Fixing the problems of a mixed economy requires “unmixed,” radical, fundamental solutions. After so many decades of government interference in the economy and our lives, those solutions must necessarily be gradual to allow individuals to restore what has been taken away from them. Nevertheless, the steps of those solutions must lead in a single direction–not both ways at once–else the problems will be multiplied, not diminished.
An example of the wrong approach may be found in last week’s congressional vote on the earnings’ limits for Social Security recipients.
Currently, Social Security recipients aged 65 to 69 “lose” $1 in benefits every $3 they earn over a limit of $17,000. (Those funds are restored after five years without adjustment for inflation and without any interest that may have been earned.) This egalitarian stop-gap measure aimed at preventing Social Security from hemorrhaging completely further penalizes productive people who have contributed to the scheme for their entire working lives while encouraging them to sacrifice their own careers at an arbitrary, government-selected age. Last week, the House of Representatives voted unanimously to repeal this limit, and the Senate and President are expected to confirm the measure.
This legislation affirms some principles of justice and individual responsibility. It acknowledges that once a person has contributed to this scheme throughout his life he deserves that money back. It abolishes one of the government’s penalties for hard work, and returns to the elderly some control over their own lives. The downside is that it perpetuates the inequities of the system as a whole and continues to pass the burden of paying for it on to younger and future generations.
A proper solution to the Social Security system requires a fundamental change of thinking, a recognition that not only are the elderly entitled to the money they earn, but that every individual is entitled to the wealth he creates. As Rep. Bill Archer (R-TX), Chairman of the House Ways and Means Committee, said, “Why…would we want to discourage any American, whether they are 17 or 67, from working?”
A real moral and practical solution requires a dual assault on Social Security and taxation, removing the entire mechanism of income redistribution. For example, establishing a tax-free “age-zone” that would allow individuals an increasing number of years to prepare for their retirement by working for themselves, simultaneously raising the age level at which one could claim Social Security benefits. In the first year of such a plan, 64-year-olds could work tax-free in exchange for delaying their social security benefits to the age of 66. 63-year-olds could work for two years tax-free, delaying their social security payments until age 67, and so on. Within five years, as the tax-free zone grew and the Social Security age limit rose, there would be a sizeable (if not massive) accumulation of personal wealth (most of which would be invested in such a way as to benefit the entire economy), liberty would be restored, and a new sense of individual responsibility would begin to grow. Within 20-30 years the entire Social Security scheme could be abandoned with enough money remaining to pay those individuals for whom such a program would come too late.
Unfortunately, “the right approach” is a foreign concept in Washington. Without a radical change in ideas, over the next 5, 20 and 30 years, we will see many more partial, stop-gap solutions proposed for the problems created by this partial, stop-gap solution, none of which will bring the fundamental problem any closer to resolution.