Choose Language Carefully

by Don Boudreaux on January 5, 2005

in The Economy

Writing in today’s New York Times, Swarthmore College psychologist Barry Schwartz offers several criticisms of efforts to privatize Social Security.  Here’s one:

This brings me to the final defense of privatization: the payroll taxes you pay are your money, and you ought to be able to do what you like with your money. This, I suspect, is the real justification behind the move to privatize, and it is the worst reason of all. The payroll tax is not "your" money; it’s our money. Social Security was created as an insurance scheme, not a pension scheme. It was meant to provide a safety net, to protect the unlucky from immiseration in old age. The benefits we get are not payouts from accounts in which we have accumulated our own private stash.

Schwartz passes off a very controversial piece of political philosophy as if its validity is plain for all fair-minded people to see.

Of course, Congress does require all American workers to pay into Social Security.  Congress also sets the terms of these taxes and the terms of Social Security payouts.

Schwartz turns these facts into a political proposition that would have horrified America’s founders – and, I suspect, would disturb most Americans today.  Schwartz proposition is that whatever Congress taxes begins its existence as the property of “us” – we collectively – and not as the property of the person who produced or earned it.

Old McDonald makes his living as a tomato farmer.  McDonald earns $50,000 this year from his efforts.  Congress will take about $7,500 of these earnings, calling it McDonald’s “contribution” to Social Security.  According to Schwartz, simply because Congress levies this tax, the $7,500 was never McDonald’s.  It was ours, collectively.  (Question: Were the tomotoes that he grew and sold to get the $7,500 paid to Social Security never really “his,” but “ours”?  How about the time and effort that he put into growing, marketing, and selling these tomatoes?)

Even those who approve of Social Security need not – indeed, ought not – believe that monies paid in taxes were not originally the rightful property of those who earned these monies.  If government is our servant (or so goes the theory), we tax ourselves to give it the resources necessary to carry out the tasks we ask it to carry out.  This view of the matter holds that we – we, the people – pay for the government.  It’s our money that we then, through taxes, transfer to the state.

Perhaps my point seems merely one of semantics.  I think that, while it is indeed largely one of semantics, the point is neither small nor unimportant.  If we call the money that we pay in taxes “the property of ‘us’” or “the property of the government” and “not the property of those who produce the wealth from which taxes are paid” then we come to think of taxes very differently.  We come to think of government not as our servant, but as our lord and master.

In fact, government may be a poor and uppity servant – but no free people should ever even begin to think of government, or even the collective that it pretends to represent, as a lord and master.

Addendum: Thinking further about Schwartz’s astonishing claim, I wonder if he would say that the money that he pays for a new car or a pair of jeans was never really his, but, instead, the property of the automobile dealership or the department store.  I suspect not.  So why does he not extend this same sensible conclusion to monies that people pay to government?

Despite denials from many on the left, evidence is abundant that statists regard government as something of a creator, an uncaused cause, the source of our social, if not physical, existence.  The state is deified.

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