Social Security Goes Bankrupt
According to new projections from the Congressional Budget Office, Social Security will officially go bankrupt this year, paying out $45 billion more in benefits than it takes in. Until now, Social Security defenders have briskly assured us this would not happen for twenty or thirty years, but those who ignored the political spin and looked at the actual numbers knew it was coming much sooner.
This is an important milestone in the utter collapse of American socialism. The cold reality of Social Security insolvency hopelessly discredits the premise of government-assured prosperity for all, financed by “contributions” from taxpayers and businesses. No aspect of liberal economic philosophy can survive in the minds of those who understand the impact of this news.
Social Security has always been part of the Big Lie repeated in President Obama’s State of the Union address. Wise politicians do not have vast resources available to “win the future” by over-riding competition with political judgment. They can’t create successful industries through vast subsidies. They’ve never had that kind of money.
American socialists have been raiding the Social Security “trust fund” for decades, to make the rest of the government look less insolvent than it really is. The funds are stuffed with IOUs, which count as “assets” for Social Security… but are not counted as liabilities for the general Treasury fund.
This year, we reach the point where Social Security must pay substantially more in benefits than it takes in, and there’s no “cash reserve” to tap into, no “lockbox” full of money that can fund the program for a while longer. The excess is coming right out of general revenue. This is the year when Social Security transforms from a secret piggy bank that lets Big Government pretend it has lots of money to spend, into another massive expense it must cover.
One of the liberal canards that dies with Social Security bankruptcy is the notion we can “tax our way out of deficits.” We tried that a couple of times before with this particular Big Government albatross. Jimmy Carter tripled the FICA tax rates in 1977, and promised it would make Social Security solvent until 2030. Wrong. Dead wrong.
Modern liberals are trying to float the idea of raising the employer contributions to Social Security this time, without increasing employee deductions – in other words, another hidden tax, added to the pile of glass bricks already carried by a private sector wrestling with double-digit unemployment. Just because you don’t see those taxes on your paycheck stub doesn’t mean they are not real. Employers would pass those extra costs along to employees and consumers, through reduced wages and increased prices… or they’d just cut back on the amount of increasingly expensive labor they purchase.
Social Security is the eternal proof that if you raise taxes to repair a deficit, liberals will just spend the money. That’s what happened to Jimmy Carter’s massive FICA hike. That money didn’t go into some kind of safety-deposit box. The government spent it to finance other programs, and here we are, bankrupt in 2010 instead of 2030.
This is why Social Security must be privatized. Would you willingly invest in a private fund which subsidized all the stupid, wasteful, and morally abhorrent things Big Government has been spending your Social Security “contributions” on? A fund manager who gave the kind of speech Barack Obama delivered in the State of the Union would have been laughed out of the room before the speech was over. Solar shingles? High-speed rail? More billions for a failed education bureaucracy? He would have been crushed beneath the stampede of fleeing stockholders.
Look at it this way: Social Security is not – and never was – an investment made by the young, to be collected when they grow old. It’s a system of current workers paying the benefits for current retirees – a Ponzi scheme. The ratio of workers to retirees has been falling rapidly. The last thing we can afford to do is accelerate that process by reducing the number of workers… and that’s exactly what tax increases do.
There is nothing politicians love to do more than buy political support with future commitments, which someone else will have to pay for. Taking back such a promise produces howls of outrage from its dependence, who are grimly determine to collect what they are owed. That’s why union pension plans are out of control, and that’s why Social Security is falling apart. Politicians will make all the unsustainable commitments we let them get away with. Social Security and Medicare, the worst ones they ever made, are melting down before our eyes… after a century of generating revenue that allowed government to grow larger in a thousand other ways.