Socialism, American Style, Part 2

Jacob G. Hornberger – October 4, 2020

[Read Part 1]  

The crown jewel of American socialism is Social Security, a program that originated among socialists in Germany in the late 1800s and then was imported into the United States, where it became an established program in the 1930s as part of Franklin Roosevelt’s New Deal system of welfare and regulation.

Contrary to popular opinion, especially among seniors, Social Security is not a retirement program and never has been. From the time that Social Security was enacted into law, it has always been nothing more than a welfare program, no different from food stamps, education grants, farm subsidies, corporate subsidies and bailouts, and foreign aid.

There is no Social Security fund into which people have made contributions during their work lives. There are no lockboxes at Fort Knox containing everyone’s Social Security “contributions.”

What about all those payroll taxes that people have paid during their work years? They are simply taxes, not contributions. They are no different from other taxes that people pay and have paid throughout history. They are simply another way for the federal government to raise money to pay for the ever-burgeoning expenditures of what has become known as a “welfare-warfare state.”

The government raises its money though taxation. It has a variety of ways it does that. On the federal level, the government imposes income taxation, tariffs (i.e., sales taxes on the purchase of foreign goods), excise taxes, the payroll tax, and others. All of these tax revenues go into the government’s coffers, which it then uses to pay for its welfare-warfare-state programs.

The federal government doesn’t save any of the money it collects in taxes. It spends all of its tax revenues in the same year that it collects them. In fact, the government spends more than what it collects in taxes. That’s what its $24 trillion debt is all about. That enormous debt reflects the fact that the federal government has borrowed the amount by which expenditures exceed tax revenues.

What about the so-called Social Security fund? It’s just smoke and mirrors designed to make it look as if the government is maintaining a fund with people’s payroll taxes. It doesn’t consist of the money that people have paid in payroll taxes. That money, again, is spent in the year it is collected, along with all the other tax revenues the government receives. The Social Security “fund” consists of nothing more than IOUs from the government. Those IOUs represent debt owed by the government, not actually cash savings that the government has accumulated and retained from people’s payroll taxes.

Suppose a parent is saving money for his kid’s college education. Each month, year after year, the parent puts away a large amount of cash in the family safe. When the kid reaches 16 years of age, the cash savings total $100,000. One day the parent decides to buy a brand new Porsche that costs $100,000. He uses his kid’s college fund to pay for the car. But he inserts a paper into his safe that says, “IOU $100,000.” When the kid asks his parent how his college fund is doing, the parent responds, “It’s doing great! The fund is fully funded in the amount of $100,000.”

But the parent, like the federal government, is engaging in smoke and mirrors. There isn’t really a college fund at all because IOUs are not the same as cash. For the government to replace the IOUs with cash, it would have to levy taxes on people, which is the same thing as simply levying taxes on people to get the money to send to Social Security recipients.

And that is precisely what all too many seniors do not want to recognize — that the money they are receiving is not a “refund” of their “contributions” but instead is being collected by the Internal Revenue Service from the younger people in the country — the people who are still working, many of whom are suffering severe financial constraints. Many young people have no savings or nest egg. They have no money for a down payment on a house. They live paycheck to paycheck. Some of them are deferring marriage for financial reasons. Some of them are still living with their parents into their late 20s and early 30s. The burden of federal, state, and local taxes is breaking them.

Repeal, not reform

What about the formula that the Social Security Administration sends to people showing how much in Social Security payments they will be receiving? That’s just a means by which they determine how much retirement welfare to send everyone.

Although they call Social Security an “entitlement,” no one is actually entitled under the law to receive anything. Contrary to popular belief, the Social Security law did not establish a contract between the government and the citizenry. Moreover, there is no commitment under the law to continue the program. If Congress voted to repeal Social Security today, no one could sue and recover for breach of contract or breach of promise.

Social Security is nothing more than a straight confiscate-and-transfer program. The IRS confiscates money from people to whom it rightly belongs and gives it to people to whom it does not belong. That’s the very essence of political stealing.

Suppose I accost you while you are withdrawing money from an ATM. I hold a gun to your head and demand that you give me $10,000 out of your account. Unwilling to lose your life over the money, you withdraw the ten grand and hand it over to me. I then go and distribute the money to seniors in town who are desperately poor. I do not retain any of the money for myself.

Am I a good and caring person for helping needy seniors with that money? I would think that everyone would say, “Of course not, Jacob. You’re just a thief. You are being good with the money you stole, but you shouldn’t be praised or thanked. You should be arrested, prosecuted, and punished.”

Suppose that I instead go to the government and say, “Tax that guy $10,000 and give it to needy seniors” and the government complies. Am I a good and caring person now? Many people would say, “Yes, Jacob, you are now a good person because you have supported a government program that takes money from people by force and gives it to seniors.”

But why the difference? Isn’t the moral principle the same? In the first instance, I am stealing someone’s money and giving it to needy seniors. In the second instance, the government is doing the dirty deed for me. In fact, in terms of morality, there is no difference at all. Stealing is stealing, whether it’s done by a private thief or by the government and regardless of how the money is used.

The only morally proper course of action is to repeal, not reform, Social Security.

No gradual reduction. No transition. Just end it. That’s what must be done with any program that is founded on immoral principles and that violates individual liberty.

Freedom or “phasing out”?

Some people, including even some libertarians, claim that this position reflects a lack of compassion and an uncaring attitude toward seniors. But where exactly is their care and compassion? They aren’t talking about voluntarily donating their money to seniors. They are talking about having the IRS continue taking money from younger people by force. Thus, their care and compassion is vicarious and indirect in that it comes through the initiation of force by government.

Why do I favor the repeal, not the reform or gradual reduction, of Social Security?

I want to be free! To achieve freedom, it is necessary to identify infringements on liberty and then remove them. If all that we libertarians do is succeed in reforming the welfare-warfare serfdom under which we live, we will not have achieved liberty. Liberty necessarily entails the removal of infringements on liberty.

Imagine that you’re living in 1850 Alabama. After years of effort, a group succeeds in getting a law enacted that reforms slavery. The law provides that there will be no more lashings, better food and health care, and shorter work hours.

Would the slaves be grateful? Undoubtedly! Nonetheless, they would know something important: Reform wasn’t freedom. Freedom necessarily would entail the dismantling of the structure of slavery. Freedom today necessarily entails the dismantling of the structure of serfdom.

Thus, everyone has a choice: Social Security or a free society? You can’t have both because Social Security, as a mandatory charity program, is a massive infringement on liberty. In a genuinely free society, people have the right to keep everything they earn and decide for themselves what to do with it. Mandatory charity is the opposite of freedom and in fact isn’t charity at all. Real charity can come only from the heart of a willing individual.

Thus, even when some libertarians propose “phasing out” Social Security over the next 40 years or so, their phase-out plan means that freedom will be delayed by 40 years or so. That delay doesn’t interest me. I want freedom now in my lifetime, and, again, that necessarily necessitates the removal of infringements on liberty now.

A Social Security reform plan that is popular among some libertarians is one that would permit younger people to “opt out” of Social Security and require them to invest a certain percentage of their savings into government-approved retirement accounts. Under this plan, seniors and those who choose to “opt in” would continue receiving Social Security payments from the government.

The problem with that reform plan, however, is that it still isn’t freedom. Instead, it is a hybrid version of economic fascism and socialism. Fascism is a system whereby the government permits people to keep their money and businesses but directs and orders them on how to use them. Again, a genuinely free society is one in which people are free to keep everything they earn and to own property and decide for themselves what to do with it. Mandating that people invest in government-approved retirement accounts violates that principle and, therefore, leaves people unfree in that society for an indefinite period of time.

Moreover, since seniors and those who opt in must continue to receive their Social Security checks under this particular reform plan, the government must continue taxing younger people to get the money that needs to be sent out. Thus, a 20-year-old must not only save a certain portion of his money, he must also surrender a portion of his income to cover Social Security recipients for the next 40 years. What happens 40 years from now when those 20-year-olds say the same thing that seniors today say, “I’ve been contributing for 40 years into Social Security. I have a right to get my money back”?

Why not simply repeal Social Security, especially given that that is a necessary prerequisite for anyone who wants to live in a free society?

The false assumption

Some people say that there isn’t enough money in the private sector to fund seniors. But that argument is obviously fallacious because the only place that government gets the money to pay seniors is from younger people who are being taxed. If Social Security were abolished, all that money would then be back in the hands of people who today are having it taken from them by the IRS in the form of payroll taxes. In fact, younger people actually would have more money than what is distributed to seniors because there would no longer be money being spent on generous salaries and other administrative expenses for the tax collectors and the people who administer and distribute the Social Security checks.

At the core of Social Security is the assumption that freedom simply wouldn’t work. Younger people, it is said, cannot be trusted to honor their mother and father on a voluntary basis. They are a bad, rotten group, the argument goes, that must be forced to be good and caring. The mindset is the same for church groups, charitable foundations, wealthy and middle-class people, neighborhood groups, and friends and relatives of seniors. None of them can be trusted to do the right thing, we are told. They all must be forced to care for others, including their parents and grandparents.

I say, “Nonsense!” to all that. People can be trusted with freedom. After all, God trusted people with freedom. That’s what the gift of free will is all about. But the government holds that God made a mistake in trusting people with freedom. And so the government has fixed God’s “mistake” by forcing younger people to care for seniors and others.

But God doesn’t make mistakes. He knows that some people will turn their backs on others, but that is the system he chose. God wants people to have to make choices on when and to what extent to help others. It is through such choices that people’s conscience is exercised. That’s how people grow. That’s what nudges a society to a higher level of morality and right conduct. Under what moral authority does the government interfere with that process?

There is no doubt in my mind that if we repealed Social Security today, which is what we should do, everything would be fine. No doubt whatsoever. A free people can be trusted to do the right thing, and they have the fundamental right to be free to choose, one way or the other. Some people will undoubtedly choose to turn their backs on others, but that is their right. If people are “free” to do only the right thing, then they cannot truly be considered free. Freedom necessarily entails the right to choose the wrong thing.

If Social Security were repealed today, many seniors have enough money to live without it. Others might have to return to work. There is nothing wrong with that. I see seniors working all the time. They are still in the mainstream of life, interacting with younger people, instead of sitting in a dark corner of their living room waiting to die.

There are some seniors who truly need help. No doubt about that. But that’s when children and grandchildren (who no longer would have to be paying the taxes that fund Social Security) would have the opportunity to step up to the plate and help those who helped raise them, feed them, clothe them, and educate them. It’s one of life’s most meaningful actions.

In those cases where seniors have no children or grandchildren to care for them, that’s where nephews and nieces, friends and relatives, wealthy and middle-class benefactors, church groups, and charitable foundations come into play.

Let’s not forget, after all, that our American ancestors lived without income taxation, the IRS, Social Security, and other socialist programs for more than 100 years. They produced the most prosperous and charitable society in history.

What we need to do in America is to recapture a faith in ourselves, a faith in others, a faith in freedom, and a faith in God. When that happens, support for Social Security and other mandatory charity programs and the taxes that fund them will disintegrate, and we will be well on our way to a free, moral, prosperous, charitable, and harmonious society.

[Part 3 to be published]

Reprinted from The Future of Freedom Foundation. Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at and from Full Context.

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