Stop Social Security

Retire the retirement program.

Social Security

I will acknowledge upfront that if I ever run for political office that this newsletter will probably be used in all of the commercials against me, so it’s a good thing that I don’t plan on running for political office. I will also acknowledge that this newsletter comes from a place of particular bitterness since I just finished giving the government all of the money that it has decreed that I owe.

I don’t want to sound anti-taxes; I understand that the government provides certain services that must be paid for and I am thankful for that. With that said, there is one tax that every time I have to pay I get beyond frustrated because the government isn’t providing a “service.” That is Social Security.

I am not referring to the aspect of Social Security that provides for disability insurance in case one is prevented from working. This is one of the few social programs that I don’t have a problem with the government getting involved in. I think the private sector, mainly churches and nonprofits, would do a better job of allocating resources to help those who cannot work, but I am okay if the government decides to get involved.

However, the vast majority (80%) of people who receive Social Security are not disabled; instead, they participate in the Social Security retirement plan. This “service” by the federal government is absolute nonsense and we need to stop pretending as if isn’t. For whatever reason, Social Security seems to be the third rail of political conversation, and to suggest it be stopped makes one a nutcase. The Democratic and Republican Parties do not agree on much, but they seem to agree that Social Security should be left untouched.

Social Security is set up to continue in perpetuity. The taxes are taken out of one’s paycheck before he ever sees it, making it easy to forget about. The payments are dished out to those above the age of 62 who are some of the most politically active constituents and want to ensure the payments continue (deservedly so since they paid into it). The youngest workers are the ones that are hurt the most by the system, but they are some of the most disengaged citizens. As a result, the system chugs along unchanged and out of bounds to talk about politically.

Well, this is nonsense. The Social Security retirement program is demeaning, economically stupid, and detrimental to responsible citizens.

Problems

At its core, I find the Social Security retirement program to be one of the most demeaning programs that the federal government has. Essentially, the government takes my money and promises to give it back to me in 40 years because I am not responsible enough to save for retirement on my own. I can’t be trusted to look out for my own interest, so I need the government to take care of me like a parent looking after a 5-year-old.

It would be one thing if there was an opt-out option for Social Security retirement. An opt-out option would maintain Social Security retirement for everyone unless they actively decided to leave the program. People could even be given the regular opportunity to opt back in if they initially opted out of the program. Instead, the government assumes that everybody is incapable of saving and need people in the government (who apparently are a special, responsible, enlightened group capable of handling money unlike the rest of us rubes) to handle money for us.

It’s not just demeaning, it’s also economically stupid. As I have talked about before, I believe that the free market leads to more freedom and economic prosperity than any other system created by humans. By allowing individuals to pursue their own economic prosperity through private property rights and limited intervention from the government, a free-market economy leads to better goods and services for cheaper. This is because a free-market economy spreads economic decisions out broad and wide which allows individuals to constantly take risks and test new goods, services, and processes that can make them profitable.

The Social Security retirement plan takes 6.2% of wages or 12.4% of income from the self-employed out of the hands of individuals and into the hands of a centralized entity. This prevents risks from being dispersed, which inevitably holds back the economy from growing and improving. Capital, in the hands of the government, is allocated less efficiently and the material lives of everybody are worse off. But hey, at least I’ll get a check from the government after I’m 62.

The last problem with the Social Security Retirement plan is that it is detrimental to responsible individuals. Every dollar that a responsible person gives to the government in the Social Security retirement program is one less dollar that can be invested in some capacity by that person. While it is certainly kind that the government adjusts Social Security payments to keep up with inflation (I’m not going to go down the rabbit hole about how they determine the rate of inflation), a responsible person can take the percent that is already getting taken out for Social Security and get a higher rate of return on their capital.

It wouldn’t require much financial knowledge to get a higher rate of return than the government either. Throwing the money into a passively-invested S&P 500 tracking ETF would be all that is required to earn more than the government will distribute back out. This would also allow individuals that had the time and knowledge to invest money in other ways to get an even higher rate of return. This has the added advantage of forcing people to be more responsible which is better for society as a whole.

Conclusion

I don’t want the conclusion that one draws from this newsletter to be one that leads to the immediate end of the Social Security retirement program. I believe that those who are receiving payments now because they paid into their whole career should continue to receive payments. I also think that those who have been paying into it but aren’t 62 years old should receive payments as planned or receive payments now.

I have no idea what exactly the changes would look like. I also have no idea about the financial state of Social Security and whether these reforms are even possible. I do know that the next generation of workers should not be subject to the Social Security tax and the program should be grandfathered out. The disability insurance is worth keeping, but the retirement program should itself be retired.

God Bless,

Hunter Burnett