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August 23, 2011

Our Lexicon: Dragnets vs. Safety Nets

What politicians call a “social safety net,” isn’t. It’s a dragnet.

  • A safety net would only catch people when they fall, but….
  • A dragnet entangles everyone, even when they don’t need aid

Warren Buffet qualifies for Social Security and Medicare. Is Warren falling? Does he need help? Of course not. Why then have the politicians created dragnet programs that provide benefits to people like him, and to millions of others who don’t need assistance?

One thing is clear — dragnet programs give politicians vast power, foster dependence, and create huge constituencies that will fight to preserve such programs.

Social Security and Medicare are classic dragnets. They ensnare everyone. Everyone pays, but the returns are poor and mismatched to needs. Benefits go to many people who don’t need them, and often those who need help the most get the least.

I know a woman who receives only $400 a month from Social Security. She struggles to survive. She has no safety. She has no net beneath her. For her, and for millions of others, the so-called “social safety net” is a myth.

Meanwhile, all of today’s workers are caught in the dragnet, forced to pay regressive payroll taxes that diminish their ability to save, while fostering a need to cover emergencies using credit cards that charge impoverishing interest rates.

Dragnet programs usually have one other feature — fraud.

For instance, politicians describe Social Security as a retirement plan, or as retirement insurance. It’s neither.

True insurance takes the form of a true safety net. It protects you in the case of unlikely but severe problems. But Social Security gives money to everyone, regardless of need. No insurance program works that way.

Neither is Social Security really a retirement plan. A true retirement plan invests money to create new wealth so that more can be paid back than was paid in. Instead, Social Security works like a ponzi scheme, taking money from today’s taxpayers to pay benefits to yesterday’s workers. It robs capital from the economy rather than adding to it, and will pay future recipients less than they could have earned from savings.

Politicians will sometimes admit these problems when confronted with them, but then they claim that Social Security was only intended to augment retirement, not provide a sole means of support.

Here’s the problem with that….

The Social Security tax consumes 15% of every person’s income. This would be enough to fund a full and prosperous retirement if saved in a normal way, but the best The State can do with this money is “augment” your retirement. This is yet another way in which Social Security is a dragnet, and not a safety net. A dragnet prevents movement. Social Security does something similar. It prevents millions of people from having the full and prosperous retirement they could otherwise enjoy.

Don’t be fooled when people talk about “the social safety net.” There is no social safety net. Instead, there are dragnets that ensnare us, so that we are dependent on scam-artist politicians.

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