Backgrounder: Social Security, a Christian Objection
By Tyler Watts, Ph.D.
I recently heard a politician promise that he would protect Social Security, arguing that this vaunted program is an inviolable “contract” between the government and seniors. Hah.
Now, this politician was just doing what comes naturally; that is, saying anything to appease a particular voting bloc, in this case the powerful American Association of Retired Persons. His statement about Social Security, however, obscures the economic and ethical problems that plague this and other entitlement programs.
First, we should realize that Social Security is not a sound retirement-income program. In a bona fide pension system, people contribute their own savings that are then invested. The retirement income of these investors is based on the principal plus the investment return of the fund.
With Social Security, though, “contributions” (payroll taxes) are not invested but spent. The lack of investment returns means current beneficiaries are funded by current taxpayers and not their own prior contributions. Indeed, Social Security began paying out more to seniors than it takes from workers’ paychecks in 2010, and this problem is set to get far worse due to the wave of baby-boomer retirements and meager employment growth.
So, Social Security is an unsound, bankrupt government excuse for a retirement program. We all knew that; what really should gall us is this idea that Social Security represents some kind of sacred obligation between the government and old folks. A contract between two parties that involves stealing money from a third party is not valid under Common Law. Indeed, we have another name for it — theft. So let’s recognize Social Security for what it really is: an inter-generational wealth transfer scheme, or, to put it bluntly, legalized plunder of the young by the old.
This aspect of Social Security is grotesque when viewed from a Christian perspective. Proverbs says “A good man leaveth an inheritance to his children’s children.” And Saint Paul, further emphasizing that wealth should be handed down and not up, admonished the Corinthian believers that “the children ought not to lay up for the parents, but the parents for the children.” Social Security reverses this, representing a financial version of Isaiah’s prophecy of how the wicked would “feed on the flesh of their own offspring.”
Though Social Security is morally perverse to those of us who adhere to Judeo-Christian ethics, economics informs us why politicians — both Republicrats and Demoblicans — continue to champion Social Security. They are power oriented and observe the first rule of (re)election: Old people vote.
They know that retired seniors have much more at stake in any federal election than the average working family, as 33 percent of federal spending is for old-age “entitlements” in the form of Social Security and Medicare. Having more spare time and more wealth on average than working-age families, seniors also vote more and make larger campaign contributions — all aimed largely at keeping the gravy train of entitlement spending rolling. Social Security is known as the electrified Third Rail of politics for good reason: Any politician who touches it will die in the next election cycle.
Due to these political dynamics, prospects for Social Security reform are slim to nil. So what are the rest of us to do? Here’s what I’m doing, and what I advise young people to do: Forget about Social Security. It’s immoral, it’s bankrupt and, even if reformed someday, it won’t give you near the same benefits given to your grandparents. This should not surprise us. Why would the U.S. government, the same outfit that gives us airport security, the Postal Service and the Internal Revenue Service, do a better job administering a retirement program?
Even setting the insolvency and immorality aside, Social Security is a terrible retirement plan; it earns a pathetic return from its holdings of government bonds, faux investments that don’t contribute to capital formation or economic growth. Those who want real income security for retirement simply need to consistently save 10-15 percent of their income in a diversified portfolio in an individual retirement account or a 401(k). These are financial vehicles that promote actual business investment and therefore job growth, not just tax payroll.
Someday, perhaps, we can end this sham or change it into a welfare program for the truly poor. For now, let’s at least stop the political pretense that government is contractually obligated to take from the young and give to the old. Our politicians cannot magically transform theft into “entitlement” and draw up “contracts” that would offend the Mafia.
Tyler Watts, Ph.D., a longtime member and adjunct scholar of the Indiana Policy Review Foundation, now is director of the Institute for Economic Education in Texas.