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Social Security’s Malign Premise

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Take note of the sheer panic displayed by the left-socialist opponents of President Bush’s Social Security proposal. We can divine some significant information from that reaction.

The president’s suggestion (no detailed proposal has been offered yet) would not give individuals anything like the control over their own incomes and retirement planning they are entitled to. People under 55 would be “allowed” to direct the government to put a small percentage of their Social Security taxes into investment accounts the composition of which would be determined by government planners. On retirement, people apparently would not be free to take the cash in a lump sum.

Whatever this is, it is not true privatization or ownership. The government’s hands would be all over the new system. It would be a state-guided scheme with a veneer of private ownership. Yes, there would be elements of private property. But property circumscribed by arbitrary edicts is not authentic. It’s a midpoint between two conflicting principles.

This makes the panicky opposition all the more revealing. The statist politicians and pundits who sound the alarm against any change in Social Security (besides raising taxes on the “rich”) understand that even implied criticism of the program is dangerously close to questioning the premise of the welfare state. According to that premise, people need the government to care for them, and those who don’t must be compelled to finance that care. This includes providing retirement income, medicine, and other forms of security that go beyond simply deterring crimes against person and property. Politicians are happy to do these things because it’s the path to power, prestige, and influence. It’s easy to be generous with other people’s money.

To even suggest that people don’t need the government’s swaddling is to call the entire welfare state into question. But that is intolerable because too much is invested in it. Most of what the federal government does is forcibly transfer wealth from those who create it to favored interest groups (not necessarily the poor). Politicians build careers by pleasing such groups. If congressmen couldn’t redistribute other people’s income, how could they “serve the public”?

Of course, the system doesn’t really serve the public. It demeans and infantilizes people by making them dependent on self-serving politicians and bureaucrats. Who really wants to rely on officials who might cut benefits or raise the retirement age if the political winds happen to blow that way? When someone asks what today’s retirees would have done had Social Security not existed, he commits the fallacy of failing to look for the “unseen.” Had government not been taking a significant portion of their incomes, retirees would have had the money to invest for themselves. The innovative and consumer-sensitive marketplace would have responded with a variety of savings vehicles. Government’s con game is to crowd out private alternatives through its coercive powers and then point to the lack of private alternatives to justify itself.

The politicians and pundits who claim the sky would fall if people were “allowed” to divert even a small amount of Social Security tax to investment accounts have never explained why individuals don’t have the right to opt out of Social Security entirely. We’re supposed to be free. So why are we compelled? Defenders sometimes say that Social Security is an insurance program and everyone must be in the pool for it to work.

Bad answer. Social Security is not insurance. Insurance is a voluntary pooling of risk. Life, auto, and home insurance work perfectly well without compulsion. Why must we have compulsory retirement insurance?

We “must” have it only in the sense that politicians “must” have a method of buying votes and “serving” us whether we like it or not.

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    Sheldon Richman is vice president of 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.