The Real Crash: America's Coming Bankruptcy by Peter Schiff

Author:Peter Schiff [Schiff, Peter]
Language: eng
Format: epub
ISBN: 9781250008350
Google: e8UesbXE2TEC
Publisher: Macmillan
Published: 2012-05-21T21:00:00+00:00

Hurting the Vulnerable

Think about the way Social Security pays out benefits: once you retire, SSA determines your monthly benefit, and then pays that to you every year (adjusted for inflation) until you die.

This amounts to a net transfer of wealth from those who die younger to those who die older. There’s nothing inherently wrong with old-age insurance. People outliving their savings is a real problem. But forcing everyone to buy into such a plan has perverse consequences.

For instance, black men have a life expectancy six years shorter than white men. As of 2006, the average white man lives to 75.7 years, the average black man dies at 69.7. Full Social Security retirement age is sixty-seven years. That means that a black man can expect to take in 2.7 years of benefits, while a white man can expect to get 8.7 years. In other words, a white guy gets three times as much bang for his buck on Social Security. Suddenly, this program sounds less “progressive.”

This is true regarding wealth, too. Richer people live longer. They have better doctors, easier jobs, more time for exercise, and are more likely to make healthy lifestyle choices. This life-expectancy gap makes Social Security benefits regressive.

Of course, those retirees currently collecting benefits are far wealthier than those currently working to pay the taxes. Sure, current recipients paid taxes when they were younger, but the rates were far lower than they are today. So Social Security really amounts to reverse welfare whereby money is transferred from the young and poor to the rich and old.

Also, on the micro level, you can see plenty of moral problems. What if you’re a forty-year-old who can still work, but has a terminal illness and you have near-zero chance of reaching sixty-seven? Of your own volition, you would stop paying into a retirement plan that only pays out when you reach sixty-seven. But Social Security is not of your own volition. I remember during the 1980s several young men suffering from AIDS tried to get out of paying Social Security taxes on the grounds that they would not live long enough to receive the benefits. Instead they wanted to use the money for medicine that might extend their lives. For their own good, their requests were denied.

Further, unlike actual retirement savings, you can’t leave any leftover money to your children. Rich people can still afford to leave something to their kids. It’s the middle class that gets robbed.

Like many aspects of the New Deal, Social Security was a raw deal.

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