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    Social Security Manipulation Violates the Rule of Law

    06/12/2013
    Personal Freedom and Prosperity 110: 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.

    Social Security Manipulation Violates the Rule of Law

    Pursuant to our Social Security Act, Trustees are tasked with reporting the program's finances.  The current Trustees' report calls for prompt legislative corrections:  

    Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible. Taking action sooner rather than later will leave more options and more time available to phase in changes so that the public has adequate time to prepare. 

    Charles Blahous, one of two public Trustees, succinctly identifies the reasons Social Security is financially insolvent.  The shortfall facing Social Security, as a whole, arises primarily from demographic factors interacting with the program’s benefit formula and financing method:

    • The number of beneficiaries is growing rapidly relative to the number of taxpaying workers
    • The real per-capita program payments are rising under current benefit formulas.
    • The program is financed on a pay-as-you-go basis, meaning that each generation’s benefits are paid for the most part from the tax contributions of the following generation, rather than saving those contributions to finance future payments.

    Our politicians presume that means-testing who receives benefits (wealthy seniors would not receive promised benefits) and changing the cost-of-living formula (adopted in the 1970s) would preserve our Social Security program as we know it.  However, these are difficult political votes.  Presently, there is a strong coalition, led by avowed socialist Senator Bernie Sanders of Vermont, opposed to changing our current formula.  Likewise, very few politicians support means-testing to reduce promised benefits to seniors.  

    Harmfully and immorally, Congress and the President will most-likely do nothing until they are forced to make unpopular votes.  Simply, America's political elite will ignore and avoid being prudent and responsible until the so-called Trust Fund is insolvent, which is predicted to be 2016 for disability benefits and 2033 for old-age and survivor benefits.

    Moreover, there also exists a critical, philosophical issue.  Absolutely absent in this political debate – as opposed to the the Trustees duty to report on the finances – is Congress and the President's honor and respect for the Rule of Law.  Should Congress and the President manipulate a long-standing law – denying benefits to some and change the established formula for all beneficiaries?  Our Rule of Law states: 

    The law prevails, not the proclamation or arbitrary decision of a ruler, government bureaucrat, the enforcer or judge.

    Incredibly, America's political elites – Members of Congress, the DC media and most academics - don't know, appreciate or care about our Rule of Law.  By changing the cost-of-living formula and means-testing to determine who receives benefits, government (Congress and the President) will be saying to every worker and every employer,  “Yes, you were taxed 15.3%  to pay for Social Security.  However, we were not honest or good stewards and now here are the new rules.  Every beneficiary receives less and some wealthy people get substantially less or nothing.”  This is a horrible breach of an essential duty of morality and governance:

    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 or judge.

    Alas, the present proposed manipulations are a continuation of the inglorious history of Social Security.  Politicians - Republicans and Democrats – have regularly manipulated Social Security for their immediate political advantage.  For example: 

    • President Johnson hid the cost of the Vietnam War by including the surplus Social Security tax revenues in the overall budget. 
    • Nixon increased benefits by 20% percent and notified seniors just before the election.  Ten years later Social Security was approaching insolvency. 

    Thus, government unilaterally altered the contract with American workers and beneficiaries.  For example, Congress and the President initiated a tax on the benefits and increased the payroll tax and retirement age.

    Only personal accounts – owned by the worker – will stop government manipulation and restore the Rule of Law.   America must stop robbing from the young and unborn, who will be most impacted by the presumed changes.  America must terminate how Social Security is financed :   the program is financed on a pay-as-you-go basis, meaning that each generation’s benefits are paid for the most part from the tax contributions of the following generation, rather than saving those contributions to finance future payments.  Any other fix to Social Security will continue the corrupt and destructive abuse of power by government.  The only honorable solution is to stop the inter-generational theft and servitude.  

    I purpose the Freedom IRA, which allows young people to opt-out of Social Security by investing 7.65% in their own IRA.  When a person opts-out, they give up thier future rights to Social Security, with the exception of disability benefits.  In other words, they forfeit all that they have been previously taxed. 

    I am well aware that fiscally-prudent Americans are very concerned about the cost of such a transition.  One suggestion is to entice seniors, who are  approaching retirement, to voluntarily delay their Social Security benefits until they turn 72.  A combination of delaying benefits and reducing taxes would  substantially reduce the burden of government debt.  To advance this concept, additional design parameters and fiscal assumptions must be “scored” by the Office of Management and Budget.   Stay tuned.

    Any other fix to Social Security will continue the corrupt and destructive abuse of power by government.  The only honorable solution is to stop the inter-generational theft and servitude.   Young Americans will be have a more secure retirement, and hopefully more people will understand and appreciate the Rule of Law.



    Read Previous Post on Social Security:

    Social Security: Structurally Violates Freedom

    Social Security: Immoral Special Interest Politics

    Indirectly Obama and NYTimes Admit Social Security is a Ponzi Scheme

    Chained CPI - Harms Elderly and Bamboozles the Young


    1 comments
    Fix Social Security Now
    06/13/2013

    "The number of beneficiaries is growing rapidly relative to the number of taxpaying workers"

    The beneficiaries to retiree ratio is overplayed. This ratio is falling, but not at the rate that the costs are rising. We are paying 5 times as much on twice as much income. If demographics were the problem, why is it that Social Security was insolvent in 1983 at the peak of the boomer earning years.

    The comment about LBJ is not realistic. When LBJ was president, the system was a paygo system. It did not generate any material revenue for LBJ to use. The ENTIRE trust fund was roughly 30 billion, mind you Social Security was on-budget for one of his budgets.

    Social Security has been means tested since 1984 with a test that now reaches up to 1/3rd of retirees. So it isn't possible to implement means-testing, and there isn't much room to expand it.

    Paygo financing does not work. We take a dollar today to pay benefits, and then we make a promise of more benefits in the future. Since the dollar isn't invested - there is only one place where the money can come from.... future workers. We are the future workers. The rest is a sideshow to make people think that Social Security works or could work.

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