Tuesday, December 23, 2008

Social Security and Obama: Pension or Welfare?

My dad warned me about Social Security(SS)/Medicare. He told me I'd be rich many times over if they didn't take the payroll taxes away from me over my life.

My biggest problem with SS is the middle class sees it as a pension. Many republicans use the delusional phrase "but I paid in...." . It is so annoying when republicans claim they "paid in" as if they checked a box on their income tax form for "Yes, I want to contribute to SS". This is democrats greatest victory. You never “paid into” anything, taxes are taken from us by force if necessary. The feds are taking my (FDIC taxpayers) money and giving some to you (SS beneficiary) and spending the rest. Your money was “taken away from you and given away and spent many years ago”. It is a welfare scheme that is setup to convince the recipient they they earned it, even if they paid little or no federal taxes. That way they will demand it. Democrats love it, it is their biggest victory having the middle class addicted to a welfare type redistribution system. They actually call it a federal mandatory insurance system, not a pension. You are insured against having NO income at retirement if you have met some minor work history requirements. It is also expanded to the disabled (as a disability payment) and to minor dependent survivors. Like Medicare, it is very popular with those that get it.

I understand it is taking money from the young to give to the poor. I also understand we need to take care our poor elderly. My problem is the outright dishonesty in the way it is presented. Social security was originally setup like a pension, those that paid more in payroll taxes got more benefits when they retired. The payroll taxes are not tax exempt. That was OK until the government started taxing SS benefits. This means that while the feds claim to pay you your full benefits, in reality some of your benefits go to the general budget if your income is too high. Sound familiar? That's because since the 1980s the SS payroll tax has run a surplus and the feds wrote themselves a phony IOU and spent that money on other stuff too.

If this doesn't sound enough like a scam, to encourage lower income people to work we not only don't charge them income tax, but we pay them the Earned Income Tax Credit (EITC) out of general revenue. This is equivalent to us paying their SS payroll taxes while they pay no income taxes. So if you do well you pay income taxes on both your SS taxes and on your benefits. And part of your payroll taxes goes to the fake trust fund, which is just general tax revenue to pay some poor guy's SS taxes through the EITC. But when he retires he will demand his full SS benefits, because he was told he paid in. And don't try to cut his when it goes broke because he needs it, unlike you. This is the problem and the brilliance of it. Those who don't pay are sure that they earned it.

Lastly , Obama and democats want to expand the tax credit for payroll taxes, sending even more money back. He calls it "Making work pay". So it's really welfare but set up to look like a pension so the seniors will demand it


  1. Now the chicken come home to roost - this social security calamity is the beginning of inevitable sovereign default and bankruptcy, after which even these IOUs are worthless. Siphoning money out of Social Security via these IOUs in effect will just mean you were paying a higher, non-redeemable income tax all those years.

  2. very nice blog .. I liked the theme too! never thought they were going to write about it:) thanks

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