SOCIAL SECURITY REFORM: PRINCIPLES, NOT ACCOUNTING
Per CNN and other media outlets, when Florida Gov. Ron DeSantis ran his first campaign for Congress in 2012, he expressed support for “privatizing” Social Security.
They predict, with little surprise, that this should provide red meat for attacks from former President Donald Trump and from Democrats should DeSantis announce a presidential run.
If indeed this is the case, it adds credence to Nikki Haley’s slogan for her new campaign that we need a new generation of leaders.
The president who brought us Social Security, Franklin D Roosevelt, told the nation in his first inauguration in 1933, in the dark days of the Depression, “The only thing we have to fear is fear itself.”
Roosevelt gets high marks for courage and leadership. The problem was not that he was bold. The problem was what he did.
Today, again, the nation badly needs bold leadership. And what needs to be done is undo the damage that Roosevelt did back then. Most of the profound fiscal and social problems that we face today trace back to Roosevelt’s actions in the 1930s, most specifically his signing Social Security into law in 1935.
The constitutionality of Social Security was challenged in 1937 in Helvering v. Davis. The argument was that Social Security violated the Constitution’s 10th Amendment, which prohibits action by the federal government not specifically enumerated in the Constitution.
The Supreme Court found Social Security constitutional by offering a new, sweeping understanding of the constitution’s “general welfare” clause in Article 1, Section 8: “The Congress shall have Power To Lay and collect Taxes … (to) provide for the common Defence and general welfare.”
General welfare had always been understood to be about implementation of explicit authorities enumerated in the Constitution. Now general welfare could be just about anything Congress wanted to do.
Helvering v. Davis and Social Security opened the door to today’s modern welfare state.
Social Security was the nation’s first “transfer payment” program, in which one set of taxpayers could be taxed and that revenue used to transfer to others for purposes that Congress deemed in the “general welfare.”
Per economist/blogger Scott Grannis, transfer payments now tally up to about $4 trillion annually, almost two-thirds of the federal budget. They now constitute more than 20% of Americans’ disposable income, compared to 5% in the 1950s.
In case some still think Social Security is an investment retirement program, please think again.
It is a welfare state transfer program, in which taxes paid by those working now are used to make payments to those currently retired.
Shortly after Social Security became law, there were more than 40 working and paying taxes for every retiree. Today, because of increasing life spans and decreasing birth rates, there are three. The Congressional Budget Office says that Social Security revenues will fall short by 23% of obligations by 2034.
Our fiscal problems today are not about accounting but about principles. We need to restore American principles of ownership and freedom.
Per the Committee to Unleash Prosperity, if a single person earning 45% of national median income could invest 10% of their income in a diversified stock/bond portfolio over a 40-year working life, rather than paying Social Security taxes, they could purchase an annuity at retirement worth $37,784, compared to $11,923 that they would get from Social Security.
By restoring American principles of ownership and freedom, we can fix our fiscal problems and make every American healthier and wealthier.