Is the choice Social Security or liberty?
Benjamin Franklin is reputed to have written, “Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.” This perspective is largely absent from the debate over President Bush’s proposal to reform Social Security.
In a nutshell, Bush has proposed that younger workers be allowed to invest part of their Social Security taxes in personal retirement accounts. The rationale is that the personal retirement accounts will give these younger workers more retirement income than the present Social Security system, which supporters of the Bush proposal say will not be financially viable by about 2018. Those opposing personal retirement accounts counter that Social Security will be solvent for much longer, until 2042 or 2052. Thus the argument over Bush’s reform proposal suggests that the problem with Social Security is an actuarial problem.
But what right does government have to force me to save for my retirement in the first place? Doesn’t being free mean that I have the right to choose a lower standard of living in the future in order to enjoy a higher standard of living now? Don’t hold your breath waiting for Social Security to be debated in these terms. You’ll surely asphyxiate long before you hear the political leaders of today’s America sounding like Benjamin Franklin.
Economic liberties are about as passe as tri-corner hats. Ask most politicians whether liberty should be sacrificed for security and you’ll be treated to their standard sound bites about the Patriot Act. That one of the costs of government programs like the New Deal and the Great Society is individual liberty is simply overlooked.
Social Security demonstrates not only that it does cost individual liberty to pay for nanny government, but also that Franklin was correct when he said that the security we purchase by giving up liberty is temporary.
Social Security is a “pay-as-you-go” system, which means your payroll taxes are not saved or invested for your retirement, but instead are used to pay benefits to those already retired. In other words, what you receive in exchange for a lower present standard of living is nothing but a promise that government will force the next generation to pay sufficient taxes to support your retirement.
And the demographic changes since Social Security was created have made it an expensive promise to keep.
When Social Security was created, there were about 40 workers for every retiree. Today, however, there are only three workers per retiree and that ratio will decline to two-to-one as the baby boom generation retires. The Social Security tax has risen from 2 percent of the first $3,000 to 12.4 percent of the first $90,000, which means that 80 percent of Americans pay more Social Security taxes than federal income taxes.
Bush’s proposal is a step in the right direction, albeit a modest step. While government would continue to force you to save for retirement, at least part of the forced savings would be for your own retirement. Additionally, you would have some degree of control over how these forced savings are invested.
In contrast, continuing the current Social Security system means that every penny that the government takes from you in payroll taxes will continue to pay for somebody else’s retirement.
Those opposed to personal retirement accounts claim that allowing individuals to invest in the stock market is too risky. But a study done by the Cato Institute reports that there has been no 20-year period where there has been a loss in the stock market. In fact, the worst rate of return over a 20-year period, 3.36 percent between 1929-1948, is still much better than the 2 percent return projected for current and near retirees.
Underlying all of the actuarial skirmishing about Social Security’s solvency and the risks and returns of personal retirement accounts is the broader issue of whether our country will become more collectivist or more free. That Social Security is not being discussed in these terms shows how much things have changed since Franklin’s time.
Ed Mosca is a Manchester attorney and former chairman of that city’s Republican Party.