Americans don’t save very much. According to a 2006 article, “The number-crunching folks at the U.S. Commerce Department’s Bureau of Economic Analysis dished out some discouraging news recently, saying that Americans spent more than they earned in 2005 — a negative savings rate of 0.5 percent for the year. That’s the first time that’s happened since the Great Depression.”
Hmm… Why might that be? Could it possibly have something to do with the fact that the federal government lops off 15 percent of every single paycheck? And that’s before income tax, property tax, and state and local taxes. I once saw a documentary about African tribes that keep cattle, not for the milk or the beef, but for the blood. They stick bamboo shoots into the cows’ neck arteries for a warm drink. The payroll and other taxes are the bamboo shoots in the necks of American workers. My wife and I are “saving,” but only in the sense that we’re climbing our way out of debt. We would have had a positive net worth years ago but for the fact that our life’s blood — our labor — is siphoned off to feed the welfare state. And the only reason we’ve been able to make progress is that we’ve put off having children, purchased a tiny condo rather than a house, and kept our spending low. It’s hard to save when so much of our labor is lost to taxation.
Our society punishes the responsible in order to reward the irresponsible, taxes productive effort in order to subsidize vice. What’s the point of saving when your welfare check is proportional to your irresponsibility? If you earn less, save less, learn less, waste more, and have more children you can’t afford, you get more welfare. And what’s the point of saving for old age when the federal government promises to continually transfer ever more wealth from workers to the retired?
Hillary Clinton’s answer to the deep social pathologies generated by the welfare state is, of course, to expand the welfare state. An October 9 article from The New York Times reports:
Senator Hillary Rodham Clinton of New York unveiled the second biggest domestic policy idea of her Democratic presidential campaign today, proposing to spend $20 billion to $25 billion a year to create 401(k)-style retirement accounts for all Americans and provide federal matching money of up to $1,000 to middle-income people.
Under the plan, the government would give a dollar-to-dollar match for the first $1,000 saved by Americans who earn up to $60,000 annually. For those who earn $60,000 to $100,000, the government would provide a 50 percent match, or $500 for the first $1,000 saved.
Mrs. Clinton said she would pay for the program by freezing the estate tax at its 2009 level of $7 million per couple. A campaign analysis of the plan said that the freeze would affect about 10,000 of “the wealthiest estates” in the United States and provide a new retirement savings systems for an estimated tens of millions of families. …
As with her biggest policy plan for universal health insurance, Mrs. Clinton cast her savings proposal in terms of choice…
Reduce the payroll tax on working Americans? Not a chance. Instead, Hillary wants to forcibly take more wealth away from the people who earned it in order to give it to others who did not earn it. But this is not just a straight subsidy: it is meant to “encourage” people to do what federal politicians know is best for them. It is social engineering.
Where might Hillary have picked up such an outlandish, unjust, and anti-American idea?
Donald Lambro complains for the conservative TownHall.com: “The lure of a refundable federal tax credit from general revenues is a government subsidy, pure and simple. The worker who receives it doesn’t have to work for that matching money in order to save it.”
Yet Lambro continues: “President Bush offered a bipartisan plan to provide private-investment accounts that would let workers invest a small percentage of their payroll taxes in stocks and bonds and build wealth.” Never mind the fact that this does nothing to address the spending side, at least for several decades.
When did we get to the point when the alleged opponents of subsidies for savings are talking about the federal government “letting” workers invest their own money? You’re going to “let” my wife and me save some small portion of the money that we earned? Gee, thanks.
The simple fact is that Republicans, conservatives, and the Cato Institute are the ones who long advocated the idea of using federal force to socially engineer more “private” (read, government-controlled) investment. Hillary’s plan is merely a variation of the conservative plan.
Thankfully, at least some people are actually talking about restoring economic liberty by reducing the payroll tax. Yaron Brook said in a recent press release from the Ayn Rand Institute:
The basic principle behind Social Security is that individuals have a right to unearned retirement income. To pay for these unearned benefits, the government seizes money from workers and transfers it to the elderly. This is a perverse injustice. Why should a twenty year old who is struggling to make ends meet have to finance someone else’s retirement? Why is it parasitical for a young person to live on the dole, but an inalienable right if he waits until he’s 65? Why should those who conscientiously save for retirement be forced to sacrifice a chunk of their income to support those who were not as responsible?
There is no such thing as a ‘right’ to someone else’s labor or money. The ‘needs’ of the elderly do not justify turning the young into part-time slaves. Instead of looking for ways to save Social Security, we should be designing a plan to phase it out entirely.
Some claim that without Social Security the streets would be lined with senior citizens unable to pay for their homes or their food. But this fantasy ignores the fact that, before Social Security, there was no epidemic of starving old people. Individuals planned and saved for their own retirement. Those few who genuinely couldn’t support themselves relied on their families and on private charity — they did not demand the government reach into other people’s pockets to provide them with goodies.
We don’t need the federal government to “encourage,” subsidize, force, or micromanage our investments. We need the federal government to leave us the hell alone so that we can invest our own money as we see fit.