Anti-Social In-Security

The Solution

To solve a problem, you must first understand it.

Understanding the nature of a problem is absolutely essential to understanding how to solve it. It has been said that a clear definition of a problem contains the solution. This is true. To solve the problem of the Anti-Social In-Security we must first understand what the problem is.

What are the facts?

First, Anti-Social In-Security is a fraud. It is a Ponzi scheme maintained at the point of a gun by the taxing power of the state. If it were perpetrated by an individual, he would be subject to charges of criminal fraud.

Second, there are no "contributions." It is not insurance. The employee payment is an income tax authorized by Title 26, Subtitle C, Chapter 21, Subchapter A, Section 3101(a) of the US Code. The employer payment is an excise tax on wages authorized by Title 26, Subtitle C, Chapter 21, Subchapter B, Section 3111(a).

Third, you have no real "account" in the ASIS system. You have no property rights in the "Social Security Fund". This was decided in 1960 by the U.S. Supreme Court, in Fleming v. Nestor, 363 U.S. 603 (1960). There is no requirement that benefits continue and the may be eliminated by the Congress at any time. Even the SSA web site admits this!

Fourth, there is no real "Social Security Fund". All taxes paid under the two Title 26 sections are used to pay benefits. The excess of taxes over payments is used for general purposes. The "fund" is merely a record of the excess. It is not supported by anything but future tax revenue.

What is the problem?

The problem is that the excess of taxes paid will shrink and become a deficit. At the present time the taxes collected under the ASIS system exceed the benefits paid out. This is due to the bulge of present tax payers who will soon become beneficiaries, the post-WWII baby boom. This will occur, according to the report of the trustees of ASIS, in 2017. Between now and then the surplus, presently used to fund other government programs and decrease the deficit, will steadily shrink.

As this happens either other taxes will be raised or the deficit funded by actual US bonds will increase. These bonds are not optional and must be paid back. Many are held by foreigners. A third option, reducing spending is unlikely to happen.

Once the crossing point is reached and the so-called "bonds" in the fictitious "fund" are cashed to provide benefits, the only way that benefits can be paid is by increasing other taxes or selling actual bonds that must be paid back with interest. Again, many of these will be held by foreigners.

The problem is NOT with ASIS going broke. It is ridiculous to even talk about that. It's a fraud and has always been "broke." It is not a problem that we will have in 2017 or later. The problem is with us now and has been with us for as long as the ASIS system has existed. As the deficit steadily increases and the likelihood of default on real bonds increases, the US will have to pay higher and higher interest on bonds. Again, many of these are held by foreigners. The reader is invited to contemplate the desirability of having so much of the US debt held by foreigners and the overall affect this will have on the economic security and sovereignty of the US.

Another aspect to the problem is that people need to have some sort of retirement. While the vigor of older people has been increasing steadily, there comes a time for all of us when we can no longer work. Because many present day workers, especially older ones, have not saved, there are many who are poor and have no retirement. Most others have factored ASIS into their retirement plans. While they may be able to survive without ASIS, they would have to do so at a reduced level of comfort. A common plaint is "what are we going to do with these people?" Inherent in this question is the assumption that "we," in other words the taxpayers, have a responsibility to "do" something. In other words, a working father and mother are responsible for maintaining strangers in a comfortable retirement.

What are the fundamentals of a solution?

Here is an outline of a solution to the problem based on the facts that will actually work and that won't just shift the burden from one tax(payer) to another.

First, repeal ASIS and replace it by what it actually is, welfare. Pretending that beneficiaries "earned" their benefits ignores the fundamental nature of ASIS. It is a fraud. While the victims of a fraud are unfortunate and to be pitied, they do not deserve to be compensated for their losses by the taxpayer. In a practical sense, it is impossible to continue a fraudulent pyramid scheme forever. It always collapses of it's own weight. One way or another, it is going to fail. The best we can do is control the damage as much as possible.

Since ASIS benefits are welfare, no matter what you call them, there should be a means test for receiving them. People with sufficient income and other resources should not receive benefits. This should be the case for welfare that replaces ASIS benefits as well.

Any welfare payments should be returned from the recipient's estate. Taxpayers should not be required to fund inheritances. If the system is set up to allow people to keep their own homes until they die their heirs should not benefit. It is not the responsibility of the taxpayer to make sure that an heir gets an estate.

Part of the repeal should eliminate the income tax on wages and require that employers increase wages by the amount paid to the excise tax. The tax now paid by employers is a cost of employment. Employers should not benefit from the elimination of the ASIS system at the cost of their employees. This would not cost the employers anything but would allow employees to use these funds for their own retirement.

All contributions to retirement funding, whether paid by the employer or employee, should be deductible either from the employer's or employee's taxable income if the income tax is maintained. Right now if employers set up a defined benefit program, the funds they expend for it are tax deductible. Employees should receive the same benefit. While the amount of these deductions could be limited or regulated to some extent, the total deduction should at the very least equal what is now available for 401(k) plus the ASIS taxes now charged.

Reasonable support for parents paid by their children should be deductible. This would encourage children to take care of their aged parents. At the very least, they would not be penalized by taxing income that they expended to help the unfortunate victims of the ASIS fraud.


The only way to "solve" the ASIS problem is to eliminate it. Massaging the system by raising taxes, adjusting benefits, changing eligibility requirements, creating "privatized" accounts and so forth are just continuations of the fraud. They are based on a total denial of the very nature of the problem.

It is up to present retirees and soon-to-be retirees to lead the effort to implement this policy. While this may be hard, it is important that the younger generations be protected and that the people who bought into the fraud take the consequences. If older people do not do this, there will eventually be a political war between the generations. Once younger people discover that all they have to do is vote for politicians who will eliminate ASIS they will. They old saying, "Pay me now or pay me later" is quite apt and later payments will be much higher than now.

İEdwin J. Pole II, July 4, 2005