Dangerous Best Intentions

Those of us who believe in liberty often think the people running government must know what they do is evil. They couldn’t possibly be stupid or naive enough to honestly believe what they are doing is right.

This was a lunch conversation started with my friend, Liberty.me CEO Jeffrey Tucker, who had just returned from a conference devoted to discussing a fascinating historical novel called Red Plenty. A book set in the USSR, when the statistics and Sputnik signaled it was the Soviet Union’s—and more importantly, communism’s—moment.

For that brief time, writes author Francis Spufford:

It looked like somewhere which was incubating a rival version of modern life: one which had to be reckoned with, learned from, in case it really did outpace the west, and leave the lands of capitalism stumbling along behind.

Just counting the production numbers, the Soviet braintrust of mathematicians must have thought they were winning the race to make the world a better place.

But America’s government operatives are just as cock-sure they’re right, despite every government program being a complete bust. Tucker and I quickly listed public schools, the post office, and all the rest, including Social Security. Why don’t they just give up?

Because somebody inevitably writes something to the effect, “Before Social Security and Medicare, millions of the elderly were doomed to spend their retirement years in poverty and illness.”

Financial columnist Jane Bryant Quinn once described Social Security as “arguably the US government’s greatest success.”

The Government is Good website claims, “These two programs [Social Security and Medicare] have done more than anything else to relieve the pain and suffering of our elderly population.”

But now that a large portion of the population is dependent on Social Security, the system has been bled dry. The most recent Social Security Trustees Report says the trust fund will run out of money by 2034, and benefits will have to be cut more than 17%, if changes aren’t made.

This shouldn’t be news to anyone, so people must be getting prepared, socking away more money for their golden years. Right?

Not hardly. The Washington Post reports one in five people close to retirement—ages 55 to 64—have saved zero. These folks figured Uncle Sam was yanking a good chunk from their paychecks every couple weeks, so come age 65 or 66, there will be a pile of “their” money waiting for them.

Overall, 31% of people surveyed by the Federal Reserve claimed they hadn’t saved a nickel for retirement, and over 40% of young people haven’t even given retirement a thought. Believe it or not, 20% of those over 60 channeled Scarlett O’Hara and said, “Oh, fiddle-dee-dee. I’ll think about it tomorrow, for tomorrow is another day.”

So, how do today’s workers plan to put food on the table in their golden years? The largest response was, of course, Social Security. Roughly 45% of respondents plan to rely on the trust fund that’s going broke.

The reader doesn’t have to get very far into The 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds report to read:

Social Security’s cost exceeded its tax income in 2013, and also exceeded its non-interest income, as it has since 2010. This relationship is projected to continue throughout the short-range period (2014 through 2023) and beyond.

As you would expect, retiring baby boomers will draw down the trust fund in more rapid fashion through 2035, because the number of beneficiaries is growing much faster than the number of workers.

The sobering news comes in the conclusion of the report’s overview:

The projected theoretical combined OASI [Old-Age and Survivors Insurance] and DI [Disability Insurance] Trust Fund asset reserves increase through 2019, begin to decline in 2020, and become depleted and unable to pay scheduled benefits in full on a timely basis in 2033.

The report calls for immediate legislative action to solve this math problem, saying either a payroll tax increase from the current 12.40% to 15.23%, or a 17.4% decrease in benefits is needed for the fund to remain solvent.

You may have noticed the government calls contributions to Social Security “tax income.” So, Roosevelt’s plan, passed in 1935, no longer pretends to be a pension or insurance plan, like so many suckers believe. It was and is, to paraphrase Marx, “From those able to work, to those who don’t.” FDR was only able to gain passage by wrapping the bill with politically popular measures making it, “virtually impossible to oppose his unpopular socialistic plan,” writes Sheldon Richman.

There was no groundswell of support for Social Security before its passage, and it didn’t become popular until “[g]overnment officials… actively sought to reshape public opinion,” according to historian Charlotte Twight.

Like any other government program, Social Security changed over time, and not for the better. Twight explains:

The record documents a sustained and systematic expansion: increases in worker categories covered, expansion of levels and types of benefits, increases in payroll tax rates and in the taxable wage base, the switch to pay-as-you-go financing (divorcing benefit increases from the necessity of immediate tax increases), and a decrease in the relative importance of means-tested old-age assistance.

So did FDR and the wise men around him in the White House honestly want to care for the elderly? Perhaps he was as deluded as Nikita Khrushchev, who told a crowd in Moscow in 1959, “In our day, the dreams mankind cherished for ages, dreams expressed in fairy tales which seemed sheer fantasy, are being translated into reality by man’s own hands.” What Khrushchev believed was that communism would put an end to scarcity. FDR’s fantasy was not quite as ambitious, but similar: the elderly could live a long, healthy life without sacrifice.

The Soviet dreams would come true, because, as Spufford writes, “of something that the Soviet Union possessed and the hungry lands of capitalism lacked: the planned economy.” Yes, Russia was, in Lenin’s words, “one office, one factory.” Lenin’s dream “could be directed, as capitalism could not, to the fastest, most lavish fulfillment of human needs,” Spufford explained. “Therefore it would easily out-produce the wasteful chaos of the marketplace.”

Likewise, FDR figured it was better to have the government plan for people’s old age by taking a portion of workers’ paychecks away from them, rather than leaving it to the whim, whimsy, and chaos of individuals.

Spufford’s description of the hubris believing in the Soviet fairytale should send chills up the spine of those who saved nothing and placed their wellbeing in the hands of Uncle Sam. “Intelligence was invested in it, as well as foolishness: a generation’s hopes, and a generation’s intellectual gifts, and a tyranny’s guilty wish for a happy ending.”

Economist Ludwig von Mises famously determined in 1920 that socialism wouldn’t work, because it couldn’t calculate. As for the motives behind Social Security, Richman explains,”:The more likely reason is that Roosevelt and his coterie saw the long-term political advantage of Social Security, namely, the vote-getting potential of making all Americans dependent on government for their retirement income.””

Rather than a happy ending, the communist fairytale has left millions in poverty. Social Security will do the same in America.