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February 15, 2005

Reasons for Social Security Refuted

The two common justifications given for social security are that (a) without social security, old people would be poor, and (b) we need to force people to save for the future lest in their old age they starve or go on public charity. Neither of these reasons justifies a program like the one we have, where all income-earners are taxed in their youth and paid pensions in their old age. . . .

. . . Reason (a) is a reason to have public charity include old people who cannot work as well as young people who cannot work. As far as I know, that is currently the case. Thus, we don't need social security for it.

Reason (b) is, at most, a reason to make sure that everybody who can save does save for their old age. I would say, myself, that if someone could have saved for their old age and didn't, then we simply should not put them on public charity.

But suppose we don't want to make people pay the penalty for their improvidence. Even then, reason (b) doesn't apply to most people, because most people *do* save, even in addition the forced saving of Social Security, and they would save even more if Social Security. Most people save, if only in the form of owning a house (which they could sell in their old age) or by means of an employee pension plan. At a minimum, Social Security should exempt all of those people from paying tax or getting benefits. We do not need to force Bill Gates to provide for his old age. Going a step further, another common way to provide for old age is to have children. Someone with eight children should not have to worry about starving in their old age. If we do not already, we should require that children maintain their old parents, just as we require parents to maintain their young children. And we should exempt someone with children from being in the Social Security system. They have invested for their old age in raising children. And in their old age, their own children should pay taxes for their pensions, not other people's children.

Going two steps further, for the few eligible people left, why require them to do their forced savings via a low-yield government program? All that is necessary is to force them to contribute to a pension plan, much as in the private-account plans. Going three steps further: how many of the improvident who would not save for their old age actually would reach old age? If someone is reckless enough not to save, maybe he will die early in one of numerous ways (shootings, accidents, drink, drugs, AIDS) that affect reckless people. In fact, if you plan to burn yourself out by age 40 it is irrational to invest in a pension plan.

Little mentioned is the corrupting moral effect of Social Security. For one thing, it encourages improvidence, because a person can count on a government pension even if he saves nothing himself. For another, it encourages filial impiety. Instead of caring for my parents myself, I can shrug them off as the government's responsibility.

Posted by erasmuse at February 15, 2005 01:20 PM

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test 1

Posted by: Eric Rasmusen at February 16, 2005 07:31 AM

[For some reason your blog did not allow me to post my comments on your Social Security argument so I'll have to email them to you.] Posted

"This is a fairly facile argument. It is purely academic and doesn't deal with any of the realities of the situation.

Firstly, you ignore the "working poor," people who may work two or three jobs and still not have any money to spend on their retirement. You may deny their existence, but you are wrong, and can be proven as such.

Second, you quote "without social security, old people would be poor" as if it were an assumption, but it has been historically proven to be true. One example: According to an agency publication, "Income of the Population 55 or Older: 2000," 8 percent of elderly beneficiaries were poor, but a startling 48 percent would have been below the poverty line had they not been receiving Social Security.

Furthermore, you also don't provide a real alternative, which is a key part of arguing against a standing policy."

Posted by: Christopher Bell at February 16, 2005 07:33 AM

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