Thursday, November 22, 2007

Is there a really 'free lunch'?

We have all heard – “there is no such thing as a free lunch” - but do we really believe it?

Some things may appear to be free but there is always a cost to someone. For example, you may think education or healthcare is ‘free’ if you don’t pay for it but the reality is your taxes and your neighbor's taxes pay for this ‘free lunch’. Universal health care is supposed to be another ‘free lunch’ but when all is said and done it will cost us all dearly and it will ruin the health care we have now; then where will those living under universal health care systems in other countries go for their health care?

Social Security is another good example. When Social Security started the maximum anyone paid into the system was $60 a year; that was the combined total of two percent from an employee and employer up to a maximum of $3,000 per year. The percentage today is 12.4% up to $97,500 per year. Many receiving Social Security benefits today probably don’t care because someone else is paying for them.

The Social Security Administration says that those born in 1877 and who retired in 1942 got an average of 36.5% real rate of return on what they paid into the system. Those born in 1950 will receive an average of 2.2% return and those born in 1975 will get 1.8%. It will be worse for future workers.

In 1935 (the year I was born), there were 45 people paying into Social Security for every one person receiving benefits. Today the ratio is about three to one. The reality is that Social security is a big ‘Ponzi scheme and the government is the ‘con man’. If a private business operated like that, the directors would be sent to prison.

Who are paying to keep the Ponzi scheme going; the productive members of society are footing the tab. The Democrats call these people “the rich”; but who are the rich? It’s not Bill Gates, Warren Buffet or George Soros that keep the Social Security scam alive; it’s the wage earners that support the Ponzi scheme, people like you and I who pay most of the taxes that bear the cost.

The Social Security idea is a good one but politicians have perverted the concept into just another source of funds for the ballooning government. Payments into the system are used to support the expanding budget while paper chits, IOUs, are put into the ledger for benefit payments, which in turn increases the budget and the need for higher taxes. If we are down to three workers needed to pay for the benefits of one recipient now, what happens down the road when only one worker has to carry the load? If the real rate of reurn is 1.8% now, how long will it be before we will be lucky just to get our own payments back?

Are you one of those that think there is such a thing as a ‘free lunch’ or who doesn’t care where your Ponzi payment is coming from?

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