Social Security Is Not 'Insurance'

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Perhaps the
biggest media story of 2010 was the influence of Tea Party voters
on the congressional landscape. The new congress comes to Capitol
Hill with a mandate to end profligate spending and restore fiscal
sanity, we are told. But when the House and Senate convene in January,
the newly elected members will face tremendous pressure to maintain
spending levels for entitlement programs. Even the most modest proposals
to trim Social Security or Medicare spending will be met with howls
of indignation and threats of voter revolt. Legislators who propose
any kind of means testing or increased retirement ages can expect
angry visits from senior citizen lobbyists ready to fund a candidate
back home who supports the status quo.

But millions
of Americans now realize that the status quo is an illusion that
will not last even another 10 or 20 years. The federal government
cannot continue to spend a trillion dollars more than it collects
in revenue each year, because we are running out of creditors. Fiscal
reality is setting in, and the consequences may be grim even if
Congress finds the courage to take decisive action now.

Courage begins
with a commitment to see things as they are, rather than how we
wish they were. When it comes to Social Security, we must understand
that the system does not represent an old age pension, an “insurance”
program, or even a forced savings program. It simply represents
an enormous transfer payment, with younger workers paying taxes
to fund benefits. There is no Social Security trust fund, and you
don’t have an “account.” Whether you win or lose
the Social Security lottery is a function of when you happened to
be born and how long you live to collect benefits. Of course young
people today have every reason to believe they will never collect
those benefits.

Notice that
neither political party proposes letting people opt out of Social
Security, which exposes the lie that your contributions are set
aside and saved. After all, if your contributions really are put
aside for your retirement, the money is there earning interest,
right? If your money is in your “account,” what difference
would it make if your neighbor chooses not to participate in the
program? The truth, of course, is that your contributions are not
put aside. Social Security is simply a tax. Like all taxes, the
money collected is spent immediately as general revenue to fund
the federal government. But no administration will admit that Social
Security is nothing more than an accounting ledger with no money.
You will collect benefits only if future tax revenues materialize
as hoped; the money you paid into the system is long gone.

My hope is
that at least some members of the new Congress will cut through
the distortions and see Social Security as it really is. The best
way to fix the impending Social Security crisis is also the simplest:
allow younger individuals to opt out of the program and use their
tax savings to invest privately as they see fit. This is the true
private solution. Your money has never been safe in the government’s
hands, and it never will be.

See
the Ron Paul File

December
28, 2010

Dr. Ron
Paul is a Republican member of Congress from Texas.

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