Tuesday, January 22, 2013


Last Friday I watched a *“scicumentary” on PBS about time and how it is defined.

The program host visited various physicists, philosophers and clergy to discuss the topic of time and came to the conclusion that we don’t know how to define it.

Politicians can’t define it either. In fact, they lack the gene to anticipate what might happen in the future, largely because they can’t see past the next election or the current firestorm of choice.

“Unintended consequences” of their decision making often end up costing and/or hurting both their constituents and the other citizens of the United States.

One such “unintended consequence” is Social Security.

It was intended as an aid to retirement…a federal government plan to “care for the elderly” and to garner votes and political favor for FDR.

On this very blog I have referred to Social Security as a Ponzi scheme.  I was wrong. It is much worse than a Ponzi scheme.

Shikha Dalmia, a senior policy analyst at Reason Foundation, writes this about Social Security:

Social Security is not a Ponzi scheme. It is much worse.

Here are three reasons why:

One, a Ponzi scheme collects money from new investors and uses it to pay previous investors—minus a fee. But Social Security collects money from new investors, uses some of it to pay previous investors, and spends the surplus on programs for politically favored groups—minus the cost of supporting a massive bureaucracy. Over the years, trillions of dollars have been spent on these groups and bureaucrats.

Two, participation in Ponzi schemes is voluntary. Not so with Social Security. The government automatically withholds payroll taxes and “invests” them for you.

Three: When a Ponzi scheme can’t con new investors in sufficient numbers to pay the previous investors, it collapses. But when Social Security runs low on investors—also called poor working stiffs—it raises taxes. Indeed, Cato Institute’s Michael Tanner of the Cato Institute points out, 

Social Security taxes have been raised some 40 times since the program began. 

The initial Social Security tax was 2 percent (split between the employer and employee), capped at $3,000 of earnings. That made for a maximum tax of $60. 

Today, the tax is 12.4 percent, capped at $106,800, for a maximum tax of $13,234. Even adjusting for inflation, that represents more than an 800 percent increase.

And given that the worker-to-retiree ratio is expected to fall from 3-1 today to 2-1 in 2030 (down from 16-1 in 1950) these taxes will only go up unless the government decides to kick retirees in their dentures and slash benefits.

Now, please don’t go telling me about how I have “reaped the benefits” of the Social Security program. I have had Social Security taxes taken out of my paycheck ever since I began working, much to my chagrin.

I was not given a choice. The money was confiscated…just taken…by the federal government. It was not invested as a retirement plan would be. It was just taken and redistributed.

When Social Security was enacted, it was touted as proof that the federal government cared about people.

Only it proved no such thing, largely because of unintended consequences.

Millions of people have no income EXCEPT Social Security, for a variety of good and not-so-good reasons.

Some lost their retirement savings due to economic pressures. Others lost savings because of their own stupidity. Still others never saved in the first place, expecting the government to take care of them in their old age.

As everybody knows (apparently not), one cannot live on Social Security alone and have any of life’s amenities.

The unintended consequence of this poorly designed scheme is that there are millions living right at the poverty level precisely BECAUSE of a government that was supposed to be helpful (if you are naive enough to believe that’s why FDR pushed it).

I am not really interested in discussing the merits or demerits of Social Security here, I have used it as an example of the federal government predictable way of enacting legislation that has UNINTENDED CONSEQUENCES.

I could have chosen Federal Reserve Act of 1913, The New Deal, The Great Society, the Civil Rights Act of 1964, the Sarbanes-Oxley Act , the Dodd-Frank Act, the Department of Education Organization Act, the Reorganization Plan Number 3 (Environmental Protection Agency), or the Food and Drugs Act of 1906 (Food and Drug Administration). I chose Social Security. Get over it.

The point is the federal government cannot foresee the consequences of the laws it imposes on people because of its nature, its distance from the people, because it lacks the gene to anticipate what might happen as a result of any given law and its penchant for scrambling to pass foolish legislation in the name of “serving its constituents.”

They major on proving the sarcastic adage:  “We’re from the government. We’re here to help.”

*A combining of science with documentary. Not a real word, until now.


Fredd said...

The insidious nature of this Social Security Ponzi Scheme on Steroids was clear to FDR: votes from geezers who prior to FICA would languish in poverty after their prime, and until their deaths.

This was the nature of human existence in every society since man crawled out of the ooze.

It's not that FDR didn't foresee the unintended consequences: he simply did not care even a whit about what this monster of an entitlement became in the future. All he cared about were the elections of 1932, 1936, 1940 and 1944. That's it.

And for the rest of us, those elections are long forgotten and buried pieces of history. But we are living and breathing the chaos that he dumped on us, because he just didn't give a hoot about the future.

In reality, no politician really does. They all live in the here and now of the upcoming re-election.

Joe said...

Fredd: "...we are living and breathing the chaos that he dumped on us, because he just didn't give a hoot about the future.

"In reality, no politician really does. They all live in the here and now of the upcoming re-election."

Is there a practical way to stop this, or even to make politicians care?

Fredd said...

Joe: yes, the practical way to eliminate professional politicians from wrecking our future is the imposition of term limits.

Of course, we saw how that proposal went in Newt's 'Contract with America.' Nowhere, essentially.