Pension Choice

For more than 50 years, Democrats and Republicans have known that us baby boomers were going to bankrupt the Social Security system; and for more than 50 years they have both kicked the can down the road. Welcome to the end of the road.

Only the seriously delusional still pretend that any real funds have been accumulated in the Social Security Trust Fund. You can’t spend the same dollar twice, and we have raided the fund year after year to pay for other current government services. What is in the "Lock Box" is some worthless junk bonds issued by a government that is trillions in debt and a few months away from default - the deadbeat government in question is the United States of America. That is so painful to say out loud.

Every time a panel is formed to look at Social Security reform, the answer comes back the same: extend the age of eligibility, increase the payroll tax, and reduce the benefits paid. And Congress does none of them. Reduce the benefit and the blue-heads won’t vote for you; raise the tax and working people won’t vote for you; extend the age of eligibility and nobody will vote for you. It is impossible for politicians to do what needs to be done – coercion is hard work.

That’s why we Libertarians prefer to do things the easy way – ask for volunteers, and leave the politicians and bureaucrats out of it. Most people will gladly pitch in to save Social Security; you just need to ask them nicely.

Lately, I have been asking this question when I speak to groups with lots of baby boomers in the crowd: how many of you would continue working past the age of 65 if you didn’t have to pay any taxes on what you earned? Almost all the hands go up; there you go - problem solved. I call it Pension Choice.

The idea is ridiculously simple: at age 65, you retire….from paying taxes on earned income. That’s right - zero, zilch, nada. You will not pay any income tax, payroll tax, capital gains tax, or tax on dividends if you decide to keep working full time and defer the draw on your social security benefits. Look at the gross earnings on your pay stuf - that is what will be going into direct deposit. Sweet.

You have suffered enough; you have carried the world on your shoulders for five decades and it is time to lay your burden down. We thank you for your service; enjoy the full fruits of your remaining labors. You decide - if you want to retire at 65 and draw benefits under the current system, go ahead; if you want to keep working and keep everything you make, go ahead.

No one is adversely impacted by the decision of any another person, and no one is coerced into doing something they do not want to do – the founders called that novel concept the "pursuit of happiness", and we should put it to use more often.

Every day past 65 that you work is one less day the government has to pay you benefits, and one less day that someone else who is working has to pay for those benefits. Win-win. Medicare and all the other unfunded pension plans (which are about to default) would be de-stressed and salvaged as well when individuals elect to defer their retirement age. Win, win, win. Everybody wins, but not everyone will be happy.

Socialists and statists will whine and pout and pitch a fit because they don’t get to tell you what to do; let ‘em all cry in their living-wage, eco-bean mocha latte. We should have told them to stick it years ago, before they morphed Uncle Sam into creepy Uncle Ernie with one hand in our pockets and the other down our pants.

But what about all the lost tax revenues from the people who keep working? What tax revenues – they were going to retire, remember? We weren’t going to collect any taxes anyway, so the loss of revenues to the IRS is negligible, while the savings in deferred benefits is substantial. If only one person defers it is a good thing; if several million do, it is a really good thing. Even the economists at CBO could get this one right – maybe.

And besides, it is the value you add with your labor that creates prosperity and economic growth, not the taxes the government rakes off the top. Having millions more productive, value-adding citizens engaged in bona fide economic activity is what will propel this nation out of its coma; not quantitative easing, or faux stimulus spending, or accounting gimmickry, or redistributive economic folly.

Introducing Pension Choice does not make the Social Security system a good deal; there is nothing that can do that. Over time, it must be converted from a promise of defined public benefits to a personal asset funded with defined contributions – I think we all know that. But to do so responsibly will take a generation, and we need to save Social Security right now so people who have paid in for 50 years have something to show for it – either tax abatement or pension draw as each sees fit.

The right-here-and-now problem of extending eligibility dates and reducing benefits is easily solved without confiscation and coercion, as difficult as that notion is for statists to comprehend. And now that there are no earmarks allowed, the Pension Choice law could be written on one page and voted in a day.

So why not; does anyone in Congress – from either party - have a better idea? Let’s hear it.


"Moment Of Clarity" is a weekly commentary by Libertarian writer and speaker Tim Nerenz, Ph.D. Visit Tim’s website www.timnerenz.com to find your moment and order his new book, "Tooth Fairy Government."