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A government with moral and legal authority promulgates written rules and universally, impartially and uniformly enforces the rules, which provides a predictable and stable legal order on which to base economic and personal decisions. The law prevails, not the proclamation or arbitrary decision of a ruler, government bureaucrat, the enforcer (e.g., policeman) or judge.Means-Testing Entitlements Will Extend Corrupt Government
Academics and concerned Americans have known for 20 plus years that Social Security, Medicare and Medicaid would bankrupt the federal government. During these 20 years, government has done virtually nothing to avert the enormous debt of these programs. Worse, Bush II eagerly extended prescription drugs burdens on America, and former Speaker of the House Pelosi brags on her homepage in scuttling of plans to convert Social Security to personal ownership and solvency. [Read: Social Security Structurally Violates Freedom]
Thus, Social Security, Medicare and Medicaid continue to promise benefits, and continue to increase our debt. In general, most Democrats want no changes in benefits and continue to seek tax increases. Overtly, Democrats only talk about taxing the rich. However, as Paul Krugman explained:
"We won't be able to pay for the kind of society we want without some increases in taxes," he said, "and surely in the end it will require some middle-class taxes as well, maybe a value added tax."
A value added tax (VAT) is a form of sales tax, which taxes everyone. With the VAT, Democrats are seeking additional taxes, the same as those currently burdening Europe. Copying Europe's tax system is a terrible idea. It will plummet America's decline to the likes of France and eventually Greece.
Within the last few months, organizations and people with strong conservative credentials, including the Heritage Foundation, have become advocates for “means-testing.” Government would pay less than the promised benefits to wealthier Americans. Seeking a compromise, major Democrats are openly discussing means-testing Social Security and Medicare. As stated in The Hill:
Sens. Dick Durbin (D-Ill.), Max Baucus (D-Mont.) and Claire McCaskill (D-Mo.) have all expressed a recent openness to expand means testing for the sake of deficit reduction.
And in the lower chamber, Rep. Emanuel Cleaver (D-Mo.), the chairman of the Congressional Black Caucus, sounded a similar note this month.“I think most rational people, including Democrats, agree we have to make some cuts and deal with Medicare,” Cleaver said Dec. 7 on MSNBC.
“Let’s have some means-testing, because I don’t think that cutting benefits at this time is going to go over well. We can do means-testing and reduce the payments [to the wealthy].”
No, no, no. This is politics as usual. Politicians always find the easiest solution to get past the next election. There are several reasons means-testing is bad policy – like creating a disincentive to save. For a thorough discussion, see Andrew Biggs article in AEI. For sure, the means-testing fix will continue the miss-allocation of capital and prolong government manipulations long associated with Social Security and Medicare.A Principled Solution: Rule of Law
Only adhering to core progenitors of freedom will break the ongoing corruptions and resulting economic stagnation. The means-testing scheme violates two tenants of governance for freedom – the rule of law and property right.
A paramount duty of government is to provide a predictable and stable legal order on which every American can base economic and personal decisions.
Social Security has been misused and manipulated by Presidents and Congresses for their political benefit – always at the expense of the use and enjoyment of the American worker. Notable examples:
President Johnson used the Social Security revenues to hide the cost of the Vietnam War.
President Nixon increased the benefits by 20% and directly told the recipient seniors just before the 1972 election.
President Obama and Congress lowered the worker's Social Security tax by 2% for two years prior to the 2012 election, and then quietly let it be raised.
Theoretically, means-testing will only impact wealthy seniors. Wrong, the history of Social Security proves the opposite. Here is what the means-testing scheme declares to the impacted Americans:
We – GOVERNMENT - confiscated the fruits of your labor and impliedly promised you would receive benefits. However, GOVERNMENT implicitly and stealthy lied to you. GOVERNMENT used your money for all the other functions of government – wars, roads, welfare, windmills and more. Now, GOVERNMENT is in a predicament. GOVERNMENT needs more money to pay for past GOVERNMENT lies and broken promises. Thus, as an act of citizenship and because you were prudent and responsible, GOVERNMENT has decreed that you do not get paid.
Even if it is only a one time event, this scheme is a violation of the rule of law, which destroys the moral credibility of government. Of course, this scenario will not stop with just the rich. Just as government recently manipulated the payroll tax, there will definitely be attempts at a VAT tax as well as other taxes and nefarious connives.Property Rights:
The latest schemes – means-testing and a VAT - not only violate the rule of law, but wrongfully and harmfully are taking property from the our workers. By coercion, government is taking the fruits of workers labor and intellect.
Again, government takes a worker's money and uses the money for wars, roads, welfare, windmills and more. Nothing has been saved to pay for the government promises. Just as a stable legal order is essential for freedom and prosperity, a worker's property (money) allows the worker to spend, save and invest in the worker's best interest. Morally and economically every worker should spend, save and invest the fruits of their labor as they deem in their best interest. This is how a free society prospers. Not by GOVERNMENT edicts. When government takes more than is necessary to protect the worker and all Americans from the force and fraud of others, the worker's power and freedom is reduced.A Moral Proposal: The Freedom IRA
To end GOVERMENT'S deceit and theft, young Americans must make a grand bargain. Young Americans must be allowed to put their entire payroll tax into an IRA; 7.65% of their income.
In exchange for investing in their IRA, the worker forgoes any and all claims to Social Security, and contracts not to take withdrawals from their IRA until age 72. We'll call this the Freedom IRA, which is would be in addition to all other forms of retirement accounts – 401k, Roth, private accounts and others.
Additionally, this contract should be offered to every American. Any worker that wishes to forgo Social Security – young, middle-aged and older – shall be allowed to opt-out of Social Security. In order to greatly increase the opt-out rate, there would never be a tax on the money invested in the Freedom IRA if the benefits are withdrawn after age 72. To be clear, everyone opting-out would never be taxed – not prior to deposit or when withdrawn.
Included in the Freedom Contract would be enticements for people currently 50 years and older to voluntarily delay receiving Social Security benefits until they reach age 72. Again, the incentive would be no taxation on their Social Security benefits.
The combination of young people opting out and seniors voluntarily delaying benefits would greatly reduce the cost of transition. Most importantly, the Freedom IRA will stop political deceit and manipulation.
To restore freedom and prosperity, America must know and embrace the elements of the Rule of Law:
A government with moral and legal authority promulgates written rules and universally, impartially and uniformly enforces the rules, which provides a predictable and stable legal order on which to base economic and personal decisions. The law prevails, not the proclamation or arbitrary decision of a ruler, government bureaucrat, the enforcer (e.g., policeman) or judge.
The rule of law and property rights are absolutely essential for freedom and prosperity, and are necessary to stop government from deceit, confiscation and misfeasance.