Social Security con job.

ITEM: "Democrats and their allies launched an ad campaign Thursday to warn voters about any new Republican effort to privatize Social Security," reported the Associated Press on August 3. Beginning in Pennsylvania, Missouri, and Ohio, the "ads are two 15-second spots aired back to back showing an elderly couple in a modest home sharing a hot dog. It shows an older woman splitting a pill in half as the narrator says: 'If George Bush and his backers in Congress privatize Social Security and cut benefits in half, what will you have to cut in half.'"

ITEM: The White House website, in a section called "Strengthening Social Security for Future Generations," boasts: "Social Security was one of the great moral successes of the 20th century by providing a critical foundation of income for retired and disabled workers."

CORRECTION: With Democrats claiming that the president and the GOP are going to slash benefits for the elderly, and the White House praising the "morality" of the Social Security program, Americans are once again being presented with false alternatives. The missing alternative, ignored by both major parties, is to phase out the Social Security System over time while honoring commitments to retirees and near-retirees.

This is one case where maintaining the status quo makes the situation worse, since it will cost taxpayers an extra $600 billion each year that the inevitable reform is delayed. The government continues to promise to pay trillions of dollars more in benefits than it is collecting. By 2017, according to the Social Security Trustees, the system will literally start paying out more each year than it collects. With the first of the baby boomers to retire soon, the inexorability of demographics will add to the problem. In 1950, there were about 16 workers forced to pay for each Social Security beneficiary; today, that ratio has fallen to 3.3:1; by about 2025 or 2030, that will reach the 2:1 range--meaning, in essence, that each married couple in the country will have to pay for their own expenses plus the benefits for one retiree. As it is, most Americans already pay more Social Security taxes than income taxes.

Social Security was long billed, wrongly, as an insurance program, where premiums were built up in some sort of trust fund. Of course, it is nothing of the sort. Taxes collected are paid out immediately, with the government leaving behind IOUs.

Though the demographics of the American population assuredly have helped exacerbate the situation, economist Thomas Sowell has correctly observed that the "only reason changing demographics are a problem is because Social Security was never insurance in the first place, even though it was politically expedient to describe it that way." (Basic Economics, Basic Books, 2000)

Democratic and Republican politicians alike have much to answer for in establishing and perpetuating this fraud. The Democrats have indicated that they are going to try to make the supposed threat of privatization of Social Security a major issue in the 2006 elections. Yet, even Democratic President Bill Clinton acknowledged that the Social Security program is in trouble when he said that there were only three options for reforming it: raise taxes, cut benefits, or allow the private investment of some payroll taxes. One wonders if the Democrats, having opposed the latter two choices, will tell voters what is left.

Another option, going belly-up, is not a promising future, but it is because of false promises about Social Security that this result became predictable. The pyramid scheme that the White House calls "one of the great moral successes of the 20th century" has involved decades of lies; it has cheated entire generations of earnings; and it has established a system that transfers wealth from the relatively poor to the rich.

When Social Security was being created, despite its limited beginnings (the original maximum tax was $60 per year), some legislators tried to avoid the problems we face today. They tried to add an option so taxpayers who wanted their own better private pensions could opt for those. The promoters of Social Security were smart enough to recognize that the government would not be able to compete on a level playing field. Wisconsin Senator Robert LaFollette, for example, said that this would be "inviting and encouraging competition with its own plan [Social Security] which ultimately would undermine and destroy it." FDR vowed to veto the legislation if choice were part of it. He got his way.

And, no, instituting Social Security didn't rescue the elderly poor from the Great Depression. As Jim Powell summarized in his book FDR's Folly, during the 1930s, "Social Security, through the payroll tax, increased the cost of employing people and thereby helped prolong high unemployment. Social Security monthly benefits didn't begin going out to people until after the 1930s were over."

Several years ago, Robert Woodson of the National Center for Neighborhood Reform asked rhetorically: "What would be the public reaction if I proposed a plan to collect monthly contributions from working black men and women, then transferred a good portion of that money to older white women? Or what would happen if I tried to sell a retirement investment plan to 24-year-old black American males that would end up paying each of them $13,400 less in benefits than they paid into my plan? Most likely, if I were successful in conning people into these schemes, I would be arrested, tried and convicted of fraud."

Moreover, the supposed income guarantee of Social Security simply doesn't exist. Though most Americans no doubt are not aware of it, the Supreme Court has ruled (in Flemming v. Nestor) that Americans have no binding contractual or property rights to Social Security benefits--which Congress can change, cut, or eliminate.

Those who have fashioned Social Security have been involved in a long list of misdeeds--conning taxpayers, running a pyramid scheme, double-dealing, and bankrupting the nation's future, to name just a few. These transgressions are bad enough, but the federal government makes it worse by insisting that inflicting us with such a system has been a great moral achievement.