In his recent appearance on MSNBC’s “Morning Joe,” Representative Ron Paul was asked by Sam Stein of the Huffington Post whether he was going to set a good example for younger Americans and opt out of Social Security.
As a libertarian and a constitutionalist, Congressman Paul recognizes that Social Security is an insolvent, unsustainable, unconstitutional welfare scheme. Although he wants younger workers to be given the opportunity to opt out of the system as we make a humanitarian transition away from the dependency of Social Security, when asked by Stein if he was on Social Security, Paul acknowledged that he was and saw no inconsistency in receiving benefits.
Social Security is properly a federal Old-Age, Survivors, and Disability Insurance (OASDI) program. It provides benefits for retirement, disability, survivorship, and death to about 55 million Americans at a price to approximately 157 million taxpayers of more than $800 billion a year. It is “funded” by payroll tax deductions from both employers (6.2%) and employees (4.2%) on a taxable wage base of $110,100. One must pay Social Security taxes for a minimum of forty quarters to be eligible for benefits, which are figured based on the average of a worker’s thirty-five highest years of earnings (up to particular year’s wage base), adjusted for inflation.
Social Security is the most expensive item in the federal budget. For years it generated more in tax revenue than it spent on benefits. However, since 2010, the system has run a deficit that is projected to increase every year as more and more baby-boomers retire.
The truth about Social Security is no secret. It is a relic from the New Deal. It is the cornerstone of the welfare state. There is no trust fund. There is no retirement account in the name of each taxpayer. Social Security is an intergenerational wealth-transfer program.
But does this mean that libertarians should not accept Social Security?
I occasionally run into, or read something written by, libertarians who say that to be a pure or consistent libertarian, one should not accept Social Security. To do so would be to sacrifice one’s principles.
Of course, these same libertarians mail letters at the government post office, drive on government roads, and conduct business with government money. But, they might reply, I am forced to do these things. The government has a monopoly on mail delivery, the vast majority of roads are owned by the government, and few businesses accept anything other than government money as a means of payment. Social Security, on the other hand, is voluntary. One can choose not to receive it.
I don’t disparage those libertarians who refuse to accept Social Security because they want to have as little interaction with the state as possible. But I don’t think that they are purer or more consistent than those libertarians who say: “Sign me up.”
Let’s say you are a libertarian who has reached retirement age (67 if born in 1960 or later). The federal government has been confiscating a portion of your income for fifty years via, not just Social Security taxes, but income tax, Medicare tax, taxes on airline tickets, excise taxes, and indirect taxes on imports (tariffs) that result in you paying higher prices for imported goods. This is all in addition to state and local taxes.
And what has the federal government spent your money on? Various forms of welfare, maintaining an empire of troops and bases around the world, fighting senseless foreign wars, corporate welfare, agricultural subsidies, funding Planned Parenthood, public broadcasting, enforcing ridiculous regulations, the National Endowment for the Arts, and whole departments it has no business having like the Department of Education.
I think it is safe to say that at least 95 percent of what the federal government spends money on is unconstitutional.
Libertarians should see Social Security as a way to get some of their money back that was wasted on unconstitutional spending. It’s as if the government said: “Would you like a refund of some of the tax money you’ve paid in over the past fifty years? Okay, sign here and we will make a deposit in your bank account every month until you die.” Now, is that any different than signing a form that says: “Your monthly Social Security benefit amount is _____? Does the difference in wording on a government form really make any difference?
And don’t worry about getting back more than you paid in Social Security taxes. The Social Security Trust Fund is an accounting fiction. There is no individual retirement account with your name on it. Just figure the total amount you’ve paid in federal taxes and collect your “Social Security” (or your “tax refund” if you want to be a more pure libertarian) until that amount is reached. Don’t bother only taking 95 percent of the total because you are entitled to interest on your money.
If it be argued that the tax money you paid in over your lifetime has been spent and therefore you would have to be paid with borrowed money, I would say in reply that the tax money you are paying in this year is immediately spent as well. The refund next year of your excess withholding taxes from this year will likewise be paid in borrowed money. Are you going to refuse your tax refund next year? I didn’t think so.
Anyway you look at it, the taxpayers deserve a refund.