taking your money.  If anything it’s rewarding them and punishing people who had nothing to do with it.  There is no justice, no “right”, in continuing the taking from one generation to pay for a previous one.  It would be one thing to take back from the ones who took from you.  Even that may not be “right” in some larger sense, but there is a certain logic to it.  But taking from innocent third parties simply because others took from you?  There is no moral or ethical justification for it.  The old saw about “two wrongs” and all that.

Peter being robbed to pay Paul does not give Peter the right to rob John in turn.  It just doesn’t work that way.