Is Social Security Pro-Family?
Giving Private Obligations to Government Weakens Family Ties
FEBRUARY 01, 1996 by DANIEL LIN
Mr. Lin, a graduate of UCLA, wrote this article while an intern at the Institute for Research on the Economics of Taxation.
Whenever politicians fear that the public believes a program has outlived its usefulness, they re-categorize it to make it seem relevant. How else could worthless vanity projects become “jobs programs”? and minimum-wage laws that make unskilled workers too expensive to hire be called “poverty fighters”? Now leaders of both parties routinely drape a “pro-family” mantle over any government folly which they desire to protect. For instance, Social Security is being promoted as perhaps the government’s most sacred pro-family program.
The reasoning is simple: poverty destabilizes the family, so a program that alleviates poverty must be pro-family. By guaranteeing a retirement income for every worker, Social Security keeps the elderly out of poverty. In addition, Social Security supposedly offers working adults relief from the emotional and financial burden of supporting elderly parents. What could be more pro-family than government using its enormous power to take care of Mom and Dad for you?
Such thinking shows a fundamental misunderstanding of the role of the family in society. A family is more than just a group of people—it is a vital social and economic unit, distinguished from other human institutions by the responsibilities members have toward each other. For example, breadwinners have a duty to provide for themselves and their families. Parents and children have the responsibility to care for each other. Encouraging the fulfillment of these private obligations is the only way to fortify the family. In contrast, giving such responsibilities to government drives a wedge between family members and weakens the ties that hold them together. Thus, Social Security, by seemingly relieving individuals of their responsibility to care for their elderly parents, is profoundly anti-family.
Social Security’s anti-family bias is not limited to its effect on responsibilities. Its funding mechanism, the payroll tax, also greatly burdens families.
The total tax may not have been onerous at Social Security’s inception, when the combined employee-employer share was two percent, but since then have come 22 tax increases. A majority of families now pay more in payroll taxes than federal income taxes. Of course, there are no exemptions or deductions to the payroll tax—the “pro-family” program feeds the government before it feeds a worker’s family. Thus, despite its appearances, Social Security really doesn’t eliminate the financial burden of caring for one’s parents; it merely disguises it.
“Share the Burden”
The problem is not solved by dividing the total payroll tax between employers and workers. Politicians argue that this policy is “fair” because it makes employers “share the burden” of financing their workers’ retirement. But government is unable to make employers play Santa Claus, whatever legislators may hope. The payroll tax is in effect an excise tax on work, both discouraging job creation and depressing wages. When government raises the cost of hiring a worker, employers are forced to offer lower wages, employ fewer workers, or go out of business. The employers’ “share” is thereby passed on to the workers.
Nevertheless, for years the system seemed to work. But the number of people available to support each retiree has been steadily falling, going from 16 workers per retiree in 1935 to three workers today. Within 30 years two employees will be supporting each retiree. So much for Social Security “saving” the average couple from the burden of providing for their parents.
The Impact on the Elderly
In the end, the biggest losers are the elderly, who are supposedly being cared for. Families form and prosper because survival and happiness are more likely to occur among people who love and care for each other. Socialized care offers none of these advantages. Instead, it places responsibility for the elderly on the general population, which cares nothing about anyone’s individual well-being.
Moreover, socialized care is inevitably politicized care. Instead of individuals making private decisions about their own families, retirement care is shaped by political horse-trading. Politicians must sort through campaign promises, balance pressures from special interests, and assess the level of taxes that workers are willing to bear. Throwing the well-being of the elderly into this messy political arena is not pro-family. After all, true retirement security should not hinge on the next taxpayer revolt or the well-rehearsed promises of politicians.
Perhaps most strikingly, Social Security’s tremendous effort to redistribute wealth across generations leaves the elderly worse off than if they had invested their payroll taxes privately. If the average 20-year-old worker pays $1 in payroll tax, he or she can expect to receive $1.70 in real (after inflation) Social Security benefits by age 70. Based on past returns, that same dollar invested in stock mutual funds over the same period would have swollen to $32. By forcing workers to pay into what amounts to a sucker’s investment, Social Security is exacerbating the burden it is supposed to alleviate.
Is Social Security pro-family? Only if increased unemployment, depressed wages, higher taxes, and forced participation in a bankrupt system help the family. A true pro-family policy would remove these barriers, encourage work, and allow individuals to invest their own money. A government concerned about stable families would not come between adults and their elderly parents. Given the government’s track record at developing programs that strengthen the family, the best pro-family policy would probably be to restrain the desire of politicians to make policy pro-family.