ECONOMICS
Economics in Many Lessons 1: What happens to Social Security when you Die?
By Nero
When it comes to the government interfering in free market capitalism there is probably no better example of a good idea gone straight to hell than Social Security. Now you may ask, “What could possibly be wrong with such a system? Sure, money I could be using now is taken out of my paycheck every month and I don’t really have a choice if my job has the government collect “SS” benefits or not, but Social Security is providing me with funds to live off of when I retire”. Absolutely not. In fact, if you’re like me (a 20 something that hasn’t even entered the workforce yet) by the time you’re eligible for benefits Social Security will be bankrupt and you’ll be screwed. In this first lesson allow me to explain some hidden effects of SS that not many people realize and I would like you to specifically think about the above mentioned question: What happens to the money I have paid into SS if I die before I collect any benefits?
But first a little explanation of what Social Security is. SS is probably the longest lasting and most influential of the New Deal reforms that FDR, America’s most famous socialist president, enacted during the Great Depression. Worried that the common man did not have the ability to save for his own retirement FDR created Social Security to provide government funded pensions for workers once they retired. Today the program also pays out funds if you are disabled, poor, or in very rare cases, death benefits, which will be discussed in further detail later.
Now like practically every other socialist policy enacted on paper, this idea seemed like a great compassionate achievement: the big ol’ loving government was watching out for its citizens making sure they weren’t all destitute when they were old and feeble. This couldn’t be further from the truth for many reasons, the first being how Social Security funds are collected and dispersed. Now, most people would assume that if the government was going to take part of your earnings for your retirement that it would do something like put it in a special account just for you and wait until you needed it. False. When the government takes cash out of your pocket for SS it isn’t setting it aside for you specifically, instead it’s giving it to someone who’s already retired. In other words the people who are working now are paying for those who are retired; the people who are working now aren’t actually saving anything. Why is this such a bad thing? Because when this practice started in the 1930’s the ratio of workers to retired workers was 18 to 1. Today the ratio is 3 to 1. In ten years it will be 2 to 1. By 2040, there will be more people drawing money from the system than paying into it. In other words we will be running a massive deficit we can’t close and the system will implode because it was never sustainable in the first place.
A further problem that exists with SS is who pays for it. Most people see that 6.2 percent of every paycheck is taken to fund the system and they are told that an equal amount comes from their employer’s revenue that matches there payment and thus provides 12.4 percent into the system. Again this idea is completely false and this tax (because it is in essence nothing more than a tax) is paid entirely by the employee. Here’s why: Let’s assume that after all other taxes and deductions are taken from your paycheck you receive 500 dollars and than 50 dollars of that 500 is taken for your share of SS. Theoretically if you are losing 50 dollars a month for SS you would assume your employer is also putting up 50 to match your share. Completely untrue. In fact all your employer does is cut your paycheck by an additional 50 dollars in order to pay the additional amount. As noted by Professor Mark Brandly in an article for Mises.org every employer in the United States, when they are required to match an SS payment, simply cuts the employee paycheck by the amount that they are expected to pay in order to put the entire tax burden on the employee and not lose any of their own profit. In other words, that 500 dollars will be cut down to 450 to compensate for what the employer is supposed to pay and then cut down to 400 for what the employee is expected to pay. The burden for SS falls entirely onto the worker simply increasing the amount of bone-crushing taxes one is expected to pay whether they actually want SS or not.
A further problem pointed out by Blandly in his article is what happens to surplus SS when it is collected. Believe it or not, though SS is on track to go bankrupt within the next few decades, at this very moment it is in fact still churning out a surplus; that is SS is collecting more money than it is paying out. Last year it actually ran a surplus in excess of 180 billion dollars. But what did the government do with that money? It borrowed it FROM ITSELF to spend on OTHER PROGRAMS. It essentially wrote itself an I.O.U. and took the money out of SS in order to pay for some other monolithic government idea that is probably failing as well. The stupidity of this concept is astounding: have you ever heard of a private company writing itself an I.O.U. and borrowing money from itself? Probably not, on the grounds that 1. Such an idea is idiotic and no business would stay afloat doing such a scheme and 2. No intelligent human being would back or invest in a company that did so. But it’s common knowledge that if the government were a real business it would have gone bankrupt long ago because practices such as these only succeed to drive it deeper and deeper into debt with no viable way out.
But now I wish to draw your attention back to the idea expressed in the title of this article: What happens to the money you pay into Social Security if you die before you can collect benefits? Allow me to share a personal example. I lost my mother when I was 18, a woman who had worked for 30 some years and had paid a handsome amount into SS against her own will. When she passed away my family inquired as to what was going to happen to said money, we were wondering if myself and my sister were able to collect it to use to pay for college (after getting our answer I would have taken it and donated it some random charity, anything else would have been a better use of the money). What were we told? Unless we were under 16 or disabled we were not entitled to a penny and the government got to keep it. All of it. My mother had 30 years of her hard earned money taken from her only to have the government get to keep it before she could even use it or let her children benefit from it. So it what is the answer to the question above? If you die before you collect you are essentially donating your hard earned cash to the government. In fact, since SS money is getting so tight, it is in the government’s best interest that YOU DIE BEFORE YOU COLLECT, AS THIS IS THE ONLY WAY THE GOVERNMENT CAN MAKE A SURPLUS IN THE SYSTEM AND BIDE A LITTLE MORE TIME BEFORE THE ENTIRE PROCESS COMES CRASHING DOWN.
I could name certain other problems with Social Security, such as the fact that it’s a secret, almost paranoid organization, that it sends its workers on retreats costing hundreds of thousands of our tax dollars, or that, most importantly, there is NO PROVISION IN THE CONSTITUTION ALLOWING FOR GOVERNMENT MANDATED AND BACKED PENSIONS. However I believe the above mentioned examples of absurdity will suffice. Social Security is not a great social invention but is in fact the complete opposite: it is an anchor dragging down our economy that is not only not viable with any higher amount of taxation but succeeds in taking money out of your pocket that you may never get to use. It is an institution meant to give the government greater control of your life in the name of helping you and the sooner it is abolished in the name of justice and economic freedom the better. No true American could support such a system that is creating a huge tax burden for later generations and unless we Americans take the necessary step and privatize Social Security, giving Americans control over their own money, we will continue on the road to bankruptcy and economic ruin.
TU NE CEDE MALIS