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Social Security and Its Antidote

Timothy J. Harris

How can we Biblically justify forcing one person to provide for the retirement of another? Why do employees end up paying the employer's taxes? The masked injustices of our national retirement program force us to rethink its desirability.

1936 saw the advent of the first mandatory national retirement pension system in the United States as part of President F.D. Roosevelt's Second New Deal. This program, commonly known as Social Security, provides an interesting foil for evaluating current political thought in terms of scriptural principles because it focuses on a topic of vital importance to most people: long-term financial security. At the same time, an examination of the Social Security System necessarily entails a discussion of the role that civil government should have with respect to this program.

At first blush, it seems unlikely that people who trust in God and acknowledge the Biblical command to be hard-working stewards should expect government to utilize its taxation powers to provide for their "golden years" of retirement. Yet the fact is that the majority of Christians today, like their unbelieving fellow-citizens, readily endorse the Social Security system. This indicates either that Scriptural principles do not conflict with the system, or else there is widespread ignorance of or resistance to Biblical teachings relevant to it.

Before addressing this question, however, it would be helpful to have before us a picture of how Social Security actually operates. For if the system were genuinely fair and sound, then widespread support for it would be understandable and would explain the unwillingness of Christians to evaluate it using sound Biblical principles. Even if criticism based on Biblical principles were valid, it would be much harder to inspire the motivation to even consider those criticisms. On the other hand, if the system proved to be corrupt, in ways which even people not professing to believe the Bible should recognize, then the enthusiastic acceptance of the system itself becomes problematic.

An Overview of the Social Security System

Original Bill of Sale

Those who created and promulgated Social Security originally billed it as a true pension investment program into which one would contribute funds which would be accumulated and be invested for a future return. In reality, however, the system is based on a pay-as-you-go basis. Today's workers are paying in while today's retirees take out, with little or no residual, and sometimes it runs a deficit.

Had its creators truthfully advertised how the system would operate, it might never have passed in 1936, even given the "me generation" that elected F.D.Roosevelt. In essence, the system depends on a labor base that must continually outgrow the pool of retirees.

In this sense, Social Security is the moral equivalent of a chain letter. A chain letter scam works only as long as enough contributors can be tricked into thinking that by putting their "contribution" into the envelope for the currently designated beneficiary, an exponentially growing group of contributors at some future date will do the same for them. The program's current revenue surplus does not change the underlying reality. Even a real chain letter can work for a while -- especially if contributing to it is required by law and increases with time.

Cost to the Employee

(1) Double Taxation -- We are accustomed to hearing of the cost of a government program in terms of billions of dollars. But the aggregate cost of a program is meaningless, apart from knowing how the cost is distributed. A little bit of money from a lot of people is a lot of money. Instead, we should consider the cost to the individual.

Long ago, most of us who receive weekly or bi-weekly wages stopped reading our pay stub detailing our disbursements; we think of our actual salary as the net, as if the amount doled out in Federal, State, and FICA taxes were never earned, and the "gross pay" a purely fictitious quantity. It becomes hard to think of the money we lose as real.

Unlike other withholdings, Social Security deductions cost more. Why is this? First, unlike state taxes, the assessed and collected Social Security tax, FICA (Federal Insurance Contribution Act), is itself subject to state and federal income tax. That is, if you have $2,000 withheld in a year for FICA, that $2,000 still counts toward the total upon which you are assessed income tax. If your combined marginal state plus federal tax rate is 33%, for example, then you would need to earn an additional $3,000 in order to "break even" vis-a-vis the situation if there were no FICA. More practically, the repeal would be equivalent to getting a raise not of $2,000, but $3,000. This is not the case with state tax since it is still deductible on the Federal return, so that to make up for the loss of a state income tax assessment of $2,000 would require an additional marginal income of the same amount, $2,000 (neglecting the slight increase in the state tax itself).

(2) Hidden Taxation -- Many people do not realize that they actually pay every penny of the so-called "employer's contribution" to Social Security. The employer's contribution is part of the total cost of hiring each employee; in its absence, the entire amount would appear as additional gross income to the employee.

To see why this is so, consider what would happen if employers suddenly did not have to pay their part of the FICA obligation. Most people suppose that this would simply become additional profit for the employer. A little bit of reflection, however, shows that this could not be the case for very long. Employers will keep hiring staff as long as it is profitable to do so, that is, until the cost of hiring one more person would exceed the value of the additional revenue the person would bring to the firm.

The cost of hiring, of course, includes all implied costs, including salary, benefits, taxes, and the marginal increase in rents, energy, etc., entailed by bringing the new person on. By hypothesis, he has already done this before the repeal of his portion of the FICA tax. Once it is repealed, his cost for each employee drops 7.5% of the base salary while the reward (the revenue generated by his employees) remains the same. Keeping all salaries the same, he can now afford to hire more personnel until the diminishing returns again brings the additional cost of hiring one more employee above the increased revenue that this employee would generate. But at the current competitive salary, there was already a balance between the supply and demand for this labor pool. In order to attract additional profit-producing workers, he must raise the previous offer sufficiently higher to lure staff away from his competitors. Of course, his competitors are all seeking to do exactly the same. As a result, employers are forced into a bidding war with each other for labor. The skirmish will end at a price roughly 7.5% higher of the base salary higher than it was before, since that wage is the level that the market forced the employer to pay prior to the hypothetical FICA repeal.[1]

The new salaries, 7.5% higher than before, but costing the employer not a penny more, apply to all the staff since they are all potential recruits for the competitor. Any employer that refuses to "play the game" will find his staff gradually disappearing. In short, the 7.5% supposedly paid by the employer is a direct opportunity cost to the employee: his market earning power would be 7.5% higher than it is with the tax. Therefore, around 15% rather than 7.5% of one's market earning power is being spent of Social Security.

(3) Lost Savings -- There is one factor this analysis neglects. We would most likely spend only a part of our net salary increases on additional consumption. We would put part of the increase into savings and investments, which would increase the overall capitalization of the economy and in time cause an increase in productivity that would be felt as yet further accumulated wealth downstream.

To put this into some perspective, a person earning $40,000 per year is paying $6,000 per year (including the hidden tax) into social security, or $500 a month. It will not be difficult for any mortgage payer to translate that into the kind of house he could afford in terms of his ability to handle a monthly payment. Even more to the point, many that are currently unable to afford a home would be able to obtain a mortgage and begin building home equity for their future security.

Invested over a 42 year career, and figuring a rate of return of 3%,[2] this money would accumulate to over a half-million dollars without any reduction in his current standard of living in the meantime. In other words, a half-million dollars would be waiting in addition to whatever home equity and investments he was making already. The retired couple, starting with $500,000 and an investment return of the same 3%, could take over $33,000 out of the accumulated asset per year over a twenty year period. Again, this is in today's dollars. With no mortgage payments; this would be a very livable return. Indeed, since only part of this would be subject to tax and tithe, the return would be comparable to, if not higher than, the earlier earned wage. Naturally, they would not want to plan to deplete the fund based on the average life expectancy of the actuarial table, but free market solutions similar to insurance (but voluntary!) would permit a life-long guarantee of a slightly reduced monthly payment by pooling the risk over many retirees.

Hidden Agendas

Some may respond to this analysis by pointing out that it only applies to the middle class and well-to-do; the poor would be unable to provide for their own retirement years without a state-imposed system such as Social Security. But if the only justification for the system is subsidization of the retirement years for the poor, then why not call it what it is, namely welfare, pay for it out of general revenues, and at least restore honesty. Integrity, hardly more than a cliché for our politicians, ought to begin in the names we give things. The increase in welfare expenditures for the genuinely needy elderly would have to be a pittance compared to the total cost of social security, which is paid to the shuffle-boarding yacht-riders in Florida no less than the truly destitute.

I hear the objection already, that the partial increase in one's earnings due to eliminating Social Security while increasing welfare expenditures financed through general taxes, would not be enough to offset the total elimination of benefits even to the middle class and wealthy payers, so that such a plan would not be good for them either.

A little bit of reflection shows that anyone offering such an objection has granted the point, that Social Security is in no sense designed as a pension program. For it cannot simultaneously be true that both the poor and the non-poor are being subsidized in their retirement from the combined pool of Social Security "contributions" unless it is the case that those not retired are making up the difference between what the retirees paid in and what they are receiving.

Here again the madness of the concept manifests itself: for this "surplus benefit" being paid for by today's workers will be part of the baseline that they reckon from when they reach that state, from which the demand will naturally be made that the next generation add a corresponding surplus. Unless a mathematics is invented whereby percentages can continue to be added without ever reaching 100%, such a system cannot continue in the long run. But the generation whose pet economist reassured them that "in the long run we're all dead" could not worry about such consequences.

This then is our system: an absurdly expensive social program, which is falsely masqueraded as a pension system, built on chain-letter economics, deceptively packaged (the false notion that the employer pays for part of it), and appealing to envy in the notion that others should support me at their level in my retirement. This is our politically untouchable mandatory retirement program.

Resolving the Quagmire

Biblical Foundation for a Critique

(1) Injustice of the Program -- At this point we need to come to terms with a very fundamental observation. Most critics of Social Security assert that the expected return from privately investing the same money now spent on the Social Security tax, would be much higher than what is in fact returned by Social Security. But an ethical objection can be raised regardless of whether or not this is true. Obviously, one of the following must be the case: my return from social security will be either (1) less than, (2) equal to, or (3) greater than, what a sound private investment would yield. If (2), then the system proves to have been a superfluous encroachment upon my freedom. If (1) proves true, then I am indeed being cheated. But if (3) is the case, then someone else is being forced to subsidize my retirement.

The burden of proof for the defender of Social Security is to show why the government should be allowed to force a productive member of society to supplement another person who failed to provide adequately for his own retirement. Regardless of which of the logical outcomes proves to be the case, then, the system is fundamentally unjust. The phrase I often hear from members of the first generation of recipients, "just pay it in son, you'll get it all back," accompanied by a wink or smirk, amply evidences that the intent indeed always was that I (the voter) would get back much more than I would get by my own investment because someone else will pay for it.

(2) The Providence of God -- Christianity provides an ethic which, believed and lived from the heart, makes possible the subjective commitment necessary for a market economy to flourish. A basic injunction of the Bible with far-reaching consequences from a practical standpoint can be summarized in the phrase "work hard, and trust in God for the results." That place of work in man's life can hardly be stated more bluntly than in the NT, "if any would not work, neither should he eat" (II Thes.3:10-11). Such a notion is of course, highly offensive to most modern ears. But the real antithesis to modern thinking, the virtual archimedean point so far as determining one's position, is the command, the invitation, to trust in God for the outcome.

That this is indeed a requirement is obvious especially from even a casual perusal of the Psalms, but no less so from our Lord's teaching. "Seek ye first the kingdom of God, and all these things shall be added unto you" (Matt. 6:33). Moreover, that this hope is not meant to be merely a spiritual exercise, but based on a reasonable assessment of how the world operates -- that the world is not merely governed by blind laws which He established once upon a time, but is under His continuous supervision -- is also easily established: "Behold, the eye of the Lord is upon them that fear him, upon them that hope in his mercy; to deliver their soul from death, and to keep them alive in famine" (Ps.33:18-19). "O fear the Lord, ye his saints: for there is no want to them that fear him." (Ps.34:9) "I have been young and now am old; yet have I not seen the righteous forsaken, nor his seed begging bread" (Ps. 37:25). It is said, even of animals, "these [lions, birds, whales] wait all upon thee; that thou mayest give them their meat in due season" (Ps. 104:27).

No teaching of Scripture, once properly understood, is more shocking to modern "sensibility." Possibly because the theme of personal trust is by its nature subjective,[3] those living under the influence of pragmatism tend to brush past these sections, not by way of denial perhaps so much as instinctively treating them in the same way we read genealogies--a bit of a literary nuisance, obviously of more interest mainly to specialists. Yet the practical consequences are tremendous. Imagine a military planner really coming to grips in his heart with the text, "There is no king saved by the multitude of an host: a mighty man is not delivered by much strength. An horse is a vain thing for safety" (Ps.33:16ff.).

It is interesting that George Gilder rediscovered the need for trust and faith for economic growth to be possible. Yet because he does not present a rational basis for such trust, his books, initially exciting to read and widely discussed, fall by the wayside, as impotent as the alternatives he criticizes. A formal substitute may work for a time, as the dynamism of early America attests. At times, our intelligentsia were given over to Deism. But as Hans Frei once said (I think by way of personal confession) Deism is but the greatest heresy of Calvinism even as Mysticism is of Lutheranism. A basis for confidence in the face of an uncertain future can be provided by Deism, though it will satisfy only for a short while. If I believe God is personally engaged in my world, then I will only with difficulty justify confidence in the face of an uncertain future.

Objections Answered

At this point, opponents may raise three objections against the theme of trusting God presented above.

(1) Providence does not preclude forced savings -- The recognition of God's Providence in earthly affairs does not necessarily exclude using a government system such as Social Security. Such a system would only be excluded if it were inherently inconsistent with this or some other Scriptural principle.

This first objection fails since to hope in God's deliverance by the nature of the case removes from the universe of possibilities the position of advocating that my innocent fellow men be forced by the law to pay for my misfortune. Where evil men have caused my downfall, it is proper to complain against them and seek redress. But it is utterly inconsistent with the admonition to trust in God, to imagine that one could go before the government and demand that the citizenry, who have done him no wrong, and did not contribute to his calamity, should be forced to pay for it. The lawful gain of my neighbor is not the cause of my misfortune.

Opponents may react by asking: what are you saying, people should just be left to die? The answer is clear: if you see someone dying, help him! (Lk.10:33-37). If you are the one dying, trust in God to provide safety: it may come, in the family's absence, from a church, a kind stranger, a local voluntary relief association-- but trust in God to provide. There is nothing inconsistent with this to ask for help -- but to demand it, by force of arms (even when those arms are wielded by the magistrate under orders from the majority) is incompatible.

The command to trust both provides the answer to man's anxiety regarding his own security and precludes a collectivist solution. But the answer is vacuous when not coupled with a high view of God's all-controlling providence. If anything, however small, can happen apart from the Almighty's having personally ordained it, then the demand that his creatures trust implicitly in Him for the outcome is hardly more than a cruel joke. We would be no better off than an existentialist desperately "positing meaning" in the teeth of all evidence. But He gives the command--the One who "spoke and it was" (Ps.33:9), "which commandeth the sun, and it riseth not" (Job 9:7), "who touches the hills and they smoke" (Ps.104:32). Whatsoever the Lord pleased, that He did (Ps.135:6).

Only in submitting to the will of this great Being who is beyond all contingency, can we live in this creaturely and contingent life with coherence and integrity. Secular libertarianism tries to ignore this God, as if He were irrelevant to the analysis of man's activity in the world. Because the intellect and heart of man cannot rest in a world cut loose from God, man usually turns to the alternative: collectivism, for it is the only godless entity that can simulate the desperately needed personal omnipotence.

(2) Failure of the church necessitates state action -- The church is not doing what it is called to do with respect to the poor; therefore, the government must step in and pick up where the church failed.

This is an inadequate objection, in that the "problem," as it is currently defined, would completely drain the funds and energy of the church. Indeed, even if the rhetorical distortions of modern politics were rectified, it could still not be used as an answer; what about the fledgling church in a newly-evangelized country? How could it be the case that the church, however small, and however great the aggregate need, could be expected to provide the entire task of relief for a nation?

Scripture, however, provides the answer since Scripture itself excludes some even within the church from being legitimate recipients of "welfare" (I Tim. 5:3-10). How much more then, does this apply to those in a similar category who are outside the church. The state is charged with punishing the wicked and rewarding the righteous (Rom.13:3-4), and in view of this, it can hardly follow that those declared to be unworthy of the welfare of the church, which is an agency of mercy, should be considered legitimate recipient's of state beneficence. Moreover, Scripture presents concentric spheres of responsibility: individual, familial, ecclesiastical, etc. (I Tim.5:8, 16), and this implies that prioritizing is inevitable and that not all needs will necessarily be met by a given institution.

All these considerations show that the church, however it has failed to live up to its calling as a body characterized by mercy, cannot be made the whipping boy for the problems men create for themselves, and in its shortcomings provide an excuse for interim statism. Scripture presents the church's task in the area of welfare as primarily directed to its own ranks, and it is largely supplemental to that of the family. Its failures cannot be patched up by the state, nor can the Scriptural mandate be transferred from the voluntary organization of the church to the involuntary coercive one of the state.

(3) Spiritual promises are applicable only to the regenerate -- The promises of divine loving care are not extended by Scripture to the wicked. Indeed, "the face of the Lord is against them that do evil" (Ps.34:16), so that for them to act, vote, and plan in terms of the promise of divine care, while remaining in rebellion, would be foolhardy.

The objector might grant that Christians ought not to trust in the collective to provide their security, and that (on the other side of the coin) they ought to look personally after the needs of others, first their own family (I Tim.5:16), then the household of faith (Gal.2:10), and finally the world. But, as citizens, recognizing the vast needs of mankind, the bulk of whom are outside the church, recourse to the state is, it is said, appropriate.

We challenge such an objector to explain how one could hold such a view except by a double-minded stance toward the world. If Christianity were but one of many legitimate private views, none of which were certain, then it would not be inconsistent to privately accept that option while publicly behaving in terms of a different set of criteria. A heroin addict need not vote in terms of the premise that everyone ought to be a heroin-addict. Indeed, he might take it as a given that the sane society outside himself were the rational one and vote for policies sensible for such a society, realizing that his own hallucinogenic world was the aberration, even while not desiring to be released from its comfort. Too many Christians do their politics in just such a manner: their public behavior -- their voting and advocacy -- is in terms of the same attempted presupposition, that God is irrelevant; they treat their own faith as if it were but a private hallucination.

Such a stance seems to be so fair to those unable to share our faith. But in reality, it is hardly other than unbelief inasmuch as it reasons in terms of a consensual "common-sense" framework in which the very God we worship is by definition irrelevant. God is everyone's Creator. If He has the right to make transcendent demands on me, it is because He is there and has that right with respect to all men. In the modern grab-bag of religious options, Christianity denies the possibility of other options. To treat His commands as a private affair is to betray a fundamental unbelief; an unbelief that may be disguised by things as trivial as a warm, holy feeling one experiences internally once a week, or the mystical sense felt upon viewing a spectacular mountain view -- as if God should be amply satisfied in that I experience a chill down my spine and would be unreasonable to expect anything more.


To reject the implications of the Christian faith is the moral equivalent of denying the "basics." The Christian worldview is a whole and cannot be dichotomized. The implied goals of the Christian life should be reflected in all the ways that we influence our fellow-men, including our voting. It is not exclusivistic or elitist to make such an assertion, for the doors of entry are wide open. The standing proclamation of hope to the lost, to come join us beggars empty-handed at the throne of grace, entails the admonition to live on earth according to the precepts of the same King. The standing threat of hell for unrepentant rebellion, has a corollary in the earthly promise of chaos, envy, greed, and uncertainty when as a society we ignore the same Judge. To suspend judgment and seek the security of the collective may show where one has cast one's ultimate refuge as well.

We must exhort our libertarian friends no less than statists to trust in Christ as their only sure hope both before God and on this earth, and to renounce an ultimate trust in their own efforts. Indeed, in terms of the gospel, we must exhort all men to trust only in God and to recline in worshipful contentment of His provision, the only one who can provide either personal or social security; and in terms of the standing proclamation, to reject all counterfeits in their private lives and in their voting.


For simplicity, this analysis assumes that the marginal valuations throughout the economy would not change relative to each other in moving to the state obtaining after the FICA removal -- what physicists call a "first-order approximation."
3% is in the ballpark of historical long-term sustainable growth in a free economy. If we use this figure, rather than the inflated nominal rate of return of current investment vehicles, we can express estimates of future wealth to be expressible in terms of today's equivalent values.
Subjective in the sense that it involves personal commitment, not in the sense of "illusory."

Timothy J. Harris has an M.S. from the University of Virginia and is a senior editor of Antithesis.
Copyright © by Covenant Community Church of Orange County 1990
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