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Many of the commentators on my articles claim, as does Chris Christie, that Social Security is a safety net. It is not.
I appreciate the comments that readers make on my articles. I respond when I can and incorporate the responses into future articles.
There are some common themes in the comments, and an article is warranted to explain that H.L. Mencken was right: For every complex problem, there's a solution that is simple, neat, and wrong. If there were a simple solution to Social Security’s imbalances, Congress would have already fixed it.
Social Security is not a safety net. It is old-age insurance, which provides a hedge against the cost of the unknown. It is not different from auto or home insurance. We do not know how many fires we will have, so we buy home insurance. We have no idea how many meals we will eat at 90, so we need old-age insurance.
When you have a car wreck, the auto insurance does not replace the car. There is a deductible. Likewise, old-age insurance is not designed to be your sole source of income in retirement. In the words of FDR, we have provided average citizens “some measure of protection against poverty-ridden old age.” Keep in mind: “some measure.”
Social Security is not a 401(k), or a substitute for one. Savings is designed to make money by taking risk, whereas insurance is the cost of managing risk. One is an investment, and the other is an expense. Policy experts on Social Security routinely confuse the two, but financial advisors can’t.
FDR opposed the idea of Social Security being a safety net. In fact, he insisted upon the program providing earned benefits over a lifetime of contributions. He also opposed the pay-as-you-go method, which he called the “dole” under another name.
According to A.J. Altmeyer, who served as the first chairman of the Social Security board, there are four basic components of social insurance:
- It provides benefits on a specific and predetermined basis.
- It provides these benefits as a matter of right without a means or a needs test.
- It finances these benefits largely out of contributions made by or on behalf of the beneficiaries.
- It provides a long-range systematic method of financing rather than a year-to-year unsystematic method.
When someone like Chris Christie says, “The fact is on Social Security remember why it was established: it was established as a safety-net program,” he is uninformed. FDR didn’t want anyone to confuse his program (FDR’s words) with food-stamps.
FDR famously said that “no damn politician will scrap my program.” He referred to it as "my program," which implied that he had a personal stake in the program's future.
Only 11% of those 65 or older collected benefits from Social Security in 1950. If the purpose of Social Security was to be a safety net, it would have been the slowest-acting plan in this history of government.
Christie and some of my readers want Social Security to be a safety net. If that is the case, be honest. Start by saying you want to end Social Security and replace it with a welfare program. Would-be reformers tell people what its original intent was because they want to foster the idea that we aren’t ending the program we have today.
To illustrate the absurdity of the safety-net narrative, the highest benefits go to the guy who had the best job over the longest career. That isn’t a safety net.
Be honest. Say, “Let’s end Social Security and transfer the resources to a real welfare program, such as Supplemental Security Income.” That would be faster, cheaper, and infinitely more honest than rewriting the history of the program to justify transforming Social Security from what it is to what it was never intended to be.
Brenton Smith is a policy advisor for The Heartland Institute, an Illinois-based think tank.
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