Chapter 2: Welfare
2.3 Freedom: How to Get it Back
Under point one of this project, we covered Education. We discussed how that’s one area in which we still have almost complete control, and how we should take control of what liberty we have. Point 2, the welfare state, is very similar in that regard. Aside from the taxes extracted from us in order to maintain the government-run scheme, we are still at liberty to save for old age, and to buy insurance of different sorts freely. Now the major exception to that is the limitation caused by the Medicare laws—that for health insurance, people over 65 effectually have little to no private insurance options and are thereby forced to be dependent on the system. Other than this, with sacrifice and self-discipline, we can take a large portion of freedom back under our own control, and plan for a day when the benefit does not exist. We’ll talk about some practical steps and sacrifices in the next section.
We have to end our personal dependence on the Welfare State: Social Security is a problem, but it doesn’t have to be a trap. This means we need to learn and plan for our own financial futures, privately, while we also plan to phase out Social Security. The issue here is that welfare of all forms should be a privately funded and insured affair, not supported through taxation. Family, Church, and private charity can replace the Welfare State. And again we’ll have to learn to refuse the benefit. (Don’t take the cheese.) Of course, this also means personal sacrifices. But we can do it with effort.
The Evils of Social Security
Before we go much further discussing the practical steps in this area, I want to drive home the immoral nature of the system, and why it has become so much of a problem.
First, Social Security is not a retirement program, or any kind of savings program at all. It is not the case—and the Social Security Administration states this clearly itself—that we are paying into a fund that is designated in our name so that we can draw from that fund in the future. It has a façade appearing to be that, but it is legally and practically not that.
I want to share with you an exchange that took place recently, between a reporter and a man named David Walker. Now, Walker was the Comptroller General of the U.S. for ten years, overseeing all matters relating to all federal public funds, and then he went on to head the Peterson Foundation which specializes in bringing public awareness to the looming collapse of the Social Security and Medicare programs. So if anyone understands the system, it’s this guy. And I want you to hear how candidly he describes the Social Security system. In light of the fact that it will probably collapse (it’s already in the red), the reporter asks a question:
[Q:] Is the Social Security program fair to younger workers?
[A.] [T]he way to look at it, rather than young versus old, is really income level. The Social Security system is designed to provide a better deal for workers who make less money because the replacement ratio that you receive compared to your earnings is much higher for lower-income workers than it is for higher-income workers.
But the reporter was no dummy, and she pounced on this answer: “So it sounds unfair to both younger workers and higher-income workers.”
Then came the outright admission by Walker. He said,
Social Security is not an investment program. You shouldn’t look at it as a rate of return. It’s intended to provide a safety net of retirement income. By definition, it’s structured so lower-wage workers will get a higher relative benefit. So, by definition, there’s an element of transfer payment.
When people look at it as, “Give me the money, I’ll invest and do better,” it depends on what your income level is. Middle and upper incomes would do better because it would eliminate the subsidy to the lower income. But that’s not what the program is. I hear young people saying, “I’m not getting a good deal.” That’s technically right, but it doesn’t reflect the nature of what Social Security is.1
So there, we have a major government official who oversaw the program, who is now an activist in regard to reforming the program, openly admitting that the program is unfair to both younger payers and middle- and upper- income payers. It is, he says, not a retirement or savings program, but rather a wealth-transfer program. And of course, a wealth-transfer program is—for the net-losers in that transfer—just the opposite of a savings program. It is in fact a “losings” program, or an un-recuperated tax.
So, instead of thinking of Social Security as some kind of investment program, and some kind of fund you’re paying into on which you can draw in the future, you need to see it for what it is—a tax now, spend now scheme (tax you now, and spend on others now scheme). Not a penny of what you pay in now will be put into a fund that will collect interest and be there when you get old and need it—not a penny. And this is not only because the system is losing money and will probably be bust when you get to that age, but because the system was never designed that way to begin with. What you pay now goes 100% to pay elderly and other people now; and the promise is then given that when you get to the proper age, the government will then collect from other young people to pay you. It is not savings, but a tax-and-spend wealth-transfer by government coercion. There is no fund, only a gun—pointed at workers forcing them to pay for the retired generation.
Social Security is the government’s promise to tax young people on behalf of older people over 65. It is an inter-generational wealth-transfer scheme. And the cost to the older generation for this agreement is that they were once the taxed generation having a portion of their income transferred to the older. In essence, the younger advocate says to the government, “I agree to pay taxes for older people now, if you agree to extract money at gunpoint on my behalf in the future.” So, it is wealth-transfer system sustained by the self-interest of the retirees and based on threats of violence.
This understanding is important when we begin to talk about phasing out or ending the system. So many people get nervous and upset, “But I’ve paid so much into the system. I want my fair share back out!” But of course this assumes that the system is a savings plan and not a tax-and-spend transfer. What you have paid all of your life is nothing but a recurring tax—no matter what else they officially name it. What you are said to be entitled to is not your money; what you are said to be entitled to is promises of future taxes on the backs of your children and grandchildren, and/or other people’s children and grandchildren. Instead of having an actual entitlement to actual assets, you have an alleged entitlement to the government’s ability to tax the younger generation—and that ability is growing weaker and weaker as time goes on for more than one reason. So we have to get into the mindset that we have not been saving for ourselves, but have been robbed on behalf of others. This is not saved money, it is lost money.
Any attempt to fix this immoral and broken system is inevitably going to involve someone, somewhere taking a financial hit (and more likely it will be everyone, everywhere). A sacrifice is inevitable. And like all of the financial crises which have threatened government with bankruptcy in the past, the longer we wait to make the necessary sacrifice, the worse and more painful that sacrifice will become. We must prepare for it, and we must prepare now. If you want to have a free society, you have to plan to be free of government control in the area of old age and welfare, and this means we have to plan now to replace that system with private options—not just “privatized” options that are still largely controlled by the government—but fully private and voluntary options.
Ending Social Security
A lot of people talk about phasing out or privatizing Social Security, but few actually present any details. As far as I have seen, only one person has published anything like a serious comprehensive plan for phasing out social security. And while that plan has some great ideas, it has one particular deep flaw which is that—in trying to minimize the pain for the dependent generation and those who have already paid in for years—it takes forty years to complete the phase-out. And it’s just not reasonable to expect people to take progressive cuts in benefits over that long of a period without complaining, and thus, it’s even more unreasonable to expect politicians to stay the course on a painful and unpopular program (at least unpopular with most of the beneficiaries) for the course of ten presidential terms, and twenty Congressional elections. It’ll just never happen.
So whatever happens first needs to include quick, substantial, and decisive actions—be it political or private.
There are two ways to aim at this: either completely abolish the system immediately, or do so over some period of time—whether sooner or later, preferably sooner—in steps. If we hope to abolish it immediately, we will cause widespread hardship for those who are entirely dependent on the system. If we do so gradually, we risk never truly breaking free from it. Although, I think the gradual option is probably the better of the two practically speaking, as long as it is done definitively and quick. And the best way to ensure its success will be to make the primary immediate goal to allow people to opt out of the system, and with the choice to exclude themselves, they are never allowed to draw benefits, but most importantly they are exempt from the taxation for the system. This is the main step toward a free society: the option to get out of the system if you want to.
But this freedom will require sacrifices, both material and psychological, in the mean time. These pertain specifically to the things we can do personally, now. Here is my advice.
The first thing you need to do is to plan—personally, financially for yourself—as if you will receive nothing from Social Security. Pretend as if it already does not exist—even though it does. This involves planning financially and mentally for personal sacrifice. Planning financially is a no-brainer: you begin to save money at a rate that will allow you to have substantial resources (in fact, adequate resources) set aside in the day you need it (notice I did not say “when you retire”—retirement and elderly need are two different things). You’ve got to have a large nest egg, and that means saving and investing a substantial percentage of your income now, from as early in your life as possible. You have to create financial independence for yourself for the day that you are no longer able to work, so that we erase the need for dependence on the government’s system. You erase that dependence completely; you replace it with personal independence.
By making ourselves and our families independent of the need for Social Security first, we can begin to delegitimize the program: if we average people can prove we don’t really need it, that means most average people don’t really need it, and that means most people in general don’t need it. In turn, that means that only a small percentage of people truly do need wealth transfers in old age in order just to live a modest lifestyle, or especially just to survive. But once we reach that point, we are talking about an entirely different social circumstance: small cases can easily be met by private charity from families, businesses, and churches (as Paul commanded the churches to do by the way). And this means we don’t need a government-run program at all, and therefore we should dismantle it and end the taxation for it. Through self-discipline, self-sacrifice, self-funding, and private charity, we can delegitimize the system even while it exists; and delegitimizing the system will create the political will to abolish it.
Achieving Personal Financial Independence
But making that first step for ourselves is the hard part. It will mean a major sacrifice for most people, because we have unconsciously trusted in the Social Security system as the means for old age security, and we have not saved money and wealth at a rate anywhere near high enough to sustain us in that time. Most people, based on the government promise, save very little if any beyond a 401k contribution (which means little more than a few percent usually). And yet if people actually sat down and calculated—based on life expectancy, standard inflation, and their annual expenses based on their expected lifestyle—how much money they will actually need in old age, they would see a large disparity between what they will have and what they will need. Add to this savings set aside for an emergency like temporary unemployment, uninsured auto accident, etc. In a proper scenario, people should be saving at least 20% of their income regularly—and putting it back in a safe investment for future needs. But this would be a major financial cut into most people’s lifestyle, because what people should be saving but are not saving, they are currently spending and even borrowing beyond that the maximum amounts possible. While people have neglected to save, they have simultaneously bought the largest house possible (with 95 or sometimes 100%+ mortgages), best cars possible, plus all the perks like $100/month cable TV plans, and much, much more. And much of the investment in these areas is mortgaged and sometimes second-mortgaged—and people are stuck in the investments. Even if most people do see the evils of maxed-out living, millions of people are now upside-down in their mortgage—could not sell their house for anywhere near what they bought it for—and thus would have great difficulty transitioning into a lifestyle of thrift and saving because of the very burdens by which they have maxed themselves out to begin with. It’s a trap—a self-set, self-sprung trap. Becoming independent and free will mean a major lifestyle sacrifice (perhaps seemingly impossible for some) to start saving a large percentage of their income towards the goal of old-age security.
How could this be done? Well, you have to set your mind on personal sacrifice. This relates to my second piece of practical advice: preparing mentally for sacrifice. Whether we phase out Social Security over time, or the State starts trimming benefits in order to save, or it goes completely bust overnight on its own as some predict, nearly all people are going to take a financial hit in some way anyway. Before that time comes, we who wish to decentralize political power and take personal responsibility and restore freedom, need to accept the fact that we are going to lose at least some money in that system and because of that system. You’re going to get robbed, and the cash is going to be lost forever. Accept it; get over it; move on. But that sacrifice is short-term. The long-term gain we get for that short-term sacrifice is the freedom and independence we say we want. The time to prepare for a better way of living—for both moral and practical reasons—is now. Mentally forfeiting and foregoing alleged future benefits will help us train our minds to accept a lifestyle of thrift and sacrifice in general. That mental preparation will get us over the initial hump of beginning to plan for an independent financial future, and will then help sustain us as we carry that new vision out day-by-day into the future. From that mentality, then, we begin voluntarily to trim and pare down our lifestyles to more conservative and viable proportions.
For the person who has simply refused to save to date, and whose mortgage and lifestyle have maxed out their income or more, there needs to be a tremendous personal accounting, and then cutting back. You need to sit down and take a scalpel to your budget. Do you really need all the appointments, pool and gym memberships, more new clothing and shoes and jewelry, TVs, gadgets, expensive food and shopping, eating out, expensive lattes every morning? The list is infinite for many people. Hundreds if not thousands of dollars are spent every month on unnecessary consumption. And most spending on consumer items is irredeemable—it is wealth gone forever rather than invested. So the capital is lost, and any interest the wealth would have gained had it been invested is also forfeited. Meanwhile, these same people rest assured that they will retire some day (maybe even sooner rather than later) at least partially on Social Security which is taxation on the younger generation. In other words, they live to the max now, giving no thought for the future, and then live off government coercion in the end. For anyone who accepts this arrangement and refuses to change, I have no sympathy, no desire to help, and frankly, consider it immoral that anyone else should be taxed to sustain those gluttonous, careless people in their old age. It’s immoral to tax people for that purpose in general; it’s grossly immoral when done in these cases.
You tell me, why in the world should anyone living a maxed-out, debt-ridden, gluttonous lifestyle be entitled to one cent of taxes taken from someone else for their retirement? I understand that there is a genuine charity case in the poorest of the poor and the truly vulnerable (but we can easily address that problem), but don’t tell me it’s moral and necessary and right to tax anyone for the benefit of someone else who squandered their entire income all their life, never saved a penny, and lived as high a lifestyle as they could along the way. No one owes that person anything, and they deserve to reap the benefits of their own immoral decisions. They should live the latter part of their lives in financial distress as a fitting punishment compensating for their earlier wastefulness. If you want “social justice,” that’s social justice.
In the meantime, for those who have currently entrapped themselves in debt and wasteful living, if they wish to rise out of it, then they need to commit both mentally and in practice to cutting back. And depending on how they choose to perform in that endeavor, their own financial future will manifest accordingly.
And this really applies to all of us. We all need to make plans, make cuts to return to a level of lifestyle that allows us to save money, purchase private insurance, and put ourselves in a position either to demand freedom from the government system, or to live freely when it collapses. In other words, if we’re really about freedom, if we’re really serious about breaking free from government control in old age, savings, and inheritance, then we will make the sacrifices in order to prepare to do so.
Opting Out of the System
The way forward is to delegitimize the government wealth transfer system by replacing it with a genuine private savings and retirement system. The means to do this is through personal sacrifice, responsibility, thrift, saving, and a public demand for individual freedom. And only once we have exercised the discipline, will we have a legitimate political demand to be removed from the system. This has to start with those of us who value freedom. We have to make the sacrifice, expecting nothing in return, until we can form enough of a base to demand exemption from the system—and an option of freedom for all who choose to live free.
There is already precedent for this in certain religious communities—notably the Amish and Mennonites. Due to their resistance to the tax back in 1961, they received a legal exemption from the system—both the program and the taxation. And they received exemption because they already a viable independent system in place, and had a religious conviction against being involved in a coercive government scheme. But, the legislative changes were worded so that the exemption really only applies to their groups. But, this does set a precedent. There is no reason that that legal language should remain so restrictive. There is no reason the exemption should not be extended to anyone with religious convictions against public insurance. This is a very serious thought for a future goal.
A very similar approach should be taken to Medical Insurance—for everyone and the elderly. Now this is more difficult than mere savings. Saving money in the face of taxation is one thing, but the effects of Medicare upon the insurance industry for people over 65 makes opting out a very tough choice. Private plans, if you can find one, could run around $2,000 per month, which makes it tough for most people; and even then, those plans won’t cover anything that Medicare covers. Now, there are already private Christian sharing programs that are very affordable and very effective in covering health care costs—and since they are not insurance programs, they are exempted from government regulation and pressure; and were specifically exempted from Obamacare. This is the type of private system that can provide a viable way forward.
Plus, Medicare is provided only if people receive Social Security benefits, and opting out by law means one must also forfeit Social Security benefits and pay back all previously received Social Security benefits. A judge upheld this federal statute in September 2011, denying a senior’s legal request to opt out without penalty. U. S. Circuit Judge Henderson noted, “[T]he actual question placed before this Court is whether the Social Security Administration can lawfully promulgate a quasi–regulatory provision that penalizes individuals who seek to decline coverage under Medicare, Part A, by requiring them to forfeit their Social Security retirement benefits.”2 The appeal was squashed the following Spring. So there is significant financial cold water in the face for anyone at 65 who wants to try to opt out.
But the main things here are that we must put ourselves in a position of moral and financial high ground. Make the mental preparations to abandon government dependence, despite the losses. Then, start planning, cutting, down-sizing, and saving for your own retirement, and start now with your own life insurance arrangements while you’re young and lock in cheap rates. Only with that in place first will we have a good shot at gaining legal exemptions from the corrupt system of taxation and wealth transfer.
There is yet a more radical position we can take. We could demand immediate exemption from the system, and if successful in attaining it, we would then face the situation of fending for our own financial futures as I just described—only, immediately. In such a case, the very fact that we find ourselves outside of the system, and without the so-called safety-net, might in itself act as the motivation for the tough changes in mindset and lifestyle we’ve talked about. Tough decisions sometimes require tough motivation.
This option, however, would also mean a large-scale social need for millions of people already dependent on the system; they would have to find immediately another source of income (possibly families, or churches where applicable). There would probably be furor from large groups demanding what they see as the money they’ve paid into the system and therefore are entitled to, even thought the system was never designed that way. There would definitely be riots. The better approach, I think, is simply to work toward the freedom to opt-out of the system—both its taxes and benefits. That would begin the end of the system.
So how do we get the freedom back? The best way is two-fold: first, the immediate personal effort that we can do now is to plan and save and change lifestyles in order to meet our own needs for our own old age security. That is, despite the system still existing, pretend that it does not, and that all taxes paid in are stolen and lost (which they are). Refuse all future entitles, and galvanize your minds against the bribery of the promises. This delegitimizes the system, and earns us the moral high ground to demand freedom from the system for all who desire it. Second, we aim politically at making that demand as broad and as public as we can; and we can even seek to erect local and state political protections against federal intrusion into our payrolls.
Now I would like to make one important point in closing. This freedom of opting out of the system which I’m talking working toward, and gaining the moral high ground from which to make that demand—that freedom already exists. We can, legally, morally, rightly, make that political demand to be free right now without having made any other preparation. We have the right to be free from that system. I don’t it to be misconstrued that I am saying that right won’t exist until we prepare ourselves mentally and financially. It exists now, and we can and should announce from every street corner, and in every election. But I outlined here is a more practical approach at getting that right to manifest in society. By putting our efforts with our demand, we create a very powerful witness in society; and whether we succeed politically or not, we will in effect make ourselves financially independent of that federal system of taxation and redistribution. And if enough people do that for themselves, we will see two things emerge: first, we will see a growing awareness of the situation, as people who take responsibility for themselves begin to become a visible block of society, influence others, and create a real community and a real social ethic. And from this, second, we will see very quickly that these communities emerge and manifest in concentrated areas of the country, and they will be widespread in the more conservative areas, which are the vast majority of counties in this nation. And when that happens, we just may begin to see local communities and counties, perhaps even entire states, protect their people from politically and physically from federal intrusions.
But the best way to make this begin is to prepare yourself financially and psychologically to be independent, as if the system already does not exist, and you sacrifice what they take in the meantime. Only by that sacrifice and that preparation will we have a real shot a restoring and sustaining a free society.
- David Walker interviewed by Kimberly Palmer, “David Walker explains Social Security’s Future,” June 16, 2009, http://money.usnews.com/money/personal-finance/articles/2009/06/16/david-walker-explains-social-securitys-future (accessed April 21, 2011). [↩]
- Hall v. Sebellius (2011); The appeal was squashed by Judge Brett Kavanaugh, who added to Henderson’s notes: “We obviously cannot do anything here about the coverage practices of private insurers. And the statute simply provides no mechanism for a person who is 65 or older and has signed up for Social Security to disclaim his or her entitlement to Medicare Part A benefits (or to “disenroll,” as plaintiffs put it). . . . One of the consequences of the expanded social safety net fashioned by the Federal Government is that private entities or charities sometimes adjust benefits based on whether a recipient is otherwise entitled to government-provided benefits. We recognize that plaintiffs are frustrated with this particular manifestation of that broader phenomenon. But absent a constitutional or statutory violation, it is not our role to police that allocation of government and private resources.” (http://www.cadc.uscourts.gov/internet/opinions.nsf/8A1A2C8F6BD52E3C85257A0E00502466/$file/11-5076-1376121.pdf). [↩]