From: lhughes@b11.b11.ingr.com (Lawrence Hughes)
Subject: Libertarian View on Social Security
Organization: Intergraph Corp. Huntsville, AL
Distribution: hsv
Date: Tue, 29 Sep 1992 15:56:25 GMT

		     Libertarian View on Social Security

	     from "Libertarianism in One Lesson", by David Bergland

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SOCIAL SECURITY

   The U.S. government's Social Security System is in big trouble. During the
Carter administration an effort was made to save the Social Security System
from collapse by increasing payroll taxes. A few years later, under Reagan,
that was found to be insufficient and more changes were made to save Social
Security, again by raising payroll taxes. Most workers now pay more Social
Security taxes than income tax. But Social Security has not been saved, and
most people know it, especially younger Americans.

   Today, many older Americans think of the old age benfits under Social
Security as the primary source of their retirement. But the system was not
designed to serve that purpose. [Note: SS was originally proposed, and the law
still reads, as a "supplement" to an existing retirement program - LEH]

   Unfortunately, the government has put out much misinformation about Social
Security, how it works and what it can do. We have been told that Social
Security is some sort of insurance, investment or pension plan. People think
they have "paid in to" Social Security. This is a mistake. The Social Security
system is only a program whereby working people are taxed and the money is
immediately paid out to people who are retired. There is no pool of money that
anyone "paid in to" which still exists as a retirement or investment fund. 
[Note: the technical term for this practice is a "ponzi scheme", and in the
private sector, it is fraudulent and highly illegal - LEH]

PROBLEMS ARE GETTING WORSE

   The Social Security System is insolvent. It should be viewed in the same
way as a bankrupt corporation. The system has about $8 trillion in unfunded
liabilities. This means that, under current estimates, all of the money which
must be paid out in the future - if the system continues unchanged - would
equal $8 trillion. The only way to accumulate the money to pay is to increase
taxes on working people in the future.

   Right now, more Social Security taxes are being collected than are being
paid out because the "baby boom" generation workers are now in their prime
productive years. But the government is not accumulating that surplus and
investing it for the future; it is gobbled up to reduce the budget deficit
caused by other profligate federal spending.

   The important point is that our society is growing older. As time goes on
there will be more older people, living longer and receiving benefits and
fewer younger people working and paying taxes. A person now retiring at age
65 who has worked at average wages for the last 40 years will receive in about
two years from Social Security an amount equal to all Social Security he ever
paid, about eight years before reaching average life expectancy.

   Obviously, that additional eight years of retirement benefits must be paid
for by today's working taxpayers. When Social Security began in the 1930's,
average life expectancy was about 65, the same age people began receiving
benefits. It's great that our parents and grandparents live longer today. But,
because they still begin to receive benefits at age 65, the Social Security
system is drowning us all in red ink.

   Experts estimate that because of the advancing age factor in our population,
by the year 2030 the average working person will have to pay over 40% of his
or her earnings, just for the Social Security tax, in order to maintain 
benefit levels as they are now. The system cannot survive under such circum-
stances. 

   There will be a major intergenerational conflict. It is increasingly
apparent that benefits for the elderly under Social Security and related
"entitlement" programs (e.g. medicare) are the largest factor in the explosive
growth and cost of the federal government. Younger working people will find
ways to evade the system just as many people now work in the "underground
economy" to evade excessive taxation. Further, tax increases of the magnitude
necessary would be such a depresant on the economy it would cause a complete
economic collapse. Thus, rather than providing security, the existing Social
Security system is a prescription for disaster and *loss* of security, not
only for older people, but for everyone.

A TOUGH SOLUTION FOR A TOUGH PROBLEM

   The way to a solution begins by facing up to the hard realities. We must
recognize that we are dealing with a bankruptcy situation and the best we can
hope for is to end the problem and cut our losses. There is no "fair" way or
perfect solution. The following proposal is designed to solve the problem
quickly and in the least burdensome way, but does not claim to be perfect.
Utopia is not one of the options.

   We begin with those people age 56 or older, including those 65 or older
already receiving benefits. People in this 56 and older age group would receive
100% of the payout under the proposal. Those in the age group from 51 through
55 will receive a percantage of the proposed payout based on their age:
52 = 20%, 53 = 40%, 54 = 60%, 55 = 80%.

   For each person in the total category (all those age 52 and older) it will
be possible to do an actuarial analysis, much as an insurance company would 
do, to determine the present discounted value of the future Social Security
benefits such persons would receive if the lived to the average life
expectancy. In simple terms, this would be the amount of money one would need
to invest at current interest rates in order to make the Social Security
benefit payments to the average person after age 65. This gives us a lump sum
figure for each person in the class.

   Each such person would choose between taking the lump sum or purchasing a
life insurance annuity contract to replace the Social Security benefits they
would have received under current benefit schedules. When this is done, the
government's Social Security System is ended. There would be no more Social
Security tax. [both "your" 7.5% and "your employer's" 7.5% would end, which
would free up more money for additional employees and/or raises - this is one
of the more insidious lies about SS - that half comes from the employer, in
some magic way - this myth breaks down when you are self employed - LEH]. All
younger workers would be relieved of the increasing Social Security tax burden
and the economy would receive a great boost because of the tax relief. An
economic collapse and intergenerational conflict would be avoided, and older
people would be much more secure than they are now.

   Where is the money going to come from to finance this Social Security
buyout? We observed above that the system is bankrupt. So is the entire U.S.
government. When dealing with a bankruptcy, the aim is to use the bankrupt's
assets in order to pay his creditors at least some percent of what is owed.

   The U.S. government holds a huge amount of assets which are not relevant to
its legitimate purposes of national defense and protection of constitutional
rights. In fact, the U.S. government owns one third of the lands in the U.S.
It also owns a multitude of other very valuable assets such as the Tennessee
Valley Authority, other power plants, the largest motion picture studios in
the world, millions of vehicles, Amtrak, postal service assets, NASA,
satellites, etc. Portions of those assets ought to be sold, in a fashion that
will maximize the proceeds, to fund the Social Security buyout.

   Finally, anyone entitled to receive payment under this proposal who did not
actually need it would be encouraged to decline payment. [bad idea - LEH]

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Further comments by LEH:

I would opt out of the SS system TODAY with no compensation (cut my losses)
if I could also stop paying SS tax TODAY (or even at the end of '92). I know
that I will never collect a cent from this corrupt transfer payment system.
When SS was begun, there was something like 10 working people contributing
for each one receiving benefits. Since then, benefits have increased, the 
rules for who can receive benefits have been greatly relaxed, and by the time
I retire, there will be about 3 people receiving benefits for each working
person still contributing.... as my father says, "how big is a normal balloon
after you inflate it at 1 cfm for two weeks? not big at all - it has long
since gone boom".

Does ANYONE still believe in this system? Could you more effectively use (or
invest in a REAL retirement scheme) that 7.5% of your salary? How about 15%?
(which is the real figure - believe me, as a former company owner, I considered
"my" 7.5% contribution to be part of the employee's salary - and regardless, it
was part of my company's salary expense, along with insurance, benefits, etc.)

		STOP SOCIAL SECURITY NOW - VOTE LIBERTARIAN


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