Insecurity -- The Father of Progress

Oscar B. Johannsen

[Reprinted from The Gargoyle, February, 1962]

Necessity has been called the mother of invention. Insecurity might well be called the father of progress. It is because of insecurity that men have, striven to improve their economic, health and social conditions. In doing so, they gained happiness for they had to utilize the capabilities that the Almighty had given them. The exercise of those abilities brought about a sense of fulfillment, a sense of pride of accomplishment, a sense of happiness.

Unfortunately, as a result of the great depression of the early 1930's Americans forgot that insecurity is a basic tenet of life and tried through Congressional legislation to make themselves secure from birth to death.

One of the most important measures passed was the Social Security Act of 1935. This attempted to establish a system of Federal old-age pensions, a life insurance and unemployment insurance program, as well as a plan of benefits to certain dependent people. All who held the type of jobs covered in the Act were compelled to be in the program whether they wished to or not.

Most people believe the program is similar to the voluntary insurance programs of private insurance companies. However, such plans are based on sound acturial principles with true reserve funds back of them to assure their success. The Government's program is operated on a "pay-as-you-go-plan". Actually, it is a "hope-as-you-pay-plan", for it is doubtful if many of the young people in it to-day will ever receive pensions from it, for it is being operated as a Ponzi scheme. Those presently receiving benefits are paid by those currently being taxed. When the young Peters of today become the old Pauls of tomorrow, the social security taxes will be so high that the new generation will find the burden too great and will either cease or drastically reduce the payments.

The plan has not, of course, given security to the people. Insecurity can no more be legislated out of existence than can death. It has created a false sense of security as those presently receiving the stipends are quite delighted with it and the young people assume, not only will they get as much money and probably more, but that it will buy as much when they are retired. Actually, one of the ways in which the program is vitiated is thru inflation, so even if subsequently payments are not reduced, they will, in effect, be reduced by paying benefits in "dollarettes".

Social Security taxes are not premiums as many believe, but actually income taxes. The money goes into the Government's general funds and technically is not earmarked for pensions and insurance. The Supreme Court has declared that Constitutionally Congress could not do that. While the Government does subsequently appropriate the equivalent amount from its general funds which it put into the Social Security program, nonetheless, the fact is that the social security taxes are merely income taxes and the Government need not put any of the money at the disposal of the Social Security program if it does not wish to. It is a particularly onerous income tax for it permits no deductions for dependency or need. The man with ten children pays as much as the bachelor with the same income. Beginning with this year, all those with incomes of $4,800 or more,will pay $150 a year, which increases to $222 in 1968 and later. These amounts will undoubtedly be increased as they raised the schedule of coming tax rates 1/8% last year and with other benefits as medical care for the aged being considered probably by 1968 the amount of tax will be at least $250. At the present time, of course, those with large families and low incomes are paying more in social security taxes than in ordinary income taxes. At the present time, about $11 billion in social security taxes are paid, which is 1/4th of the amount collected by the personal income tax.

It is believed by some that one of the real reasons why Social Security was enacted by the New Dealers was in order to get the taxes so the politicians could spend in order to elect, elect. To get the money, however, they needed to tax the masses. as the masses make most of the money. (In 1958, 75% of the personal income was earned by those making less than $10,000) However, the masses don't like to pay taxes anymore than a rich man does. So the taxes were disguised by letting people believe they were really buying insurance. In the early years, especially, receipts were much greater than expenditures, so the excess was available for the government to spend. It gives bonds to the Social Security Trust fund for the money. For the first 20 years (to 1956) receipts were about $12.5 billion and expenditures $7.1 billion.

The Social Security program will ultimately fail due to its inherent defects in another generation or two. In its failure it will cause great hardship to the aged people who depended upon it. Wisdom demands that it should be gradually eliminated, but in the present political and economic climate it is doubtful if wisdom will be listened to.

There is no security in Social Security. There is only security in the individual recognizing that he lives in a world of insecurity and must on his, own initiative strive to meet its challenge.