The Big Con of Social Security and Medicare

Longtime supporters of The Future of Freedom Foundation know that we have always called for the repeal, not the reform, of Social Security, Medicare, Medicaid, and all other socialist programs. In my introductory essay in the very first issue of our monthly journal — January 1990 — which was called Freedom Daily at that time, I wrote in part:

I have organized The Future of Freedom Foundation not only to show the bankruptcy of the socialist ideal but more importantly, to develop and promote the moral and intellectual foundations of the opposite ideal: freedom.

How many Americans realize that such governmental activities as welfare, social security, subsidies, loan guaranties, foreign aid, municipal golf courses, public parks, public schools, and education grants are the embodiment of the socialist philosophy of using the coercive force of government to take from those who have and redistributing it to those who need?

How many Americans realize that the welfare state and the planned economy constitute an abandonment of the economic philosophy to which Americans of the 18th and 19th centuries subscribed?

The tragic truth, and one which most Americans regrettably would rather not face, is that our economic system is now founded on the same immoral premises as those found in all other nations of the world: plunder, coercive redistribution of wealth, and political interference with peaceful activity. Equally tragic is that the adoption of the welfare state and the planned economy has resulted in the destruction or diminution of those qualities which many of us consider so valuable: independence, self-reliance, self-improvement and a spirit of voluntary charity. It is to the elimination, not the reduction or reform, of the welfare state and the planned economy that The Future of Freedom Foundation is dedicated.

Principles and freedom

Why did we take such an unwavering, principled position? Why have we done so ever since? Why do we continue to do so today?

Because we want to achieve a free society! We want everyone to live in a free society! Freedom is good! It is morally right! It produces fantastically positive results.

Achieving a genuinely free society necessarily entails removing, not reforming, infringements on liberty. Socialism is the opposite of freedom. It is one gigantic infringement on freedom. There is no way that people who live under a socialist system can genuinely be considered free. To achieve freedom, socialism has to be repealed, not kept intact and reformed.

Delaying and denying freedom

This principle of liberty especially applies to what are considered to be the crown jewels of American socialism — Social Security and Medicare. So long as the United States continues to maintain these socialist programs in existence, there is no way that Americans can be considered to be free. Again, a necessary prerequisite for a genuinely free society is the elimination of all socialism, including Social Security and Medicare.

Therefore, it stands to reason that when libertarians support the continuation of Social Security and Medicare, albeit in a reformed fashion, they are necessarily supporting a delay in achieving freedom, perhaps even a lengthy delay that could mean that freedom will never be achieved in their lifetime.

When I founded FFF, I was 39 years old. There were people back then who said to me, “Jacob, you are too radical. People are dependent on Social Security and Medicare. There is no way we can do what you are calling for. When those people die off, then we can talk about freedom, but not before then.”

That was 30 years ago. Today? The people who were in their mid-30s back then and who told me that I was too radical are now retired and on Social Security and Medicare.

And what do people tell me today? “Jacob, you are too radical. People are dependent on Social Security and Medicare. There is no way we can do what you are calling for. When those people die off, then we can talk about freedom, but not before then.”

In other words, with these two socialist programs, freedom becomes a never-never proposition. As long as these two programs stay in existence, Americans will never be free in a genuine sense.

Even the popular mantra of “letting young people opt out of Social Security” doesn’t achieve freedom. Sure, young people could “opt out” (by being forced to invest a portion of his monies in government-approved investment accounts) but — here’s the kicker — they still would have money forcibly taken from them to fund Social Security and Medicare recipients for the next 30-40 years. Thus, another three or four decades of freedom delayed and denied.

Among the best thing Americans could have ever done 30 years ago was to repeal Social Security and Medicare and all other socialist programs and the taxes that fund them.

Faith and freedom

In a genuinely free society, people have the right to keep everything they earn and decide for themselves what to do with it. In a free society, charity is 100 percent voluntary. No one is forced to care for anyone.

Freedom works. It enables people to save a large portion of their income. Those savings not only enable them to have a rainy day fund in the event of emergencies but also enables them to help parents, grandparents, and other people in need.

The big problem is that American socialism has caused Americans to lose faith in themselves, in others, in freedom, in free markets, and in God. The government has convinced young people to believe that they are a bad people who cannot be trusted with freedom. The notion is that if Americans were free to accumulate unlimited amounts of wealth and decide for themselves what to do with it, they would turn their backs on their parents, grandparents, and other people in need. The image conjured up is one of old people dying in alleys and gutters of starvation and untreated illnesses.

That’s ridiculous. Americans can be trusted with freedom. The problem is that they just don’t realize it. If Social Security and Medicare were abolished today, everyone, including the elderly and the poor, would be much better off.

For one thing, many seniors don’t need the money. They are sufficiently wealthy. Others might have to go to work to supplement their income. There is nothing wrong with that. There are lots of seniors working today. It keeps them in the mainstream of life, interacting with young people. Some seniors definitely need help. That’s where faith in children, grandchildren, relatives, neighbors, friends, church groups, and charitable foundations come into play. That’s the type of help that has meaning, unlike the “help” provided by the IRS and welfare-state bureaucrats.

Young people fund Social Security and Medicare

Young people might respond, “Jacob, we are just too poor to help out our parents and grandparents and other seniors. The government has to do it for us. We just don’t have a choice owing to our limited resources.”

There are two big problems with that response. Do you recognize what they are?

First, the reason that many young people are so poor is that the government impoverishes them through taxation and Federal Reserve debasement of their money. Or it impoverishes their parents, which leaves much smaller inheritances than would otherwise be the case.

Second, young people actually do have the money to replace Social Security and Medicare. They just don’t realize it.

Frederic Bastiat pointed out that the state is the great fiction by which everyone lives at the expense of everyone else. The federal government is not like a business operating in the marketplace. It doesn’t get its money by selling goods and services. It gets its money by taxing people. Even when it borrows money to fund its activities, those debts must ultimately be paid back. To pay them back, taxes must be imposed.

Social Security, Medicare, and Medicaid cost around $2 trillion per year. To pay out that money every month, the federal government has to first get the money.

Where does it get the money? From the income of younger people! They just are not aware of it because it’s done through withholding taxes. If there was no withholding taxes, employers would be paying their employees 100 percent of their earnings. Then, each April 15, people would be writing checks for the full amount of their taxes. If that were the case, younger people could see the amount of their income they were paying to fund Social Security and Medicare. Since the money is withheld before they ever see it, they don’t realize that they are actually funding that $2 trillion for Social Security and Medicare.

Thus, the fact is that young people do have the money to fund all the money that goes into Social Security and Medicare because they are already doing it, albeit involuntarily through withholding taxes.

The bureaucratic scam

Take note of the scam involved here. The federal government charges hundreds of billions of dollars for performing this “service.” You don’t think that Social Security and Medicare officials are going to work for free, do you? Many of them are pulling in six-figure salaries.

Moreover, Social Security recipients are taxed on their Social Security receipts, which just means that the federal government is retaining more of the money that it takes from younger people through withholding.

Thus, the amount of money given to seniors through Social Security and Medicare is significantly less than the amount of money that is taken from young people through withholding taxes.

Why not instead leave younger people free to keep all their money and get rid of the middle man — the federal government? That would mean hundreds of billions of additional dollars for seniors and the poor that would no longer be wasted on IRS agents and welfare-state bureaucrats.

The choice that everyone faces

Ultimately, Libertarians and all other Americans are faced with a choice: Do you want to be free or not? If you do, when do you want to be free — now or 40 years from now, when Social Security and Medicare are supposedly “phased out”?

For people who want to experience living in a free society before they die, that necessarily means the repeal, not the reform, of all socialist programs. Freedom — genuine freedom — would be among the best things that could ever happen to the American people, including seniors and the poor.

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