Gnomicon 222

If you have not already done so, you may wish to read the
Introduction to Gnomica.

Gnomicon  222
Thursday 20 December 2012
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Consider Social Security. The young have always contributed to the support of the old.
Earlier, the young helped their own parents out of a sense of love and duty.
They now contribute to the support of someone else’s parents
out of compulsion and fear.
The voluntary transfers strengthened the bonds of the family;
the compulsory transfers weaken those bonds.
Milton Friedman (31 Jul 1912 – 16 Nov 2006)

Friedman, in my view one of the last sensible and reality-anchored monetary pundits, might well have added here, “… and [They now contribute] to the unwilling support of all the world’s most heinous scoundrels”.

Among all the catastrophe-speak during the current bipartisan intransigence on the part of our self-indulgent and finger-pointing solons in D.C. no finger seems to be more misdirected than the one pointing at the entitlement we call Social Security.

Let’s review.

The notion of ‘social insurance’ – a system, a program by which a government in effect guarantees its citizen a financially reasonable living after they retire – was something seriously considered and in fact first realized in Otto von Bismarck’s Germany (1862-1889) in 1889, almost half a century before Franklin Roosevelt got our ‘social security’ system going in this country as of 14 August 1935 (the first deduction began in January of 1937).

I make no secret of my mixed (to put it mildly) opinion about this program, which I understand as, in its totality, a vast Ponzi scheme and, in some instances, outright theft.

A Ponzi scheme is a wonderful thing at the start:  new investors put in money allegedly to be invested in some vehicle but that money is never invested, just used to pay out ‘dividends’ to those who got in first, and, very soon, to pay for the military, for infrastructure, for deficit, for anything but what it is intended for – and definitely not invested for the payers’ future!  But the scheme has a tipping point — when the investments of new ‘investors’ bring in less money (which happens very soon) than what is needed to pay out the ‘dividends’ to all those already enrolled, the thing implodes and the ‘investors’ are just screwed — think Bernie Madoff.  In the case of our Social Security system, a similar thing is now and has been for some time taking place.  And ‘greedy free-loading’ seniors who have paid a lifetime’s worth of deductions into this ‘pension system’ and are expecting the promised payouts in the near future will be in for an unpleasant surprise regarding their entitlements – unless the Feds start running the printing presses at Treasury more than twenty-four seven [impossible, in my math] and/or the Chinese keep on lending money to the United States at Bernanke’s current non-rates of return [possible, I suppose].

If the system had worked the way it was supposed to, we wouldn’t have this further ‘cliff’ just down the road a bit.  But it didn’t work.  Why didn’t it work?  Because the money extracted (‘invested’ is the wrong term, implying as it does a volitional act) from the ‘investors’ did not go into any kind of investment at all: from almost the very start, as I suggested above, it was ‘borrowed’ (another sleazy government euphemism for theft) to pay for things like Alaskan bridges to nowhere, like bribes to corrupt thugs commandeering foreign government we want to ‘save’, like forever-wars of ‘liberation’, for … .  And now, in place of the fruits of the mandated investments that were never invested we have, metaphorically speaking, massive numbers of IOUs (we call those ‘government bonds’) stuffed in the lock box.

There is nothing new about what I say here – it is well known and you can check it out for yourself here, or, in more detail, here, for example.

A word on ‘theft’: if you contribute your entire working life to social security, die childless but married, and your husband is getting social security payments on all of his ‘contributions’ that are larger than what yours would have been, then you lose BIG time — the government in effect steals all your very real contributions and all the putative ‘dividends’ from the alleged investments they bought … all of it goes back into that general pool for giving away to who knows whom or what.  What do you suppose happens to all your money if you die childless and single?  Now, there’s a super-sweet scam for the investment company aka USA – let’s see your local bank or private mutual work that con and get away with it.  But Washington does.

Finally, let’s back up a bit on this notion of ‘entitlement programs’ – of which Social Security is among the largest.  If you invest every month of your working life in a retirement program run by a legitimate financial institution and then die before starting to collect, does your money just somehow ‘disappear’? does you surviving spouse (or any family member) have to pass some kind of means test to be able to collect what is due on your policy?  Or does the financial institution get to keep all that money because the survivor, “not ‘needing’ it and thus failing the means test”, is now not entitled to a payout? All those years the survivor and spouse contributed all that money – money they could have spent on themselves or invested voluntarily in a legitimate retirement program instead of being coerced into involuntarily putting it into a scheme like Social Security – and then they get absolutely nothing for it!  Nothing – the insurance company just keeps all that has been invested and accrued to the deceased’s policy.

Can the insurance company really do that?

Your government can – and it does.

And I just can’t get around calling that kind of an operation anything but outright theft.

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One Response to Gnomicon 222

  1. Al Cram says:

    All too true! It did have a chance of a longer run back when the average life span didn’t put too many people still alive at 65 and living into the 80 s was relatively uncommon. Now, inspite of the inferior medicine in the US compared to other countries, we live long enough to be a burden to the government that has been using the SS money for whatever their hearts desired. It is not sustainable, but our politicians insist they will preserve it. I don’t think they can without making changes of a major nature, and of the type that would likely prevent their successful re-election, and they are not too likely to go there.

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