Social Security: Libertarians have better idea
Posted in LFA Flashback by R Lee Wrights on September 18th, 2009 by Danny Brooks
Workers should be able to invest their own retirement funds.
When Social Security began in 1935, the age that people would draw benefits was, not coincidentally, the same as the average life expectancy. In 1950, 16 workers provided benefits for each retiree. In 1996, the ratio was 3.3 to 1 and in 2030, projections are less than 2 to 1. What began as 1% from employee and employer has reached nearly 8 times that amount. In the not too distant future, Social Security will collapse.
Complaining about Social Security is easy. The system is political in nature - taking from some to give to others while promising more to everyone. It’s propelled by taxing and spending rather than saving and investing. I would like to share the Libertarian proposal to eliminate this albatross once and for all.
For starters, everyone would simply stop paying into this Ponzi scheme. Images of the elderly and disabled being evicted from their homes and forced to rummage through dumpsters for food may spring to mind. And that’s probably what would happen…if there was no other plan in place.
The 7.65% of your income that the government confiscates, plus the matching
7.65% that your employer pays, would be turned over to you. Those under the age of 50 could invest this 15.3% in any manner they see fit.
A 25-year-old with a salary of $25,000, putting aside 15% and earning only
5%, would retire with a monthly income of $4,510 and an estate of over $1 million to leave to his heirs. Compare this to a maximum monthly income of $1,600 and no estate with Social Security.
Would there be some irresponsible people who would blow that money? Absolutely. These same people think they can retire on Social Security. Let them be a financial burden to their family or churches, but not society’s responsibility.
Under the Libertarian plan, people over 50 would receive privatized annuities in their names. Politicians would no longer threaten their retirement and claim that a vote for a conservative opponent would result in reduced benefits. Most everyone knows this is a shell game, with current recipients paid by money collected from current workers. It’s also common knowledge that the entire Social Security fund consists of nothing more than IOUs.
I would prefer a formula whereby everyone who has been a victim of this federal shakedown would get something back, even dollar for dollar. But like most of my generation, I honestly don’t expect Social Security to be there when I retire. That’s why I invest in my company’s 401(k) and stock purchase plans. When people stop depending on the government for their retirement, perhaps they too will take responsibility for their own futures, resulting in less of a burden on society. Another benefit would be less political power in Washington.
You may be wondering how we can set up private accounts for people without increasing taxes, drastically cutting benefits or raising the retirement age. The answer is simple: Sell government assets! The federal government has trillions of dollars worth of assets they have no business owning - 29% of all land in the U.S., commodities, power companies, pipelines, oil and mineral rights, unused military bases, and over 400,000 buildings that serve no constitutional purpose. And thanks to asset forfeiture laws, you can add homes, bank accounts, cars, boats, practically everything imaginable.
Before Congress closed a loophole in 1983, municipal governments could opt out of Social Security. In 1981, three Texas counties, including Galveston, voted to break the federal shackles of Social Security. The results have been astonishing. According to a 1996 report, 65-year-old retirees with 40 years in the system and salaries of $20,000, $30,000, and $50,000, would have personal accounts worth $383,032, $573,782, and $956,303, respectively. This is money that Uncle Sam can’t touch; it belongs to the retiree.
They could opt for a lump sum, as outlined above, or choose from several annuities. Other statistics:
* A retired $20,000-per-year worker would receive $2,740 each month, compared with Social Security benefits of $775 per month;
* A $50,000 salary would yield $6,843 from this plan as opposed to $1,302 from Social Security.
* Life insurance under this plan is three times the retiree’s salary, from $50,000 to $150,000, compared to the one-time Social Security death benefit of $255.
* Disability under this plan pays 60% of the worker’s salary until age 65 and is easy to qualify for, while Social Security disability is no where close to this amount, often times requires an attorney, and in unavailable for younger workers.
There are many alternative plans that could easily replace Social Security, which other countries are doing. Partial privatization isn’t the answer. The first dip in the markets would cause that plan to be scrapped. The flow of money needs to be turned off immediately and permanently. Besides, isn’t government investment in business simply socialism?
Originally published in Liberty For All August 18, 2003.
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