Thursday, April 24, 2014
In the old days, saloon owners would put out a lunchtime plate on the bar so that customers wouldn't go elsewhere to eat.
Instead, patrons could graze on deviled eggs or ham sandwiches while continuing to imbibe their favorite adult beverages. Of course, although a sign over the plate read "Free Lunch," it was obvious that the cost of the food was included in a higher price for the drinks.
That's where we get the highly evocative expression, "There's No Such Thing as a Free Lunch," abbreviated as TNSTAAFL (pronounced "tahn-stahffel"), a phrase made famous by Nobel-winning free-market economist Milton Friedman.
The reality of TNSTAAFL was made clear to a new generation this week in a newspaper's headline, "No matter who's elected, higher taxes coming soon."
But it wasn't an article about the insurance fee increases coming under Obamacare. It wasn't even about the "fiscal cliff" looming if Congress and the president don't reauthorize current income tax rates by Jan. 1 (an action called "preserving the Bush tax cuts," but actually one negating a huge tax increase).
No, the story in question was about Social Security and the $1,000 that will be added to the taxes of an average worker by the expiration of the current 2-percent-of-income reduction in the payroll tax (from 6.2 percent to 4.2 percent) that pays for it.
By this time, one would hope that it's beginning to dawn on some people that when the government provides a "benefit," it doesn't do so without any cost.
That always was true, of course -- despite however many news stories we used to read that said some piece of federal or state largesse was provided for "free."
No matter what we get, someone pays for it. And that's true even if it's financed by simply running the U.S. Mint's printing presses 24 hours a day to keep adding extra money to the total supply.
Everyone pays in that case, because that inflates the currency and subtracts value from everyone's income, even for people who don't pay any taxes at all, because the cost of everything they buy goes up.
Indeed, Congress has used borrowing to reimburse Social Security for its lost revenue, going in the red for $215 billion for the lost tax revenue over the past two years.
Over the next few decades, the cumulative shortfall amounts to a mere, ah, $21 trillion.
This week's article said there is little support to keep the payroll tax at the lower rate. Raising it was supported by most Republicans, some Democrats and the AARP, an advocacy group for more benefits for the elderly (who have the lowest level of poverty of any age group in the nation, according to the Kaiser Family Foundation).
Everyone must know by now there is no real Social Security Trust Fund. Every cent paid in by current workers goes out to pay benefits to retirees and other beneficiaries, or is borrowed for other government programs.
The borrowed excess has been replaced by Treasury bonds, which have to be paid by -- you guessed it -- future taxes.
Lots of politicians and even economists will tell you, "It's easy to 'save' Social Security from its current shortfalls." Just raise the retirement age to 70 or so, remove the current cap on income subject to the payroll tax (which now is $110,100, rising next year to $113,700) -- and, by the way, cut future benefits by up to 25 percent over the longer term.
That could let the program carry on for a few decades more.
Other economists point out, however, that because the 12.4 percent payroll tax is split between workers and employers, adding 6.2 percent to the tax paid by more small businesses for each employee could reduce the total number of workers a business could afford to hire -- and thus reduce the number of workers paying into Social Security.
And raising the tax load wouldn't make the program any more fair. Every year, fewer young people are paying for more retirees, the main reason the system's long-term future is bleak.
Younger Americans already know this. Polls show a higher response for "I believe in UFOs" than "I expect to receive Social Security."
Further, Americans still would have no real rights to their money -- unlike insurance, savings or investments, all of which can be passed on to spouses or children.
With Social Security, lawmakers can raise taxes or lower benefit levels at any time, and if you die before your retirement age, none of your survivors may ever see any of the tens of thousands you paid in.
So, Americans expecting to retire someday might want to think about which current candidate has a better plan for putting programs like Medicare and Social Security on solid ground.
M.D. Harmon, a retired journalist and military officer, is a free-lance writer and speaker. He can be contacted at: mdharmon email@example.com