#161 Social Security and Work

Social Security & Work | The Christian Economist

Social Security is not social, nor secure.  It’s not working, because it’s not aligned with God’s design.  We were created as social creatures, with the innate need and desire to care for one another.  But social security is not a voluntary system, so it denies humans the freedom that God intended for them to have. 


Widows and Orphans

James 1:27 says, “Religion that is pure and undefiled before God, the Father, is this: to visit orphans and widows in their affliction.”  It mentions those two groups because they didn’t own land.  In the agrarian economy of the first century, if you didn’t own land, you couldn’t supply your own needs.  Someone had to do it for you.  And, that “someone” was the church, which is made up of neighbors and friends of those widows and orphans.

On August 14, 1935, Congress decided the federal government should take over that role, and social security was born.  But here’s the problem: The government has no money.  It must take before it can give.  So it violates the eighth commandment, against stealing.  The church, however, can give without taking. 

Abraham Kuyper called this idea Sphere Sovereignty.  In Biblical directives, the first supplier of needs for the poor was supposed to be the family, then the church.  If a breadwinner died, it was his brother’s responsibility to take care of the destitute family.  It’s clearly a violation of Biblical principles for the poor to be cared for by the government.  And, as I’ll point out later, the program has grown well beyond caring only for the poor. 

The government should punish evil but not do good.  The church should do good but not punish evil.  Those statements by my fellow Christian Economist Art Lindsley make a clear assignment of God’s missions for the church and the government.  But, government just can’t keep it’s hands out of the cookie jar.  We really should expect that, shouldn’t we?  We know government officials are fallen, so some means of control is necessary.  In the first 48 years of the program, they were controlled by keeping social security separate.  Then, in 1983, Congress was looking for sources of revenue and spotted the Social Security trust fund.  They put their hand in the cookie jar, by borrowing against it.

Here’s at least two problems with social security: It’s not social, and it’s not secure.  


It’s not Social

What’s social about forcing people to give up their hard-earned money, so congress can re-distribute it to someone else?  I particularly feel sorry for the 20-year-olds in my class at Dallas Baptist University.  They are going to pay for MY social security, yet, they will not get any of their money back.  As I was explaining to them, just this week, that’s why we like markets, because they are voluntary.  Social security is forced.  And, if you want a general trend, it is that the Bible favors voluntary exchanges, not forced extractions from unwilling people. 


It’s not Secure

Travis Nix authored an article in the Wall Street Journal recently titled Higher Taxes Won’t Save Social Security.  

He points out that The Social Security administration forecasts that without benefit cuts or structural reforms, the entitlement program will run out of money in 2035.”  I cited a Congressional Budget office data recently that pegs the year at 2033.

Social Security is currently funded through payroll taxes paid by both the employer and employee at 6.2% each for the first $162,000 earned.  Legislators are considering the idea of lifting the payroll tax cap above the $162 K. The resulting increase in revenue would do little more than delay the inevitable by extending the program’s life a few more years. But the main purpose of the tax hike would be to let politicians avoid making the difficult decisions that might put Social Security on the path to long-term solvency.

But we should expect fallen legislators to simply kick the can down the road, as they’ve done for decades.  


Work is Good

That’s one of the ten Biblical Commandments of Economics that Sergiy Saydometov and I wrote about in our book, Biblical Economic Policy.  Removing the cap from social security deductions will harm the American economy by discouraging work. Uncapping the payroll tax is anti-worker in all regards. It will directly reduce people’s take-home pay, decreasing the incentive to work and pushing some of the most innovative workers out of the productive economy.  Where will they go?  Living off other government programs is a viable option. 

If work is good, we should have policies that promote it, not discourage it.  Unions, unemployment benefits, minimum wage, and income tax are just a few policies that discourage work.  We have grown so accustomed to policies that discourage work, that they just seem normal.  They shouldn’t.  

Thomas Sowell calls this The March of Foolishness.  And, he’s right.  In the Christian worldview, we see work as a part of creation, not the fall.  It’s good, and we should encourage it.  Our policies are upside down.

In their book, Extreme Ownership, Jocko Willink and Leif Babbin clearly state, “You get the behavior you tolerate.”  That’s correct.  And, when we tolerate policies that discourage work, that’s what we get.  

Ponzi schemes are named after Charles Ponzi. In the 1920s, he promised investors a 50% return within a few months for what he claimed was an investment in international mail coupons. Ponzi used funds from new investors to pay fake “returns” to earlier investors.  You can get away with that for some time, but eventually, it catches up with you.  There is no free lunch.  For more on that, I’ll refer you to Milton Friedman’s book by that name and a more recent publication by David Bahnson.

Social Security is a ponzi scheme, that relies on the contributions of a shrinking young population to pay off an increasing elderly population. That’s the economic reason why it’s failing.  I’ve already pointed out the Biblical reason. 

Inevitably, as younger workers age there won’t be enough money left in the system. That means that the payments young Americans make to fund their retirement will only benefit the elderly who get to it first. There’s a reason why Ponzi schemes are illegal – they don’t work for anyone except it’s administrators. They never work for their clients.  Why is this only illegal in the Private Sector?

Social security has worked for the government administrators who have used it to buy votes.  Even today, there’s a rather absurd conversation going on between the political parties.  President Biden is accusing the Republicans of favoring the sunsetting of Social Security.  An accusation they flatly deny.  Think about it: They’re all in agreement in support of a program that is Biblically, economically, and ethically unsound. 


Mission Creep

There’s also the suggestion to make Social Security a flat benefit to make it a true antipoverty program, because that’s where it started.  But, government programs of this nature almost always are victims of mission creep. 

The original program paid recipients at age 65 when the average life expectancy was between 58 and 60. Only 18% of the population lived long enough to claim it.  Now, it’s a retirement AND survivors program in an age where 82% of the population will live long enough to be an eligible recipient.

I’ve heard reasonable people claim that social security was an individual program.  The idea was that MY money was put in MY account, and returned to ME in old age.  Well, it never was designed that way. Taxes were collected for the first time in January 1937 and the first one-time, lump-sum payments were made that same month.  The first monthly payment was made on January 31, 1940, to Ida May Fuller of Ludlow, Vermont, in the amount of $22.54. Miss Fuller, a Legal Secretary, retired in November 1939. She started collecting benefits in January 1940 at age 65 and lived to be 100 years old, dying in 1975. 

So, it’s been a transfer program from the start. And, sorry to mention this dark side of the program: It SUFFERS when people have long lives, and it FLOURISHES when the participants die early.  Think about it: Your government wants you to die sooner. It’s kinda like life insurance, where the company wants you to live longer, so they don’t have to pay your survivors.  The viatical industry is the opposite: When they buy your life insurance policy, they want you to die sooner.  Should we allow a program in which someone else owns an interest in your dying sooner? 

OK, more about the funding mechanism.  It WAS a separately funded program, until Congress started borrowing from the Social Security Trust Fund in 1983.  Since then, it’s become a federal program, like any other, funded by taxes, like all federal programs.  

President George Bush tried to privatize Social Security in his second term, but he couldn’t get support, even from him fellow Republicans.  Social Security has been called “The Third Rail” of government.  That metaphor is borrowed from the electric train system.  The train cars rest on two rails and gain their electrical current from the third rail.  If you touch it, you die.  And, every legislator knows that if they touch social security, their political life will end. 

That’s what happens when you design programs that don’t align with Biblical mandates, nor economic truths.  



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