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Monday, October 31, 2005


Social Security

Social security, since it was instituted in FDR's New Deal, was supposed to give aging generations an income that would support them in retirement. Or so people thought. Old age survivors and disability insurance for one, is definitely not what it is. It is a redistributive program that is old and outdaded. I wonder, from a constitutional perspective, if it fits under the paradigms of the protective or corrective states. I also wonder, if it's constitutional at all from the plain meaning understanding of the document.

In article 1 section 8, the constitution details the areas of spending that government has the power to tax. From what I gather from reading it, it grants the power to tax to provide for militia, the army, for tribunals, to provide for the common defense and general welfare of the United States. It does not read, "provide for the financial well being of the citizens." That section is not redistributive in the sense that social security is.

From the corrective state view of the constitution, the social security program absolutely does not make the economy more efficient. It is taking money out of the hands of people who earned it, with no security, no gaurantee that the money will even be there fifty years for now. Efficiency analysis would dictate that the social security tax should be scrapped.

The protective state holds that the interpretation of the constitution should protect individual liberty. Individual liberty would say that people should be able to make their own decisions, and not be liable for the well being of people they aren't involved with. It could sound selfish, but it isn't. It's letting the economy take care of things, letting people make their own honest decisions in a process that will improve the economy and lives all the while.

1. Your reference to the power to tax is on the mark. The Supreme Court did once consider the constitutionality of the Social Security program, and the Court's opinion was that Congress has the power to tax and spend. In the Court's view, this power to tax and spend was apprently unconstrained. I think this opinion was quite wrong. In my view, the Court should have demanded that without an expressed power to create a government retirement program (much less a government program to redistribute income from workers to retired workers), Congress had no constitutional power to do so.

2. With respect to efficiency, the only possible basis for an efficiency justification for Social Security would be the insurance problems of moral hazard and adverse selection. So, if the so-called Old-Age insurance program was really an insurance program, we could feel better about the program from the efficiency perspective.

3. With respect to the protective state, it is not immediately obvious that OASDI fits with liberty. Suppose however, that instead of the Court's opinion to approve social security, there had been a proposed amendment to give Congress the expressed power to create a retirement insurance program. If such an amendment to the Constitution had been ratified, I think the normative implication would have been that WE THE PEOPLE (not they the Court and Congress) wanted to give this power to government. I think that would be an adequate practical expression of individual liberty.

So, if only. . . .If only there had been such an amendment to the Constitution before the program was originally created, then all the concerns of efficiency, liberty, and constitutionality would have been met. And, the icing on the cake would be that, in my view, the program never would have been agreed to if it was not an insurance program.
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