Ron Paul: Why the Government Lies About Social Security

Why the Government Lies About Social Security

by Ron Paul

Perhaps the biggest media story of 2010 was the influence of Tea Party voters on the Congressional landscape. The new Congress comes to Capitol Hill with a mandate to end profligate spending and restore fiscal sanity in Washington, we are told. But when the House and Senate convene in January the newly elected members will face tremendous pressure to maintain spending levels for entitlement programs. Even the most modest proposals to trim Social Security or Medicare spending will be met with howls of indignation and threats of voter revolt. Legislators who propose any kind of means testing or increased retirement ages can expect angry visits from senior citizens and lobbyists ready to fund a candidate back home who supports the status quo.

But millions of Americans now realize that the status quo is an illusion that will not last even another 10 or 20 years. The federal government cannot continue to spend a trillion dollars more than it collects in revenue each year because we are running out of creditors. Fiscal reality is setting in and the consequences may be grim, even if Congress finds the courage to take decisive action now.

Courage begins with a commitment to see things as they are, rather than how we wish they were. When it comes to Social Security we must understand that the system does not represent an old age pension, an insurance program or even a forced savings program. It simply represents an enormous transfer of payment with younger workers paying taxes to benefit the other beneficiaries. There is no Social Security trust fund and you don’t have an account. Whether you win or lose the Social Security lottery is a function of when you happen to be born and how long you live to collect benefits. Of course young people today have every reason to believe they will never collect those benefits.

Notice that neither political party proposes letting people opt out of Social Security, which exposes the lie that your contributions are set aside and saved. After all, if your contributions are really set aside for your retirement, the money is there earning interest, right? If your money is in your account, what difference would it make if your neighbor chooses not to participate in the program?

The truth of course is that your contributions are not put aside. Social Security is a simple tax. Like all taxes, the money collected is spent immediately as general revenue to fund the federal government. But no administration will admit that Social Security is nothing more than an accounting ledger with no money. You will collect benefits only if future tax revenues remain high. The money you paid into the system is long gone.

My hope is that at least some members of the new Congress will cut through the distortions to see Social Security as it really is. The best way to fix the impending Social Security crisis is also the simplest: Allow younger individuals to opt out of the program and use their tax savings to invest privately as they see fit. This is the true private solution. Your money has never been safe in the government’s hands and it never will be.

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289 Comments:

  1. I would like to opt-out of Social Security. Is there any way to do this?

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  2. Phil E. Gognitio

    I don’t know of a single member of Congress who has the integrity to us tell that being victims of Uncle Sam’s ponzi scheme doesn’t entitle any of us, regardless of our age, to steal from our grandchildren. None of us are entitled to be “grandfathered” out of the abolition of Social Security and Medicare. The money is gone — period — and Uncle Sam has no right to steal from our grandchildren in order to pay us benefits.

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  3. Hypatia Alexandria

    Which members of Congress have the integrity to tell those of us who have been subjected to payroll taxes all our lives that the money is gone, that it was not securely invested so that it would be available for us to collect as pensions or medical insurance benefits in our retirement years, that it was stolen by the US Congress to pay for government programs?

    Which members of Congress have the integrity to us tell that, had the money not been collected by the government as payroll taxes, had we invested it instead in private funds, expecting to collect it in our retirement years, and had the private fund managers fraudulently squandered our money elsewhere and had no honest means of ever recovering the money they lost, then neither they nor we would have have any moral right whatsoever to steal from our grandchildren in order to cover our living and medical expenses? To survive, we would simply have to come out of retirement and get jobs — the best jobs we could handle given our physical condition, or rely on charity — private, voluntary charity.

    Which members of Congress have the integrity to us tell that being victims of Uncle Sam’s ponzi scheme doesn’t entitle any of us, regardless of our age, to steal from our grandchildren?

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  4. Hypatia Alexandria

    Which members of Congress have the integrity to tell those of us who have been subjected to payroll taxes all our lives that the money is gone, that it was not securely invested so that it would be available for us to collect as pensions or medical insurance benefits in our retirement years, that it was stolen by the US Congress to pay for government programs.

    Which members of Congress have the integrity to us tell that, had the money not been collected by the government as payroll taxes, had we invested it instead in private funds, expecting to collect it in our retirement years, and had the private fund managers fraudulently squandered our money elsewhere and had no honest means of ever recovering the money they lost, then neither they nor we would have have any moral right whatsoever to steal from our grandchildren in order to cover our living and medical expenses. To survive, we would simply have to come out of retirement and get jobs — the best jobs we could handle given our physical condition, or rely on charity — private, voluntary charity.

    Which members of Congress have the integrity to us tell that being victims of Uncle Sam’s ponzi scheme doesn’t entitle any of us, regardless of our age, to steal from our grandchildren?

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  5. Boomers, are you angry yet?? WE should be protesting instead of the teachers!! They didn’t spend one penny to contribute to the retirement benefits they are demanding. YOU did!! Soc Sec was a HUGE ponzi scam perpetrated on us by the Govt. They spent OUR money. It’s gone. Get even…vote for INTEGRITY. RP loves America. He represents the Constitution and the US Citizens. Vote RP for 2012. This isn’t about party affiliations, it’s about America. It’s time to vote to save our Country!!

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  6. Social Security was a HUGE Ponzi scam by the Federal Govt. perpetrated upon the largest segment of our population. Many will never get to collect on the retirement they paid for and depended upon for their retirement. Trust Ron Paul to tell the truth!!

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  7. Social Security was a HUGE Ponzi scam by the Federal Govt. perpetrated upon the largest segment of our population. Many will never get to collect on the retirement they paid for and depended upon for their retirement. Trust Ron Paul to tell the truth!!

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  8. some of the comments here reflect a true lack of evolution!! You are of course kidding that we should continue to allow all people to cross our borders illegally because they are poor. Watch the gumball video and try and learn something! We cannot continue to try and sustain more than our country can support. We are broke and still trying to be big shots and “pick up the tab”. Ron Paul is right. we need to cut up our “no limits” credit cards and live within our means.

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  9. some of the comments here reflect a true lack of evolution!! You are of course kidding that we should continue to allow all people to cross our borders illegally because they are poor. Watch the gumball video and try and learn something! We cannot continue to try and sustain more than our country can support. We are broke and still trying to be big shots and “pick up the tab”. Ron Paul is right. we need to cut up our “no limits” credit cards and live within our means.

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  10. Has Ron Paul addressed Sept 11?

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  11. Dowwnload the audio from this tune at thetunify doht cohm.

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  12. They are actually requiring for “NATIVE BORN”! but knowing their ignorance they will be facing LAWSUITS. You know what the constitution says….”natural born”.

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  13. Rep. Ron Paul tell your ppl to STOP posting job requirements for “natural-born” workers before there is flood of LAWSUITS. Well, not sure if they are your ppl but surely there are in the same political party or political persuasion! Remember,…LAWSUITS especially when there is unemployment because many CITIZENS would love to get FREE MONEY!

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  14. Ha Ha what happens when the same goverment/banks shut the market down and claim bankrupt, they work together. Your money is safe nowherer. two years more

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  15. I have always that I should be able to put into a savings account that I would not be able to take any monies out of until I reached my retirement age. I would have to put into this account at least the amount that the government takes out each paycheck. That way as Ron Paul states, I would be earning interest on my monies. The government would not be able to use it to help illegals, handicapped, drug users, etc that claim they cannot work. I do not think I should take care of everyone in the world and not be able to take care of myself. I would not allow the government to put any Social Security money into one of their stock or bonds as was proposed a few years ago. Thank goodness we voted against that, otherwise, we would have lost out, as many people did with their 401k savings. I also think that the banks and other stock brokers that lost peoples savings because of their own greed should have to repay everyone that lost money. Not give losers bonuses.

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  16. Soc Sec funds are NOT government money. Those funds belong to we American workers who contributed for OUR retirement. See the attached video for documentation. Also, President Reagan left a report stating that the IRS pays zero bills. The URL is ” youtube.com/watch?v=SFAAsCRonlg” . The search title is 3Statements-IRS.m4v . There is no space after the 3. My research and documentation are extensive.

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  17. christianbychoice1

    get obama out of office now…. obama is killing America… get rid of obama now

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  18. Real straight talk. in texas.

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  19. Citizen, TJ, Tom Beebe, Others

    I’ve enjoyed exchanging thoughts and I appreciate your time. I feel we’ve reached a point where we are each simply restating our positions using different examples, metaphors, or analogies, or veering off on different tangents, or the discussion hinges upon a debate about the proper definition of a term or phrase. Therefore, this will be my final comment. I will stay tuned for your final thoughts. I can’t infer gender from user names, so I’m likely to use the masculine pronoun simply because that is the rule I was taught in elementary school.

    I have more respect for Ron Paul than most politicians because I feel is more consistent and credible. However, I’ve been disappointed lately because he seems to be making more provocative statements that I don’t think he can defend and doing so damages his credibility and the case he is trying to make.

    The original article was about social security, and most specifically, the old age retirement portion of it. My original comment was intended to express an objection to some of terms used in the article and to express my concerns about the proposed solutions. The article states that social security was a lie because an account is not being created for each contributor. I think we can differing opinions regarding the wisdom or value or legality of social security, but I don’t think a “lie” has occurred. I’ll change my mind just as soon as someone offers credible evidence of a government official stating that social security is implemented by creating separate accounts for each contributor. Thus far, nobody has. The article further makes the contradictory claim that the trust fund doesn’t exist (which is false) and that it is simply a ledger (which is essentially true). I’m quite certain the comment from bobthecat is a more accurate description than is the artice. My motivation for commenting is although I agree in its current form, social security is on an unsustainable path, but making false statements about it is counterproductive.

    I expressed two concerns regarding the proposed solution of allowing people to opt out of social security. First, this will most likely have a negative impact on the cash flow, meaning it won’t prevent social security from defaulting, it will make it happen sooner. This concern remains unaddressed or even acknowledged. My second concern is it will result in a larger number of people unable to support themselves in their old age.

    I offered an alternate solution which involved periodically raising the retirement age until it reached life expectancy (which I think was the case when it was implemented), means testing benefits (because I think social security is and should be an insurance program). If this is insufficient to restore sustainability, change the cost of living adjustments to be based on changes in wages as opposed to prices (because wages are the source of the funds), and finally, if necessary, increase or eliminate the income cap on the employee portion of the payroll tax.

    It would be helpful to me if others expressed an opinion as to whether or not my concerns are valid/accurate. For example, one might say I agree with your assessment of the impact of the proposed solutions, but Rep Paul solutions is still superior because X. Or something like my concern about cash flow is not valid because everyone under age 50 will opt out and there is a enough of a current surplus handle every one who remains. Or my concern about increased number of people unable to support themselves is valid or not valid, but in any case, people should work until they die or are able to support themselves. Someone did offer the latter response, but I still wondered about how to handle the people who were not yet dead and didn’t have any skills for which the labor market was willingly to pay them a wage at all or even a sufficient wage to support themselves.

    I think a collective democratic (“republic” in our case) government is a perfectly sensible means for a society to govern itself. The notion of opting out of government seems unrealistic to me for a variety of reasons including practicality and moral hazard.

    I don’t think the question is freedom versus not freedom or liberty versus not liberty. I agree with Libertarian777, it is a trade off. I agree 100% with TJ, there is no free lunch, it is always a trade off. Every rule or law we make sacrifices one freedom in an effort to protect another. Exactly which trade offs we should make must be evaluated on a case by case basis. I value freedom and liberty and opportunity and a variety of other things. In our free education example, the taxpayer’s freedom to spend was diminished but opportunity was increased for Little Susie and her friends. Society can debate and vote whether to endorse this trade off. So far, the United States endorses this trade off for education and I neither support nor fear the US doing the same for big screen televisions.

    Assuming we have some form of government (is anyone really proposing we shouldn’t?), I think it is perfectly reasonable that the government is paid for the collection services it provides. This reasoning and the simple fact that US constitution grants government the power to tax clearly illustrate why taxes are not coercion. The precise collection of services which should be provided and the price charged for those service is a matter of debate.

    I appreciate Tom Beebe offering a plan and regret that I didn’t offer it a sufficient review. I support the idea that marriage should neither be encouraged or discouraged by the tax code or government in general. I support the idea of reducing the number of deductions and the recognition that everyone shouldn’t necessarily pay taxes. I do not support the idea of a single tax rate because I think progressive taxes are brilliant.

    Citizen fails to realize that the money he pays in taxes might be redistributed to one of his customers. The government doesn’t eat the money, it just transfers it to someone else, who in turn spends it in the market or invests it. I’m not at all convinced Citizen understands how progressive income taxes are actually calculated because he keeps talking as though he pays 35% of his income in federal income taxes. It simply doesn’t happen. If Citizen is paying 35% of his income in federal income taxes, he needs someone else to prepare his income taxes. Citizen further talks like capital expenditures aren’t deductible expenses. Citizen also invokes the “suffering/punishment” argument. This, in my view, is easily one the lamest arguments I have ever heard. A person is never, and again, I do mean never worse off after taxes by moving into a higher tax bracket. In any case, even if it were punishment/suffering, it is completely Citizen’s choice whether or not to bear it. To avoid the suffering, Citizen could charge his customers less, pay his employees more, or give more money to charity. Citizen could work/produce less (society as a whole will not be adversely affected because someone else will pick up the slack). Citizen could completely close up shop and get a minimum wage job where there would apparently be less suffering. But of course Citizen won’t do any of these things because the suffering argument is nonsense. And Citizen, it sounds like your business relies on the public transportation system. How much are these highways worth to you then? Where would your business be without them?

    TJ must have a different definition of “own” than I do. Humans own everything and the rest of the animal kingdom own nothing because humans impose their will over the other animals, which would be a violation of their natural rights. My neighbor’s dog may urinate in my yard, but neither I, nor my dog, nor the neighbor’s dog are under any illusion that the neighbor’s dog suddenly owns my property. If my dog and the neighbor’s were in a property dispute, they would use force to settle it as opposed to enlisting a neutral dog to settle the matter through evidence and reason. Air isn’t owned. I can’t sell it and the air above my property today is different from the air that was their yesterday. If I polluted “my” air yesterday and it became TJ’s air today, I haven’t violated any natural rights because I didn’t use any force or coercion to cause the transfer.

    In my final analysis, I feel I’m willing to judge the public sector by the same criteria as I do the private sector because there exists a “market” of places to live. In neither case am I entitled to decide what the price of something should be. In neither case am I entitled to insist that the precise combination of services I prefer is available. In each case, I can determine value and choose. The private sector has many more choices whereas the public sector is more like a few levels (local, state, federal) of package deals. If what I desire isn’t available, I can garner my resources and if necessary in partnership with other like minded people to turn my desire into a reality. If you decide the US doesn’t meet your expectations, look around, does any other existing country? No? Well, perhaps an island is for sale where you can control everything (or nothing?). I’d love to hear how the experiment turns out.

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    • GB – I agree with your thought processes on these matters.

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    • GB,

      We all are collectively affected by our government’s far reaching powers. Much of the government’s laws and rules that are an arrogant attempt to counteract some social wrong or balance an some perceived inequity, but the reality is that many of these laws fly in the face of Natural Laws and (almost always) create Unintended Consequences.

      I loved your paragraph about me, especially the “suffering/punishment” lament.
      And you point out that I can, cut back, disperse my income to eliminate the taxes or I can quit altogether. And that’s the law of Unintended Consequences, when people believe that higher taxation has little or no effect on business growth.
      My complaint is that most people believe that government forced wealth transfers, for whatever the reason, is the ultimate social solution.
      Using your reasoning, I should just close shop and quit… and stop whining.
      NO I won’t.
      I believe creating 55 jobs and making a weekly payroll is a sacred trust, something America needs more of, but when government penalizes that effort and taxes away workers hard earned wages (15% SS retirement) under the pretense of future “security”, the LIE is very apparent. Its a sad testimony that our government is engaged in a Bernie Madoff / Charles Ponzi scheme of bilking our citizens of their rightful savings, under the LIE of false security.

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    • GB,

      Your ideas are fine from your perspective, but, in order to become just law, they must fall within the confines of the Constitution. Most of yours don’t. The most basic element of a good law is that it applies to EVERY citizen equally. There is no form of wealth redistribution that can be characterized as anything remotely resembling fair or equal.

      Income taxes aren’t so much coercion, they are, by definition, extortion. If I have to pay for a road I will never drive on, that is extortion. A clear violation of property rights. The Supreme Court struck down income taxes in 1895, after Congress adopted them. It wasn’t until the corruption of Woodrow Wilson and his gang that income taxes came to be in 1913, and this was for the equally corrupt purpose of providing collateral to the Federal Reserve so that politicians could borrow to their heart’s content. The Constitution is abundantly clear that the federal government is granted only explicit enumerated powers and that it may tax only by the methods specified and in order to fund the purposes enumerated.

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    • Just commenting on your response to my plan re: “Progressive taxation”. If you look at both the personal exemption based on the minimum wage and then the flat tax on the balance, you’ll see my plan is very “progressive”, perhaps too mush so. The tax on a family of four making $46,000, and disregarding other exemptions mentioned (health care, education and savings) is ZERO!

      Appreciate your comments. email me sometime. Unlike most, I’ll stand behind my blog contributions, using my real name and offring freely my email address, tbeebe6535@yahoo.com.

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  20. Ron, you left out that it was started in a time with high population growth, with an increasing number of working people. Now there is no growth in population.anymore.

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