The Deleterious Aspects of Social Security: A Critical Examination

Social Security Retirement Benefit, as defined by the US government, is presented as a monthly safety net designed to replace a portion of an individual's income when they either reduce their working hours or cease working altogether. On the surface, this system appears to offer financial security for retirees. However, delving into its financing and operation reveals a series of issues that demand scrutiny.

According to the same government source, Social Security is primarily financed through a dedicated payroll tax. Both employers and employees are mandated to contribute 6.2 percent of wages, up to the taxable maximum (set at $160,200 in 2023), while the self-employed bear the burden of a 12.4 percent tax. The genesis of this system, as articulated by President Roosevelt, was to address the chronic issue of economic security for the elderly. It envisioned a contributory system where workers would fund their own future economic security through taxes deducted during their employment years. The underlying premise was the recognition that a significant portion of the population lacked the means or foresight to save adequately for retirement, necessitating government assistance.

However, the Social Security system, while well-intentioned, carries inherent flaws. Foremost among them is the compulsory nature of the program. It mandates that every individual relinquish a substantial portion of their income annually to the government to fund their retirement. This compulsory arrangement denies individuals the autonomy to allocate their earnings as they see fit, whether to save for retirement or invest in their own financial future. The inability to opt out of Social Security is a contentious issue that warrants attention.

Moreover, the financing mechanism of the program places a disproportionate burden on the working class. While Social Security ostensibly claims equal contributions from both workers and employers, each contributing 6.2 percent, the burden falls more heavily on workers. This discrepancy arises from the economic concept of labor supply elasticity, which is lower than the demand for labor. Consequently, employers tend to offset their share of Social Security contributions by offering lower salaries to their employees, indirectly shifting the cost burden onto the workforce.

Considering these challenges, advocating for the instant and total abolition of the Social Security system is neither practical nor advisable due to its far-reaching consequences. A more pragmatic approach would involve a gradual scaling back of the program while promoting private retirement savings. The government can play a pivotal role in encouraging individuals to save for retirement independently and discouraging excessive consumerism. Over time, the program could be refined to serve as a safety net exclusively for those who were unable to amass sufficient retirement savings privately, ensuring that economic security remains accessible to those most in need.