Tag Archives: Social Security

Not really hypocrisy of the day

Think Progress is accusing Ron Paul of hypocrisy for criticizing social security but taking it (they also suggest that he compared social security to slavery, which he did and didn't:  He did in the "immoral" sense, but not in the "social security is a type of slavery sense):

Paul is, of course, not the only conservative to benefit from government programs that he or she opposes. But his crankish view of the Constitution has brought him to the conclusion that Social Security is altogether unconstitutional, which also hasn’t stopped him from collecting benefits.

Any critic A's criticism of policy x naturally leads critic B of critic A to see whether A is consistent with regard to x.  Since x is government policy, or law, it's very easy to spot alleged inconsistencies.  I'm against, at least I think I am, various tax breaks for people who make over a certain amount of money.  These tax breaks might benefit me.  I'm not a hypocrite for not writing a check to the federal reserve.  I'm a hypocrite if the policy I advocate goes into effect, and I do not abide by it.

People might remember that this is, in essence, the Buffett criticism (we talked about it here and here and here and here): if you like taxes so much, pay voluntarily.  Such criticism was bad then, and it's bad now.

It's bad in part because it would make it practically very difficult to criticize laws and policies without engaging in civil disobedience of one form or another.

Ponzi inception

In the movie "Inception," Leonardo di Caprio led a gang of mind-soldiers who, with the help of explosions, torture, and snowmobiles, planted ideas in people's heads.  IRL, in real life for the uninitiated, those people are pundits, who repeat stuff that's nuts, in hopes it will catch people unawares and find fertile ground in the public consciousness. 

Among the many examples of this sort of dishonest activity is the claim that Social Security is a "Ponzi scheme."  For those who haven't paid attention, the argument goes something like this.  Way back, a guy named Ponzi claimed to have an investment fund that paid rich dividends.  It sort of did, but it wasn't an investment fund.  He took money from new investors to pay off the old one, all the while not actually investing anyone's money. 

By contrast, Social Security is a "pay as you go" plan.  People working now pay for the people retired now.  This has led people to claim that it is a "Ponzi scheme."  Such a claim is obviously ludicrous.  Two obvious reasons.  First, the Ponzi scheme was a swindle perpetrated on investors by Ponzi, not a transparent system of social insurance and retirement; second, the Ponzi scheme was illegal, and not the purposefully-designed plan of a duly-elected representative body. 

These two key differences (explained here with lots of references) escape the subtle mind of Charles Krauthammer, who redefines, or tries to redefine, the illegality and fraud out of the phrase "Ponzi Scheme." 

The Great Social Security Debate, Proposition 1: Of course it's a Ponzi scheme.

In a Ponzi scheme, the people who invest early get their money out with dividends. But these dividends don't come from any profitable or productive activity — they consist entirely of money paid in by later participants.

This cannot go on forever because at some point there just aren't enough new investors to support the earlier entrants. Word gets around that there are no profits, just money transferred from new to old. The merry-go-round stops, the scheme collapses and the remaining investors lose everything.

Now Social Security is a pay-as-you-go program. A current beneficiary isn't receiving the money she paid in years ago. That money is gone. It went to her parents' Social Security check. The money in her check is coming from her son's FICA tax today — i.e., her "investment" was paid out years ago to earlier entrants in the system and her current benefits are coming from the "investment" of the new entrants into the system. "Pay-as-you-go" is the definition of a Ponzi scheme.

So what's the difference? Ponzi schemes are illegal, suggested one of my colleagues on "Inside Washington."

But this is perfectly irrelevant. Imagine that Charles Ponzi had lived not in Boston but in the lesser parts of Papua New Guinea, where the securities and fraud laws were, shall we say, less developed. He runs his same scheme among the locals — give me ("invest") one goat today, I'll give ("return") you two after six full moons — but escapes any legal sanction. Is his legal enterprise any less a Ponzi scheme? Of course not.

So what is the difference?

It's the fraud, of which illegality is a consequence, that makes something a "Ponzi scheme."  A Ponzi scheme and Social Security may involve some of the same methods, but so does check fraud–they both involve writing checks. 

It’s not hypocrisy if you don’t like it

Word has it that Paul Ryan, the respondent to the SOTU address, is a major fan of hack philosopher and confuser of undergraduates Ayn Rand such that he distributes copies of her works to staffers and credits her work with his desire to go into public service.

With Ryan and Rand Paul and everything, Ayn Rand, the original, has undergone somewhat of a renaissance lately.  This is really sad, as there seriously have to be more worthy versions of libertarianism on which to base one’s opposition to Obama’s extremely socialist agenda.

With renewed interest there will naturally be renewed scrutiny (and reawkened revulsion).  Along these lines someone has discovered (or made up I’m not sure which) that Ayn Rand and her husband received Social Security benefits.  This is supposed to be some kind of hilarious contradiction.  It’s not really.  You pay in to SS and get money out.  That’s the way it works.  You’re entitled to it because it’s yours.  They even keep track of it.  Now some might get more than they pay in, and whether Rand did is open and somewhat uninteresting question, but that’s another matter.

What is hilarious, I think, is what issues forth by way of justification for participation in public benefits.  Via someone’s attempt to support Rand’s view, here’s what she had to say about public scholarships (which has to be on the minds of all of those young Randians who get them, who attend public colleges, etc.):

A different principle and different considerations are involved in the case of public (i.e., governmental) scholarships. The right to accept them rests on the right of the victims to the property (or some part of it) which was taken from them by force.

The recipient of a public scholarship is morally justified only so long as he regards it as restitution and opposes all forms of welfare statism. Those who advocate public scholarships, have no right to them; those who oppose them, have. If this sounds like a paradox, the fault lies in the moral contradictions of welfare statism, not in its victims.

Since there is no such thing as the right of some men to vote away the rights of others, and no such thing as the right of the government to seize the property of some men for the unearned benefit of others—the advocates and supporters of the welfare state are morally guilty of robbing their opponents, and the fact that the robbery is legalized makes it morally worse, not better. The victims do not have to add self-inflicted martyrdom to the injury done to them by others; they do not have to let the looters profit doubly, by letting them distribute the money exclusively to the parasites who clamored for it. Whenever the welfare-state laws offer them some small restitution, the victims should take it . . . .

Again, in the case of Social Security (and medicare) this makes sense (though it remains a ridiculous justification–there is no way an average elderly person could possibly pay the private cost of medical insurance or health care nowadays)–but in the case of money simply gifted to you (or provided you in the form of deeply subsidized federal loans) it doesn’t.  Being morally opposed to receiving others’ stolen money, yet taking it anyway, thinking your moral opposition to it absolves you of hypocrisy makes you a double hypocrite: you’re a hypocrite for violating your own principles and you’re a hypocrite for thinking your moral opposition to an action you engage in and profit from makes you not a hypocrite.