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Wednesday, June 29, 2005

Noble Lies, Liberal Purposes, and Personal Retirement Accounts

An abstract from The Cato Institute:

Opponents of President Bush’s proposal to make individually owned personal retirement accounts a part of the Social Security program routinely charge that it is motivated by ideological animosity toward the values Social Security is supposed to embody, such as equality and social cohesion. However, a frank look at the Social Security status quo reveals that the program is very poorly designed to realize liberal ideals. Social Security has a barely progressive overall structure, if it is progressive at all. The huge volume of transfers inherent in the system accomplishes very little income redistribution within generational cohorts. Furthermore, it works to the disadvantage of current workers, who will receive a smaller "return" on their payroll taxes than do current retirees. The terms of the imaginary "compact between the generations" are manifestly unfair.

What is worse is that the Social Security status quo embodies a government-perpetuated deception designed to generate its own political support by misleading voters into believing that their payroll taxes entitle them to later benefits. The architects of Social Security created a structure and accompanying rhetoric that were specifically intended to encourage the false belief that the system provides a kind of insurance, similar to private insurance based in contract and property, and therefore involves a binding entitlement to benefits. [emphasis added]

Two quotes that illustrate this from Fleming v Nestor 363 US 603 (1960):

"... eligibility for benefits ... (does) not in any true sense depend on contribution through the payment of taxes."

"Congress included in the original act, and has since retained a claim expressly reserving to it the right to alter, amend, or repeal any provision of the act".

As well as one from Helvering v Davis 301 US 619 (1937):

"The proceeds of both (the employee and the employer) taxes are to be paid into the treasury like other internal revenue generally, and are NOT earmarked in any way."

I'll have more about taxation, direct/capitation v excise taxes, and LTV tax to come.