»The Daily Reckoning by Bill Borner

Social Security and Zombyism...
23 APRIL 2015

- By Bill Bonner

Bill Bonner
Gualfin, Argentina

Dear Diary,

First, another day without much action in the markets. The Dow rose 88 points. Gold fell $18. Why the drop in gold? More than $5 trillion in government bonds is now trading with negative yields (you pay for the privilege of lending the feds money). Consumer price inflation over the last 12 months has been approximately zero. And the derivatives market tells us to expect low inflation - and perhaps deflation - for the next 5 to 10 years. Is that going to happen? We'll have more on this next week.

In the meantime, we have gotten some cold letters from hot readers. They fall into two camps - those who agree with us and those who would rather see us imprisoned for hate crimes.

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At issue is the 'zombie' status of Social Security recipients. Here is one recent letter on the subject.

    Can you stop pushing the Social Security book now? It seems like you have been only writing about it for a couple weeks now. I am sure there are a portion of your readers, like me, who are not even close to being able to collect SS benefits. I am 50 and expect the whole system to implode before I even reach 62. Also, I agree with Bill that those who take SS are zombies, living off other people's taxes. Yes, I know they all paid in, as have I, but they all know it is a Ponzi scheme. While they were still working, I am confident that most of them wished to do away with it. Now they likely vote for politicians who protect their sacred SS benefits. That is hypocritical! I really enjoy the information that you folks provide but am seriously tired of this SS book push.
Here is an opposite view:
    I will argue until the day I die that social "protection" programs like food stamps, medicaid, and welfare protections are indeed "entitlements", but the social security retirement promise is something that I paid for out of every paycheck I've earned throughout my entire life. It really is offensive for someone like me and others who have never accepted "entitlement" help of any kind their entire lives to be included with/grouped with the many other "entitlement" spending recipients.... In terms of the numbers, I don't care that my father withdrew far more in his Social Security payments than he paid into the system. The system was designed to assist retirees, and I'm grateful it was there to assist my father live out his retirement years more comfortably.

    It is criminal to suggest that people who have planned their entire lifetimes around that promised amount of income that was clearly shown through the Social Security System websites or annual publications, to now suggest that we're grouped together with those who have lived off the government "entitlement" programs without having paid much to the support any of those entitlement payments. It is up to those we elect to assure that this important "contract" with American taxpayers is honored though appropriate taxation and prioritization, not suggest after the fact that since the government didn't manage the program properly, the baby boomers are now going to have to live with reductions in payments, postponement of payments, means testing, etc. I rarely disagree with Mr. Bonner, but a "Zombie" I'm not, and neither are all those other baby boomers who faithfully paid Social Security every pay day for decades and who believed that those in our government would honor that contract with us. Adjustments in withholding amounts for current workers can and must be made, or other reckless spending adjusted accordingly before taking this important life support away from upcoming and current retired people.
Just to settle the matter: we agree with both readers, more or less, and in the following few paragraphs we will try to put the whole issue in judicial perspective.

First, we go to our old, tattered wallet and pull out our original, government-issue Social Security card. Yellowed and frayed, it is remarkable we still have it. Even more remarkable, there is no issue date!

But we can tell from the address that it must have been given to us a long time ago. The address on the card no longer exists! It is a 'rural route' address that the post office wiped from the map in the '60s. Also, there is no zip code; they didn't exist back then.

Our first paying, official job was working as an usher in a movie theatre in Annapolis, Maryland. We were 14 years old, so it must have been 1962 or 1963. As we recall, we earned 68 cents an hour.

Good money? Hardly. But it was a start. And it was the beginning of our enslavement to the Social Security System. We've been in chains and fetters ever since.

Now, if we choose to take some of the money back, will that make us a 'zombie?' That is the question on the table.

How can you tell if you're a zombie? Do you drool...do you shuffle? Do you have a crazed look on your face and suffer from substantial brain cell damage?

Most likely, you are not a zombie. You are just getting older.

But ask yourself - if someone were not forced - by the government - to do something he didn't want to do, would you still get the same income?

You can see how this applies to tax lawyers, lobbyists, and defense contractors. Without the tax system, and the money that the feds take from us all, they'd all be out of business. They are all zombies, though many are also honest, upright and helpful citizens.

How about the big banks... Freddie & Fannie...Goldman and AIG? Are they zombies too? Probably. They most likely would have gone under, where they belong, during the crisis of 2008. They were saved by the feds and other peoples' money. Then, they were rewarded with low-cost credit. Anything below the real cost of credit - as discovered in a free market - is zombie funding. They got trillions of it.

It's an easier question when applied to, say, food stamp recipients. They are getting a zombie handout, paid for by someone who had no choice in the matter.

But what about Social Security recipients? As a group, surely Social Security recipients are a zombie crowd, because they paid in less than they will get out. Someone is forced by the feds to make up the difference. But any individual recipient may or may not be a zombie, at least according to our test. He may have put in so much money that no one was forced to provide more. In fact, he may have even put in more than his own fair share.

Our dear 93-year-old mother, for example, is a zombie. But not through any fault of her own. She just had the good luck to live a long time. That was part of the deal. Like an insurance program, some win, some lose.

And there's another wrinkle, mentioned by our correspondent above. The typical Social Security recipient is a victim as well as a zombie. He is forced to pony up money into the system, whether he wants to or not. Then, he has almost no choice: the feds have taken his retirement money; he has to ask for it back.

So, here's another question: you are walking down the street. A robber puts a gun in your ribs and demands your money. He takes $100. Then, a generous sort, he gives you back $80. Are you a zombie? Of course not.

Suppose, after giving you back $80, he beats a retreat and in his haste drops a $50 bill. You pick it up and head for the liquor store. Are you a zombie?

No, not in any meaningful sense.

Zombyism, like a herpes infection, can be contracted in a number of ways. Some sordid and repulsive. Others innocent and faultless. Either way, it is a curse.

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