The Flaws of Social Security

Friday September 3rd, 2010   •   Posted by Anthony Gregory at 6:13pm PDT   •  

Far from being an investment program, Social Security is a pay-as-you-go operation where new revenues are spent immediately and future entitlements are funded exclusively through the promise to tax workers in the future, many of whom haven’t even been born yet. It is taxation without representation in the most cynical sense.

The program is patently unsustainable, despite what its proponents tirelessly claim. For many years, Social Security took in more than it paid out, with the remainder squandered on whatever other political priorities were pressing—war, social welfare, bailouts and the like. It was through dirty tricks like these that Congress produced illusory budget “surpluses” in the 1990s.

But no more. According to the Congressional Budget Office, Social Security will pay out more than it brings in this year—six years ahead of projected schedule.

This cannot be maintained. As the U.S. population gets older, we are headed for a mathematically inevitable financial calamity. There were about sixteen workers for every one retiree in 1950. Today there are just over three. As a 29-year-old, I can expect the ratio to be 2 to 1 by the time I retire. . . . When the program started in the 1930s, it was a 2% tax. Now it’s over 12%, if you account for both the employer and employee’s shares—or if you look at the self-employed.

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For the full article, please click here.

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