Social Security: Successful Failure

Social Security has the dual distinction of being both an abysmal failure and a whopping success, and that's not just political double-speak. It all depends on which side of the coin you favor.

As the most-egregious -- and unconstitutional -- Ponzi scheme of all time (today's elderly recipients are funded by young workers, not from their own contributions of yore), Social Security is irreversibly insolvent. In 1950, the worker-to-beneficiary ratio was 16.5 to 1. In 2010, that ratio is almost 2 to 1.

Notwithstanding the political nonsense, Social Security's failure is rooted not in actuarial anomalies, but in the violation of immutable psychology: people succeed only when they are responsible for their own decisions and actions. When government manages your life, it will fail -- and therefore, you will fail.

Examples of socialism's failure abound -- from the Weimar Republic to the Soviet Union to Cuba. Even the history of Thanksgiving provides such a lesson. The colonists at Plymouth Plantation were starving because of laziness and dependence on the industrious few who produced food. In 1623, Massachusetts Governor Bradford fixed the problem by abolishing socialism and mandating self-sufficiency. He gave each household a parcel of land and the right to keep or trade any food produced -- or face starvation. End of famine.

Freedom from Government

We've read and heard ad nauseam that politicians violate trust funds and lockboxes, but any attempts to privatize Social Security -- George W. Bush considers his inability to do so his greatest failure -- always result in bitter political wars and higher taxes.

In a country that 234 years ago fought for and barely won freedom from England, how could freedom from government ever rise again to become the source of a political war? Apparently, a lot of people want to be controlled like children.

Since America's inception, there's been an ongoing battle between federalists (who value the Constitution, strong states, small central government, and individual liberty) and proponents of federalism (who prize strong central government, weak states, and malleable groups of citizens). Clearly, given America's current socialistic way of life, federalism reigns supreme.

Uncle Sam's Ponzi Scheme

The anti-privatization crowd always makes the same argument for Social Security: we can't allow our elders -- who are adults -- to be vulnerable to the vicissitudes of the stock market. Really? Better their nest eggs should depend on a system of corrupt, narcissistic politicians; high taxes; high debt; high unemployment; and a shrinking tax base?

Big Government "succeeds" only with citizens who've opted in to group subjugation and out of individual liberty. Like little puppies fetching the master's stick, they obediently buy the right lightbulb, eat the right food, drive the right car, say the right thing, visit the right doctor, pay more taxes (or none at all), and retire on government funds. As of September 2010, 43M people (14% of the total population) were receiving food stamps. Success!

Without increasingly oppressive taxation and a corresponding hike in the retirement age, Uncle Sam's Ponzi scheme is mathematically unsustainable. Because half of Americans pay zero income taxes, and 25% pay 86%, today's young workers know that they'll never receive a dime from this "security" money hole when they retire.

According to the Social Security Administration, in the over-65 crowd, more than 50% of married couples and 72% of singles get the majority of their income from Uncle Sam's Ponzi scheme. This is blatant intergenerational fraud and wealth redistribution.

Furthermore, for the first time since 1983, Social Security expenditures are expected to exceed tax receipts in 2010 by $41B (excluding interest income). So why is anyone surprised that during the Great Recession, Social Security is broken -- again?

Welfare of Society

If the intent of Social Security was to provide economic security to retirees (was that the intent?), then what is the origin of its name? Glad you asked.

At the beginning of the 1930s, "economic security" was the term used by the original authors of the legislation and by President Roosevelt. But Abraham Epstein, the man credited with introducing the term "social security" to America and the world, changed everything. As a national leader in the social-welfare movement, in the first half of the 20th century, Epstein opined:

I insisted on the term "social security" because by that time I had a clear conception of the differences which lay between the concept of social insurance as worked out by Bismarck in Germany and the conception of social protection as elaborated in England. I definitely did not want "social insurance" because this would give it the German twist of the actuarial insurance concept in terms of compulsory savings, which do not justify governmental contributions. I did not want "economic security" because what I hoped for was not only a form of security for the workers as such but that type of security which would, at the same time, promote the welfare of society as a whole, as I was convinced that no improvement in the conditions of labor can come except as the security of the people as a whole is advanced.

Obviously, the socialistic, progressive "people as a whole" concept caught on, dismissing individual liberty and responsibility, and the rest is insolvency...I mean history. Didn't the lesson of Plymouth Plantation sink in? Does it ever?

FDR liked the new term, and the Social Security Act of 1935 was born, littered with the words "social" and "general welfare." If Social Security were such a great idea and a huge success, there would be overwhelming evidence, right? Where is it?

The No-Nonsense Bottom Line

If financial independence is the goal, then Social Security is an abysmal failure. If, however, irreversible dependence on Big Government is the goal, then Social Security is a whopping success. Social Security, therefore, is a successful failure. Again, it depends on the side of the coin you favor. Let's just hope that coin is made of gold.

Marc Rudov is an author, speaker, branding expert, and radio/TV personality.