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You Call This Investment?

November 6, 2000

Tags Big GovernmentTaxes and SpendingU.S. EconomyInterventionism

Recently, one of my lords and masters on the Potomac sent me a letter. Social
Security Commissioner Kenneth S. Apfel wrote to say that, "We are pleased to
send this Social Security Statement to help you understand what Social
Security means to you and your family."

I'm glad someone is "pleased." Looking at the record of my payroll taxes over
30 years of working and what my saviors propose to grant me some twenty years
from now, I am not "pleased." I am angry. I, and millions of others forced
into this Ponzi scheme posing as insurance called Social Security, have been
mulcted throughout our working lives and it will only be worst when we retire.

I am angry that, at the birth of Social Security some 65 years ago, an
obscure amendment to the Social Security called the Clark amendment, which
would have set up some competition between Social Security and private
retirement systems, was eventually killed. Had it succeeded, and had millions
of Americans been given the right to escape Social Security slavery, I might
have avoided this.

I am not "pleased," Commissioner Apfel, that throughout my working life I have
never been given the choice to opt out, comment on Social Security or suggest
any amendments to this form of mindless socialism. But while I have generally
understood this chicanery for years, it is seeing the record of one's work
life--the tens of thousands of dollars that one was forced to "contribute"
and how little one will actually receive in return--that effectively
demonstrates, in black and white, the exact extent of this legalized theft.

Seeing one's Social Security statement is tantamount to being told your
biggest asset was "invested" in the worst, most costly mutual fund around and
now you have next to nothing. Of course, there is a big difference: One can
get out of a rotten mutual fund with one phone call. If his highness Apfel
and his gang of royal bureaucrats have their way, none of us will ever escape
Social Security, even with a million phone calls.

Take my case. I am a middle-class person who has usually had multiple jobs
throughout my life. Over 30 years, I have "contributed" some $75,000 to
Social Security and about $16,000 to Medicare. Sometimes my employer has paid
part of the bill. But like many Americans I have had independent contractor
jobs in which I have paid the entire onerous payroll tax bill myself.

My paternal pal, Keeper Kenneth, says, if I stop working in 15 years and
retire at 62, I'll get $1,062 a month. Wait eight more years and I'll receive
$2,030 a month. Looking at competing investments in the private sector, one
can see this Social Security program is pathetic and far inferior to what I
would have received had I invested my retirement money in almost anything

Let's look at that some $90,000 that's goes down a rat hole over the past 30
years. Suppose, instead of being coerced into putting money into Social
Security all those years, let's say I had been permitted to put $200 a month
into a portfolio of stocks, bonds and cash. That's an amount which is about
20% less than what I have put in Social Security. And let's say I only earned
an average 9% a year, which is a so-so return, but still would have been
about 8% more than Social Security earns.

Still, at that pace, today, at the end of 30 years, I'd have $368,895 before
taxes. And let's say, I continued on that pace for about another 10 years--I
only put in $200 a month. And I am a mediocre money manager and only obtain
an average of 9% a year on my investments--then I would have $943,286 before
taxes at age 57. With that kind of money, I could afford the best disability
and medical insurance around. I could invest the proceeds of my retirement
account in a variable annuity and live very well for the rest of my life.

At that point, I don't have to wait until age 70 to receive Ayatollah Apfel's
lousy little $2,000-a-month in the year 2,023. By the year 2,010, I would
have had close to a million dollars in the private plan! And the money in a
private plan is mine. It doesn't belong to some bureaucrat who writes me
annoying letters explaining how lucky I am to have him taking care of my
retirement. Why isn't Ralph Nader howling about this rip-off? Yet most of
this could have been prevented if the Clark Amendment had not been killed by
Social Security partisans in 1935. Why were FDR and his allies afraid of
allowing some people to escape Social Security? "It would be inviting and
encouraging competition with its own plan which ultimately would undermine
and destroy it," said Senator Robert LaFollette, a Social Security partisan.

Today, 65 years later after Social Security has destroyed the chance of
millions of Americans to attain financial independence, one wonders: Is it
the job of the Social Security to ensure that average people don't become
rich or better off? If that is goal, then the Social Security administration
is doing an excellent job. And that is due to oppressive payroll taxes, which
have been raised dozens of times in the past 60 years and will be raised many
more times in the next few years if the system is allowed to blunder along,
destroying thrift and promoting the paternalism of a government colossus that
will care for us so much that countless millions of Americans will be

Do I exaggerate? Again, let our Potomac Plato be the guide: "Social
Security," writes Apfel, "is the largest source of income for most elderly
Americans." Can you imagine tens of millions of Americans depending on this
program as their "largest source of income."? How can any average American,
some 20 years from now, expect to live well on a lousy $2,000 a month and
depend on it as the "largest source of income."

And before we all end up collecting insignificant income from this pathetic
program, we'll likely pay a lot more. We should also figure into this
chicanerous equation the effect of inevitable payroll tax hikes. The
Kerrey-Danforth Entitlement Commission of 1994 predicted that payroll tax
rates would go from their present 15.3% to some 24% in the next thirty years.

Does one not believe this commission? Then why not listen to the analysis of
a political sharpie of the first water--Clinton pal James Carville. In
Craig Karpel's book, "The Retirement Myth," Carville was asked how the huge
expected Social Security Trust Fund shortfall will be solved in the coming
years: "It'll be like anything else in politics," Carville says. "There'll be
some kind of compromise. Part of it will involve raising taxes, and part of
it will involve cutting benefits.
" (page 38)

Not only will my Social Security payments be incredibly small, but I won't be
able to count on even that! We are also not figuring that even these flimsy
little payments that our keepers propose to give us will be taxed and that,
given that the money is in fact not in the trust fund because there is no
trust fund, the government will likely print more money and cause more
inflation, further devaluing the pathetic little payments they give back to
the taxpayers.

Santa Maria! Valgame Dios! If you run the figures, you realize that Apfel's
letter shouldn't be entitled, "What Social Security Means to You," but how
"Gregory Bresiger Was Ripped Off."

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