Government Robs the People: Social Security and Inflation

The average American has been conditioned to believe that taxes are an inevitable part of life and necessary to provide the most basic public services like roads, police protection, and social welfare programs. But direct income, sales, and property taxes are only the most visible ways that government takes over the rewards of productive activity from the poor and middle class, all while rewarding high income earners and corporations with tax breaks. Two regressive taxes that have hurt Americans include higher Social Security payments and inflation.

There seems to be a perpetual cry in the media and from politicians in Washington that Social Security will be insolvent within decades; therefore, either payroll taxes have to be increased for workers or benefits decreased for retirees. Unfortunately, government projections are routinely fudged, and making predictions regarding the state of a social program that typically runs a surplus every year is wildly pessimistic. In reality, warnings of Social Security going broke is nothing more than an attempt to shift tax burdens from the rich and corporations onto workers and the poor.

Because of the stable rate of taxation and the income cap, payroll taxes affect low income earners much more than those earning higher incomes. Combined with the portion of Social Security and Medicare that employers pay for their employees, nearly 14% of a wage earner's income is given to the government. Those with incomes over $90,000 only pay payroll taxes on this first $90,000, leaving them without a Social Security burden even if they take home millions of dollars every year. The amount of their income going to fund these programs is a substantially lower percentage than a family earning less than $90,000 per year.

Claiming that the welfare programs will go bankrupt in decades also ignores the fact that the entire government is bankrupt right now. There is always a budget deficit that the federal government funds by borrowing from other countries or borrowing from the Federal Reserve. Social Security, on the other hand, has historically run a surplus, bringing in more than it has paid out. This surplus is raided by the government, though, in order to lower the budget deficit very slightly every year.

Thus, calls for higher Social Security payroll taxes or decreased benefits is nothing more than a way to increase taxes on the poor and middle classes so that the government has more money at its disposal without raising taxes on the upper classes or business. Former Federal Reserve chairman Alan Greenspan routinely called for higher payroll taxes and decreased benefits in order to prevent a shortfall in the Social Security fund that was predicted decades into the future. This is simply scaremongering to convince worried workers to give the government more money to create a surplus which is immediately taken anyway.

But no acceptable amount of higher taxes or decreased benefits is enough for the federal government to meet its budget deficits. For this, the politicians turn to the inflation machine at the Federal Reserve, which prints any shortfall out of thin air in exchange for interest payments on Treasury Securities. Inflating the money supply, though, devalues the dollar and drives up the price of goods and services. Money growth over the past decade has driven up the price of food, oil, gold, and many other commodities.

The government and the banks in which the government deposits this newly printed money get a chance to use it before the inflationary effects are felt throughout the economy. This means that the rich and politically connected benefit from essentially free money, while the rest of us have to shoulder the burden of a debased currency and higher prices at the gas pump and the grocery store. Just like with Social Security, inflation is a regressive tax on the poor and middle classes and a way for the government to raise more money than it takes in while claiming to keep income taxes low.

Both payroll taxes and inflation affect the lower and middle classes more than big businesses or higher income earners. These are two of the most pernicious, regressive taxes that are imposed on the people disproportionately. Unfortunately, the scaremongering relating to the Social Security Trust Fund as well as the veil of secrecy around the issue of money creation and inflation have combined to trick the people into agreeing to pay more in exchange for a secure retirement and blaming speculators or Middle Eastern countries for rising prices. Government, though, has already raided the retirement accounts leaving worthless IOUs in exchange, and has debased the dollar in order to fund higher and higher deficits and make big government bigger.

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Nick writes articles that help homeowners qualify for foreclosure loans or other solutions. Visit his site to read more articles on finance: www.foreclosurefish.net/

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