A few years ago, Alan Greenspan shook up the major news media with his testimony to Congress about the health of the Social Security system. Headlines screamed, "Greenspan says that Social Security benefits must be cut!" Well, duh. This isn't news, and reasonable people have been saying for years that Social Security needs to be reformed, or else it won't be there when the current generation of youngsters finally needs it. Social Security is, after all, the ultimate Ponzi Scheme. It's not a "trust fund"; it's not an investment vehicle; it's not even retirement "insurance". Rather, it's an intergenerational wealth transfer system. Money is forcefully confiscated from a younger, working generation, and given to an older, retired generation. In order for it to work, there have to be many more workers than retirees. But, since older people are now living longer, and younger people are having fewer children, the ratio of workers to retirees must necessarily decline. That means that--in order to sustain the current Social Security system--either benefits must be cut, the retirement age must be raised, and/or Social Security taxes must be increased. Any of these solutions would effectively cut the already low rate of return on workers' Social Security "investment".

Even from the beginning, there was a lot to hate about the whole Social Security idea. According to Jim Powell, author of FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression, Social Security actually did much more harm than good. The only reason it was necessary, writes Powell, is because of a problem that was brought on by government mismanagement. The Great Depression was caused by Federal Reserve monetary policies that first pumped up the stock market, and then disastrously deflated it. In turn, this caused many people to lose their jobs--along with their private, company-sponsored pension plans. Even people who still had jobs were affected, as they saw their pension plans substantially pared back. The Federal Reserve could have changed their policy to help bring the country out of the depression, but at the time, nobody seemed to understand their role in having caused it. Instead, the Hoover, and later the Roosevelt administrations tried all kinds of "voodoo" economics ideas that were to bring the country back to prosperity. For the most part, these ideas were Socialist in nature, and had no grounding in sound economic theory. Social Security was only one of these ideas.

There are several problems with Social Security. (That is, besides the fact that there is no Constitutional authority for the Federal Government to set up a universal retirement system for its citizenry.)

First, as mentioned above, the system is unsustainable over the long term. As older generations live longer, and younger generations have fewer children to enter the workforce, the ratio of workers to retirees will decline. This means that there will be fewer working people to support the retirees.
Social Security helped to increase unemployment during the Great Depression. Anytime taxes are raised, it takes money away from the consumers and investors who could most help the economy. In addition to the taxes imposed on individuals, employers also had to make a matching payment for every employee. When the costs of employing people are raised without a corresponding rise in business, employers have no choice but to cut back on the number of employees.
It's an infringement of our economic liberty. For example, I don't want to participate in Social Security. I would rather take the money that I have to pay into the Social Security system and invest it as I see fit. But, I can't do that. If I refuse to pay my share of Social Security taxes, I will be fined and thrown into jail.
The rate of return is lower than what could be obtained with private investments. For the generation now being born, the rate of return could even go into the negative. In other words, they'll pay more into the system than they'll ever get back out of it. (Sure there's some risk involved with private investments. Over time though, the market's rate of return is quite good. Besides, the risk would be lessened if the Federal Government would learn not to interfere with the economy.)
Even though it's really a welfare program disguised as a retirement program, there's no means testing. Lower income people have to pay Social Security taxes so that millionaires can also receive their monthly Social Security check.
It convinces many people that they don't have to take responsibility for their own financial affairs. Those who do want to take responsibility have less money to do so, after paying Social Security taxes.
It's a political football. According to Jim Powell, FDR deliberately politicized Social Security so that it would be almost impossible to ever repeal. Even today, it's used as a vote-buying scheme by both of the major political parties. Anytime any politician mentions anything about needed reform, the opposing politician will scream, "Don't vote for him! He wants to take away your Social Security!"
It's a scam. When FDR and his cronies set up the Social Security system, what was the average life-expectancy of an Amerian male? Try 58. What was the minimum age that was set for a person to receive Social Security payments? That answer would be, 65. So one has to wonder, did FDR ever mean for anyone to actually receive Social Security, or was it just a scam to get more money into government coffers? Even today, any excess Social Security money that's not paid out to retirees just goes into the general government coffers, and gets spent on useless government programs.

So, are these enough reasons to repeal Social Security, or do you want more? Understand, I don't advocate a "cold turkey" kind of Social Security elimination. I understand that there are a lot of older people who have based their hopes and plans on the promise of receiving Social Security; it's not their fault that the government made these promises. But, I'm sure, there must be a way to protect these people while phasing out a corrupt, inefficient system. A good start would be to repeal all taxation on investments, and let current workers decide on how to invest for their own retirement.

See also:

Social Security Demeans Workers
We can thank President Bush for reminding us that Social Security is not a pension or insurance plan but a welfare program.
by Sheldon Richman

Social Security’s Malign Premise
Take note of the sheer panic displayed by the left-socialist opponents of President Bush’s Social Security proposal. We can divine some significant information from that reaction.
by Sheldon Richman

Government’s Social Security Mess
It’s hard to say how the debate over Social Security will turn out. Considering that the system rests on the three-legged stool of the welfare state — coercion, deception, and paternalism — it’s hard to see a case for anything but abolition and the individual right to control one’s own income.
by Sheldon Richman

Why Save Social Security?
In their desire to reform or save Social Security, some advocates of free enterprise display a reluctance to openly call for the repeal or dismantling of Social Security or even to suggest that their Social Security reform plan would gradually tend in that direction.
by Jacob G. Hornberger

Why Save Social Security? Revisited
My article “Why Save Social Security?” generated so much email, both pro and con, that I thought I would share some of the comments with you, along with my response to some of the points made by them.
by Jacob G. Hornberger

SSA’s Response to a Request for Freedom
As President Bush tells the world, we have a new fresh air of “freedom” in this country. I felt it and so I thought I would act on it. I wrote to the Social Security Administration to see if I could get out of Social Security. Here’s SSA’s reply to my request. Enjoy, and think of it whenever Bush lectures the world about freedom.
by Jean Carbonneau

'Separate Water Fountains'
Herman Cain points out racial discrimination inherent in retirement program.
by Herman Cain

Worse Than No Reform
The bad news is, Democrats do have ideas for Social Security.
BY BRENDAN MINITER

Why Liberals Abhor True Social Security Reform
If Americans of all ages ever recognize the degree to which they've been conned by the proponents of failed government programs such as Social Security, they will likely respond in a manner reminiscent of the Boston Tea Party.
By Christopher G. Adamo

Why Trust in Social Security?
Isn’t a central argument among those who argue for the continuation of America’s premier socialist program, Social Security, that Americans cannot be trusted to voluntarily take care of the needs of their elderly parents?
by Jacob G. Hornberger

Social Security deceit
Walter E. Williams exposes political deceit, lies and unkept promises.

End social security
In the latest of our series of articles on America's Social Security system, Alex Epstein argues that the program doesn't need to be reformed, it needs to be demolished.

What's the Congressional Black Caucus thinking?
Star Parker says stand against Social Security reform hurts all citizens.

Republican Insecurity
A party divided cannot reform Social Security.
by Fred Barnes

Reform Wreckers
A Republican Senator pushes Social Security tax increases. He's wrong.
Wall Street Journal Op-Ed

The Social Security Crisis
Without reform, it will destroy itself.
Wall Street Journal Op-Ed

Save or Else
The movement to privatize Social Security, writes Lew Rockwell, is both ideologically duplicitous and fiscally irresponsible.

Distractions in the Social Security Debate
Hans Sennholz discusses the many proposals to reform the program and save it from its demographic failings. Demographics, he argues, are a distraction from the core problems.

Social Security Softies
Defenders of a bankrupt system are running out of arguments.
By David Hogberg

End Social Security
Star Parker says terminate federal scam, enact private retirement accounts.

Saving freedom
Arnold Kling: Increased personal assets needed to strengthen economy, liberty.

Social Security election fantasy
Statistics and studies produced by political campaigns are notoriously unreliable. The Kerry campaign is now distributing one of the greatest whoppers of all time in regard to Social Security.
By Peter Ferrara

Privatizing Social Security
Would you sign a contract that enabled the other party to change the terms of that contract at will, while you could neither stop him nor make any changes of your own? Probably not. Yet that is exactly what happens when you pay money into Social Security.
by Thomas Sowell

What if there was nothing left?
Social Security disaster looms, Greenspan warns.
By Jay Fitzgerald and Andrew Manuse

Disabling America
A prosecution brief against the New Deal, a.k.a. FDR's Folly.
By Colby Cosh

Minimum-wage millionaires?
Joseph Farah shows employees how to retire wealthy.

U.S. social security system going broke
U.S. officials said Tuesday the Social Security system is not financially self-sustainable.

The Ownership Answer
How to put social Social Security back on solid ground.
By Ed Feulner

Private Concern
For young people participation in Social Security is nothing more than a grand giveaway on their part. How long before they opt out entirely?
By Brooke Oberwetter

The impossible reform
From all ideological quarters, people are pushing and pulling in the matter of Social Security reform.
by William F. Buckley

The Revolution of 1935
A second American revolution occurred almost 70 years ago. On August 14, 1935, after very little public or congressional debate, President Franklin Delano Roosevelt signed the Social Security Act into law.
by Gregory Bresiger

Another Greenspan Social-Security Reform?
On Thursday, February 27, Federal Reserve Chairman Alan Greenspan told the Senate's Special Committee on Aging that we should tackle Social Security sooner rather than later, so as to avoid "abrupt and painful" revisions of the program when the baby boomers start retiring.
by John Attarian

Greenspan's grim diagnosis
Pat Buchanan on warning of Social Security, Medicare headed for a cliff.

Missing the point . . . and the options
The 2004 campaign is under way, and finally the political world has turned its attention to the single most important domestic policy issue we face: Social Security.
By Matthew Moore

CAGW Questions Greenspan’s Prescriptions for Social Security
Citizens Against Government Waste (CAGW) today supported Federal Reserve Chairman Alan Greenspan’s diagnosis of Social Security while criticizing his proposals to diffuse the program’s looming financial crisis.

Bush's Social Security Sham
GOP presidential hopeful George W. Bush wants to let working people invest some of the money now taken by the Social Security payroll tax.
by Sheldon Richman (Written in June of 2000)

No More Euphemisms
On the issue of Social Security reform, it’s time for both the left and right to get their acts together.
by Charles E. Rounds, Jr.

Morality and Social Security
It is widely acknowledged by people of all economic and political persuasions that something will have to be to be done about Social Security in the coming years. Some want to shore up the system through higher taxes and other reforms. Others want to convert it to a private-oriented pension system.
by Fr. Robert A. Sirico

FDR's Chain Letter
What program consumes the largest share of the federal budget? What program is predicted to go belly-up in short order by every knowledgeable observer? What program are the leaders of both parties committing to protect until it bankrupts the country and destroys what's left of intergenerational amity?
by Llewellyn H. Rockwell, Jr.

State of Social Security
Jane Chastain whacks Bush, Congress for breaking piggy bank.

The Life of Carlo Ponzi
The fact that Carlo Ponzi's investment scheme lasted less than a year--while the government's "Ponzi scheme" has lasted, through good times and bad, for more than half a century--only suggests that Ponzi should have applied his talents as a politician, where he could've fleeced his victims legally.
by Adam Young

The Myth of the Social Security “Trust Fund”
In my mail the other day, I received a hint of why Social Security reform isn’t happening.
by John Attarian

Why Not Simply Repeal Social Security?
The ultimate problem with Social Security is not a political one or an economic one. It is a psychological one.
by Jacob G. Hornberger (Written in September 1998)