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Wed August 15, 2012
Herbert London: From Social Security To Federal Benefit
In the parlance of Orwellian newspeak words often mean the opposite of their seeming intent. The Internal Revenue Service is anything but a service. Now we have yet another government inspired contradiction. Social Security has been transformed into the “Federal Benefits Payment.” One might well ask how an insurance arrangement in which the recipient makes payments throughout his working existence is regarded as a “benefit.” Whatever happened to “earned income”?
At the moment employees pay fifteen percent of their income before taxes to the Social Security agency. If one assumes a $30K payment per year and an employer’s contribution of $375 per month at a modest one percent rate compounded over a 40 year work experience the total would be $1.3 million. In this scenario, you can assume withdrawal of 3 percent a year or $39,318 or $3,277 a month or roughly three times the present average Social Security “benefit”. Moreover, using the more generous number the individual fund would last 33 years or until a 65 year old retiree is 98 years old.
Why then is the system bankrupt? Why aren’t payouts more generous? The answer in simple terms is that the government uses your money elsewhere. Social Security is not secure, is not really a benefit and, if there were any truth in advertising it should be described as a Ponzi scheme in which money “in” pays for money “out” without regard to the consequences of a deficit.
Where does this money go? Since this appears to be a pot of unexpended and reliably available funds, the Congress uses it for everything from highways to helicopters. Unfortunately the money is not in a locked box so expenditures are often predicated on an anticipated source of S.S. payments. The money is often accounted for before it has been received. Close to 40 percent of the accumulated debt in the U.S. (now at $15.9 trillion) can be attributed to the S.S. shortfall.
It is also true that many receiving this “benefit” never contributed a dime to Social Security. These are people on disability (SSI) or those suffering from drug dependency. Many do not live in the United States but still receive monthly payments. Mexico City alone has more than 1500 people receiving S.S. checks.
While most Americans have Social Security payments taken out of their paychecks, there are many who do not participate. Here again the term security is a misnomer. Social Security is anything but secure.
Orwell would have a verbal party with government titles, but the latest plan to convert Social Security into Federal Benefit Payment takes the cake. Obviously these verbal alternations are designed to confuse the public and in far too many cases it works. This is not merely lamentable; it is a reflection of a government that has little respect for the public it presumably serves.
Herbert Londonis a senior fellow at the Manhattan Institute, president emeritus of Hudson Institute and author of the book The Transformational Decade (University Press of America).
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