Anniversary of Social Security

August 14, 2010

by Mario Rizzo  

Today is the seventy-fifth anniversary of Social Security.  

Only an unreconstructed reactionary (that is, a classical liberal) would, at this late date, be opposed to Social Security Act of 1935.  

My purpose here is not to go over that issue, however. It is to comment on a recent Washington Post article on Social Security.  

We must credit the Washington Post for recognizing that the real issue is the degree to which current payroll taxes fall short of expenditures. The Social Security trust fund is merely a commitment to use general funds to make-up the shortfall. The fund is simply IOUs (promises) to use those funds to a particular extent.  

But the government would be free to use general funds even absent the trust fund. Furthermore, any legal obligation to use those funds in this particular way is as good as the word of Congress – that is, it can be changed at any time.  

I dismiss as mysticism all talk of intergenerational obligations when they are imposed by morally arbitrary statute. I have said for years (since I was 12, actually) that I did not want to pay the tax and that I would be willing to forgo benefits if I could stop paying the tax. (My tax-payments would have, if invested, even with the recent financial meltdown, given me a better to-date rate of return.)  

Now look at what some modern-day Social Security fans are saying:  

“A new group, the Strengthen Social Security Coalition, which includes the AFL-CIO, the NAACP and the National Committee to Preserve Social Security and Medicare, asserts that the president’s two choices to chair the panel, Democrat Erskine Bowles and Republican Alan Simpson, “sent a clear message. Social Security is on the chopping block.” The groups’ list of what changes are unacceptable is longer than what it would consider: no increase in retirement age; no reduction in benefits; no “means testing.” Rather, they say, the adjustments should come from the revenue side. Though the possibilities are not specified, they include raising the payroll tax rate, raising the ceiling for income on which benefits are paid or finding a new revenue source, such as the estate tax or a new financial transactions tax.”  

The Coalition particularly hates the idea of “means testing.” Why? Because if that principle is introduced then taxpayers will begin to look at the program as a redistribution scheme – perhaps even a welfare program – and subject it to greater scrutiny. African-Americans might also begin to think that they pay disproportionately in many senses, not the least of which is that they die at a younger age and thus get fewer (or no) benefits but pay a regressive tax.  

(However, the government does indirectly means-test. Social Security benefits are subject to a progressive income tax. What one hand gives the other hand takes away.)  

The social consensus for Social Security, built in part on illusion, political and economic ignorance, propaganda, and communitarian mysticism, would crumble.  

But it will crumble no matter the short-run fixes modern-day New Dealers might come up with. Americans will begin to see the inconvenient truth as more and more of the federal budget is taken up by Social Security and Medicare.  

Unfortunately, the Washington Post – like all good moderate, sensible people – advocates a “balanced” approach: raise taxes and cut benefits for new recipients. The moderate wisdom is to say ditto for every governmental fiscal problem. Suffice to say combined taxes at all levels of government are already quite high, at least if we care anything about individual liberty.  

I am not insensible to the problem created by millions of people relying on the system for retirement income, especially those near retirement age. But this is where the cynicism of the dogmatic New Dealers comes into play. By denying the obvious problems they make sudden unexpected cuts more likely. This just makes the problem of reliance worse. The nation needs to prepare now for the radical transformation of the entitlement state.

21 Responses to “Anniversary of Social Security”


  1. Social sceurity was a cynical ploy. On the eve of passage, the life expectancy of a white male at birth was not 60 years. Life expectancy for black males remained below 65 for a good part of the program’s history.

  2. James Pier Says:

    “Only an unreconstructed reactionary (that is, a classical liberal) would, at this late date, be opposed to Social Security Act of 1935.”

    Is Mario Rizzo an unreconstructed reactionary? I can’t tell if he is being ironic. If one accepts the premise that the employed ought to support the unemployed as a matter of social obligation, one is reduced to arguing from purely utilitarian grounds: the program should not be phased out, only modified so that it is solvent. If the only reason to oppose Social Security is its cost, the argument is lost. The real problem is one of justice. It is simply an injustice to force one citizen to support another. The logic of the “social contract,” taken to its logical conclusion, dispenses with individual liberty based in property rights for the benefit of a nebulous and subjective “greater good,” defined and enforced by the ruling class. It is nothing more than a payoff to special interests, cementing liberal politicians in power for generations, while the true liberal is cast as cold-hearted, callous and greedy. We can, and must, foster the awareness that the fundamental concept is morally bankrupt. If it were not, then why was it sold to the public in such a fraudulent manner? The political environment is becoming conducive to this sea change as those of us who entered the workforce after 1980 or so have long been aware that the program would not last until we could benefit from it. The argument from expediency will not be sufficient.

    We ought not be ashamed or shy away from stating the plain truth: Social Security, which de facto is a transfer program, not insurance at all, should be abolished, phased out over 30 or 40 years, and replaced by a voluntary, private system of self-funding retirement, combined with an honest-to-goodness, straightforward transfer program for only the most needy (if anything state-funded at all). If saying so makes me an ‘unreconstructed reactionary,’ then so I am.

    “This path is still blocked, however, by the most fatuous of all fashionable arguments, namely, that ‘we cannot turn the clock back.’ One cannot help wondering whether those who habitually use this cliche´ are aware that it expresses the fatalistic belief that we cannot learn from our mistakes, the most abject admission that we are incapable of using our intelligence.”
    — F.A. Hayek, The Constitution of Liberty

  3. Mario Rizzo Says:

    “Is Mario Rizzo an unreconstructed reactionary? I can’t tell if he is being ironic.”

    I am unreconstructed.

  4. Matt R Says:

    I’m with Mario. I hate old people and don’t want one penny of my money going to keep them in their granny diapers and insipid cardigans. To hell with Social Security and to hell with people who couldn’t or didn’t prepare for old age with their own money. A bunch of useless eaters, if you ask me.

    I should be able to do whatever I want with my money, like buy steel-toed boots and kick them when no one’s looking. Right in the dentures! Take that, grandma! Freedom!!!

  5. Niko Says:

    @Matt R.:

    “Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all. We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain.”
    Bastiat

    I guess we could add something on social security too there. Like if you are against it, you want all those old people to die.

  6. Current Says:

    I’m a consequentialist libertarian. I’m not really concerned about the “injustice” part, certainly Social Security is injust, so is life.

    What concerns me about social security is how it affects the long term welfare of everyone. Every redistributive tax has negative effects on that because of it’s effect on incentives.

    However, Social security has other problems because of the inter-generational transfer it entails. Lots of people cite the conflict this creates, and I think there’s some truth in that. I think what’s more important though is the calculation problems in forces onto ordinary people.

    Where I live in Ireland there is a pension similar to Social Security. Some young people think it will pay a good amount when they come to claim it. Others think that it will pay very little. This uncertainty is damaging.

  7. James Pier Says:

    An adamant second to Niko’s reply to the sanctimony of Matt R. The liberal canard that conservatives and libertarians are for a Darwinian law of the jungle has gotten rather trite and stale. Even if the only argument were that only the free market is a sustainable, viable long-term solution to the problem of scarcity–and that it’s failure, which incremental socialism will inevitably bring about, will prove disastrous for humankind–even then Matt R and his fellow travelers are on the wrong side of history. Matt R – perhaps you can muster a more substantive case in defense of your socialist case? Your ad hominem is a bore. It leaves you with no more credibility than Krugman.

    Current: I aver that your utilitarian argument accepts the socialist premise by default, and therefore has no chance of winning the day, at least not before too much damage is done. The actuarial problems of entitlements are too esoteric and uninteresting for most voters, besides which the issue suffers such demagoguery on both sides that people don’t know what to believe. “Damaging uncertainty” about the sustainability of socialist programs will not serve to motivate the non-political ‘average Joe’ to vote against what he continues to believe is not only inevitable, but also just and therefore “the right thing to do.” The moral argument is essential to meaningful change.

  8. Current Says:

    James Pier,

    So, in your view a moral argument is better because it’s more likely to persuade than a utilitarian one?

    I don’t really agree. In general moral arguments can just as easily be made for Social Security and redistribution. It’s not clearly injust for one citizen to support another.

    In general I think natural law based arguments are rubbish, “nonsense on stilts” as Bentham said. Read some of the criticisms Rothbard received.

  9. Niko Says:

    Moral and utilitarian arguments are not arguments, but excuses. You can have both types of arguments from all the sides involved in the debate. The natural law argument is the only tenable argument, because of its validity being based on “eternal laws.”

    PS: My English is not that good. I don’t think you can make an irrefutable moral or utilitarian argument against or for Social Security. You really need something of a scientific theory to cut through all the talk.

  10. James Pier Says:

    Current:

    It is not my contention that it is unjust for one citizen to support another. Quoting myself:

    “It is simply an injustice to force one citizen to support another. The logic of the “social contract,” taken to its logical conclusion, dispenses with individual liberty based in property rights for the benefit of a nebulous and subjective “greater good,” defined and enforced by the ruling class.”

    My objection is to the use of violent force by the state to coerce one citizen to surrender his wealth or the fruits of his labor for the benefit of some favored, faceless third party. There will always be a need for one citizen to support another; it must be a voluntary decision. The fact that the government isn’t forcing people to adhere to an imagined “social contract” does not lead to the elimination of support for those in need. That it would is a liberal fabrication that has purely by unopposed repetition garnered the force of fact in our culture.

    You suggest that my argument is purely one of expedience. It seems obvious to me that this in not the case. Accepted wisdom assumes the validity of the social contract. It will take decades of concerted effort to turn that around. I agree with Mario that events and circumstances will force the abandonment of the existing arrangement, but it will not be until then that the utilitarian argument will succeed.

  11. James Pier Says:

    Niko:

    I could be mistaken, or we may be talking past each other here, but I consider the natural law argument to be a moral one. It answers the question, “What is the right thing to do?” without concerning itself ultimately with “What will work best.” In the end, I believe the answer to both questions is the same.

  12. Current Says:

    Niko, James Pier,

    I sympathise with your point of view.

    But, what are these “eternal laws”? How are they justified.

    Why can’t I say that it’s an “eternal moral law” that some people can not own more than others? How can you shoot that down?

    Even if we agree on an “eternal moral law” that in no way justifies free-market policies. Because, in earlier times those laws have been broken and according to those same laws there should be recompense now. It’s a *utilitarian* argument to say “that would be futile”. We must remember that historically “all property is theft” as the Marxists say.

    John Quiggin wrote about this over at Crooked Timber the other day:

    http://crookedtimber.org/2010/08/14/libertopia-with-asterisks/

    Though I hate to agree with Socialists he is absolutely right.

    The only way to make a robust argument for a free market society is to do it from the utilitarian viewpoint. That was Mises and Hayek’s view and I agree completely. Doing that may be more complicated because it involves counter-factual economic thinking. But, it is much more robust than the natural law approach.

  13. Niko Says:

    @James Pier:
    I don’t think we are talking past each other. I consider morality in line with utility, meaning subject to fashion and whim. It has nothing to do with what would be considered a scientific law.

    @Current:
    I must confess that I’ve arrived to the natural law conclusion very reluctantly, but I didn’t read a lot of criticism to it, I just thought about it. If you can provide some of the literature you’ve mentioned that criticized Rothbard, I would be grateful. Also I have to mention that I am more familiar with Menger on the natural law discussion.

    Thank you.

  14. Current Says:

    I haven’t read Menger on natural law.

    Here is a criticism of Rothbard:

    http://edwardfeser.blogspot.com/2009/08/rothbard-as-philosopher.html

    Which really goes too far, but you get the general idea.

    Also, see my comment above. Property ownership is justified on a utilitarian grounds. Even if property could come from Lockean homesteading in practice it didn’t – that is Quiggin’s point. And even homesteading can’t be easily morally justified. In practice property came almost universally from imperialism and tribalism. How then can private property be a justified extension of self-ownership?

    In the past I’ve tried to get away from generally utilitarian ideas, but I haven’t found a good substitute.

  15. Niko Says:

    @Current:
    I read the post you’ve linked. The first one says that capitalism must fail because there is no more land to be conquered, or something like that. I cannot see any truth in that. It is a very poorly written article.

    The second one is a long article in which the author says that although the man is born free, it doesn’t mean he has the right to be. This in no way contradicts anything Rothbard said, as far as I know.

  16. Current Says:

    “The first one says that capitalism must fail because there is no more land to be conquered, or something like that. I cannot see any truth in that. It is a very poorly written article.”

    Quiggin’s principle point is that the homesteading of the 19th century was not real Lockean homesteading because Indians had been driven off the land earlier. Quiggin’s secondary point is that Lockean homesteading is not fair because it cannot be assumed that there is enough land left for others to homestead.

    The point I’m trying to make is that Lockean homesteading has never really been performed. At the very least all property apart from each persons physical self is unjustly distributed according to the natural law point of view. So, from that point of view how do we move into the future?

    He also claims that in the 19th century the reason that the ordinary people put up with “laissez faire” was because of land redistribution from indians. This is an old Marxist idea. I’m not really interested in that part of it.

    “The second one is a long article in which the author says that although the man is born free, it doesn’t mean he has the right to be. This in no way contradicts anything Rothbard said, as far as I know.”

    Well, how do you justify natural law then?

  17. Niko Says:

    I’ve understood what that guy said. I think it is stupid piece of text. Are you sure that’s the best you got?

    “At the very least all property apart from each persons physical self is unjustly distributed according to the natural law point of view.” And how would a just distribution look like? According to what law would that be just? And what do you mean by moving into the future? If we listen to the environmentalists and go back to the Stone Age, we would still move into the future, it’s just that our civilization would end. And by the way, I’ve never mentioned Locke.

    “He also claims that in the 19th century the reason that the ordinary people put up with ‘laissez faire’ was because of land redistribution from indians. In reality people put up with Marxism because it promised them to take the land from the rich and give it to them.

    “Well, how do you justify natural law then?”
    How do you justify taking someone his right of being free, except on utilitarian or moral grounds?

  18. Niko Says:

    @Current:

    A good introduction to natural law could be find in Bastiat. Theory and Practice I think is pretty good.

  19. Current Says:

    I’m going to change my quoting style since this has become a more complex discussion…

    > I’ve understood what that guy said. I think it is
    > stupid piece of text.

    Saying that it’s stupid isn’t really an argument against it.

    > Are you sure that’s the best you got?”

    There’s all sorts of stuff I could quote. I expect you know that Mises disavowed natural law?

    >> At the very least all property apart from each
    >> persons physical self is unjustly distributed
    >> according to the natural law point of view.
    > And how would a just distribution look like?

    Exactly, there is no possible way to make a just distribution any more. That would have required natural rights to have been used since the beginning of the human race.

    > According to what law would that be just?

    My point is that it’s not possible to make a distribution that is just according to natural law.

    > And what do you mean by moving into the future?
    > If we listen to the environmentalists and go
    > back to the Stone Age, we would still move into
    > the future, it’s just that our civilization
    > would end.

    Let’s suppose that I trade something with a lord, say Viscount Ridley. Now, natural law says that what I trade and he trades must not be acquired through coercion. However, Viscount Ridley’s ancestors got their land through coercion. I may not be descended from nobility, but that doesn’t mean that my ancestors didn’t get their wealth entirely from trade. So, if all property is “polluted” in this way, and it all is, then how can any trade occur as natural law describes?

    We may say “we should forget about who coerced who centuries ago”. In my view that’s a valid argument. But, it’s a utilitarian argument. What we’re arguing is that everyone would be better off now to forget about the earlier “pollution” of property through coercion.

    > And by the way, I’ve never mentioned Locke.

    I don’t think what I’m saying here depends on taking a precisely Lockean view of natural law.

    >> He also claims that in the 19th century the
    >> reason that the ordinary people put up with
    >> ‘laissez faire’ was because of land
    >> redistribution from indians.
    > In reality people put up with Marxism because
    > it promised them to take the land from the
    > rich and give it to them.

    Yes. But, this brings up another problem for natural law as a political program. It depends on convincing the people of the benefits of the doctrine of self-ownership. But, could that be done?

    Only if people were convinced that laws based on natural law would benefit them. Obviously, the proletarian would campaign against self-ownership if they thought they would benefit from that. So, practically speaking a utilitarian argument for capitalism is necessary for it’s success.

    >> Well, how do you justify natural law then?
    > How do you justify taking someone his right of
    > being free, except on utilitarian or moral
    > grounds?

    I would only justify it on utilitarian grounds. I’m not sure I understand your question.

  20. Niko Says:

    I give up. You are right.

  21. Current Says:

    Unfortunately there are no sarcasm tags on the web ;)

    If you think that what I’ve said is valid then I’ll point out that argument I gave about natural law is mostly from G.A.Cohen, though Marxists in the C19th wrote similar things. As I said earlier, many Classical Liberals such as Mises and Hayek accepted that Natural Law didn’t provide a robust argument.

    In some ways I think that that expedient or “pragmatic” argument is more important than the technical argument against natural law. If people believe natural law is against their interest then they’ll vote against it. But, in some ways this is the *strongest* argument of natural law. If you look at it from the opposite point of view then Socialists are saying: “I reserve the right to bend the fruits of your labour to any purpose I deem in the interest of the general population; whether you like it or not”. People may well agree that the fruits of their labour are insignificant compared to past generations and that in the past coercive redistribution occurred. But, they are not likely to agree to have socialists use what they have made for whatever they like.

    In my view this is the real key. In any generation there is some group that believes themselves immune, they think that the state will not dare take from them. But, this is an illusion, the state’s robbery is quite random in the long run. The self-interested argument for libertarianism is to say: “Nobody is safe. it’s not only Capitalists that will be expropriated, anyone without a good marketing campaign will be expropriated”.


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