"Let's all win and win and win and..."

Saving the Social Security system and making it even better is of vital importance now, and always. It is a beautiful system but, I think, often misunderstood. It is important to know that it was not created as a savings account or investment account for individuals. It is an investment for society as a whole, but not for individuals. It was created primarily for current taxpayers to pay current recipients. However, a reserve was built up in the early years for both emergency purposes and so that the initial recipients could “earn” the right to future benefits by having first paid into the system. It is essentially an insurance program and the tax paid is essentially an insurance premium. But a great additional benefit is that it is the taxpayers themselves that own the system rather than a few investors who wish to make a profit.

I want to make the case that we all benefit all of the time from this program, not just when we retire. I call it a win-win-win-win-win-win-win program, but before I explain my reasoning, I want to illustrate one more concept. Social Security is, at least partially, self-sustaining. When the taxpayers pay their Social Security taxes, they are essentially putting money into the pockets of beneficiaries who once paid into the system themselves. When a retiree receives a Social Security check, they usually spend it in the local economy and beyond. They are customers. The businesses that benefit from these customers pay themselves and their employees. These people, in turn, are also customers for local businesses and beyond, and their purchases again support the local and national economy. With each exchange, a portion is paid back to the government in both income taxes and Social Security (FICA) taxes. It can be shown mathematically that practically all of the money that went out as benefits returns to the government to start the cycle again. The dollars never go away; they just circulate through the system again and again, providing income and purchasing power for many people each time they exchange hands.

The reasons I call it a win-win-win-win-win-win-win program:

• It is a win for the immediate recipient of a Social Security check.
  

• It is a win for the businesses where those checks get spent.
  

• It is a win for the employees of those businesses as they both receive a paycheck and have more job security because their employer has more customers.
  

• It is a win for people who would have had to help support, or fully support, their aging parents had Social Security not existed.
  

• It is a win for society as a whole because it helps to prevent depressions through all of the above points. FDR knew this when he signed it into law and history has proved him right. Almost assuredly the 2007 crisis would have turned into a Greater Depression than the Great Depression had Social Security and the FDIC not been created during the Roosevelt years
  

• It is a win for society as a whole by allowing people, who otherwise wouldn’t have been able to retire, to go ahead and retire, leaving their job for a younger worker, thus reducing unemployment among those who are more able to work. FDR also noted this when the program was instituted.
  

• Through all of the above items, Social Security works to reduce poverty all of the time.

We all benefit from this system, all of our lives, not just when we receive the literal, immediate benefits. I truly believe that I have not even listed all of the “wins” here. Many of you may think of more.

Can the system be both sustained and improved? Absolutely! And it would not be that difficult. It would require an adjustment in the tax structure to a more Progressive structure. The easiest step would be to raise the cap. I’ll leave the details for another post. We, the people, must understand that taxes fund it, and it is we, the people, who must vote to keep it funded. But those same taxes fund all the benefits listed above, not just the social security paychecks themselves. We all benefit from Social Security from cradle to grave.

Our current, “low tax on the wealthy” structure, literally “overpays” some people, which is essentially a tax on society as a whole. It’s much more of a tax on our overall economy than literal tax itself is to individuals. I address this “overpayment”, or misdistribution in my previous article, “The Grand Ponzi Scheme”.

Social Security is a beautiful blending of the public sector with the private sector. It recirculates, or better yet, continues to circulate the money where it passes through many hands, counting as income each time. We must vote to sustain it.