Misunderstanding Social Security

Elizabeth Anderson, of the University of Michigan and left2right, has heroically taken up the thankless task of very clearly illustrating the fact that mainstream contemporary academic American liberalism is, at its core, an essentially reactionary creed built around the conservation of the institutions of the “New Deal” and the “Great Society,” and the protection of the interests of the affiliated political rentier class. One would thus imagine that Anderson would at least understand the institutions she is trying to conserve against the forces of reform. But, no, not so much with the understanding.

Anderson argues that whatever the other faults of Social Security benefit calculators like Heritage’s, “It forgets that Social Security is a form of social insurance, not a simple retirement plan. So it’s comparing apples with oranges.”

Of course, readers of the Annals of Improbable Research understand that apples and oranges are eminently comparable. But more importantly, Social Security is emphatically not a form of social insurance — unless we arbitrarily stipulate that any redistributive transfer is ipso facto a form of insurance by providing people with resources that they could use to protect themselves from risk. Social Security is: a tax and a transfer. That’s it. It’s not insurance, not legally, not in structure, and not in fact.

The Roosevelt administration defended the constitutionality of the Social Security Act in part by arguing before the Supreme Court in Helvering v. Davis that it did not establish a social insurance program. The Court agreed, and reaffirmed this point 23 years late in Fleming v. Nestor where it determined that Social Security taxes are just taxes, and that individuals have no right to any benefit on the basis of having paid these taxes.

It is true that successive governments have maintained a deceptive program structure and system of admininstration intended to trick citizens into believing that there is a connection between their so-called “contributions” and their benefits, and that Social Security is a kind of insurance. Roosevelt fully intended for citizens to mistakenly believe that their payroll tax constituted a kind of insutance premium. He vehemently opposed paying benefits out of the general fund because that would impede the goal of deluding taxpayers. No one thinks they are entitled to some kind of cash transfer from the government simply because they have paid their taxes. And the SSA to this day continues to encourage the systematic deception of the citizens of the US.

You would imagine that a liberal would deplore a system of paternalistically motivated noble lies and would forcefully argue against this kind of deception as a transgression against democracy, which is what it is. We are angry when the government uses lies in order to circumvent the democratic process by causing citizens to misrepresent their options. Think of Bush and the WMD. We ought to be incensed when the government entrenches lies into the very structure of the welfare system.

Anderson has either been taken in by the lie, is trying to perpetuate it, or has a notion of insurance so broad that anything that cushions people against risk, such as exercising regularly, wearing a bicycle helmet, or cultivating a network of altruistic friends and family, counts as “insurance.” In any case, she ought to admit that Social Security is not an insurance program according to the law or according to ordinary usage, and she should stand up for transparency and democracy by condemning the purposefully deceptive structure and rhetoric of the American Social Security system.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center