The word socialism can start some heated debates between many Americans. It has been a hot topic in recent years, and many wonder if America is headed toward a more socialist form of government. Most people agree that capitalism is at the heart of the “American dream” although there is some argument on whether there are already some socialist programs in the US. Is one of those programs Social Security? To answer that question, you need to first understand what socialism is and then examine the Social Security program itself. We can all agree that millions of Americans depend on their Social Security benefits, so the program must continue whether these benefits qualify as socialism or not.
What Is Socialism?
Many people seem to have their own idea of what socialism really is, but what is the true definition of socialism? Socialism is defined by Merriam Webster as “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.” It goes on to state that there is no private ownership of property in socialism. This is in direct contrast to capitalism. In capitalism, private individuals or companies own goods and means of production, and they pay workers a wage to produce those goods. They can then sell those goods to consumers for a profit. You might also hear capitalism called a free market system.
Socialism is often thought of as a Utopian society where everyone shares equally. Everyone is expected to perform some level of work, and in turn, the government distributes the wealth equally to all its citizens. Socialism requires a high level of government control to manage the wealth and resources of the country and provide for the citizens. Socialism sounds great in theory, but it does have some devastating flaws.
Capitalism drives innovation and hard work, while socialism provides no real reward for working harder than others or developing new ideas. Since everyone shares equally, there is really no incentive to work at all. Several countries today have some form of socialism present in their government. On one end of the spectrum, communist countries like China and Vietnam are almost completely controlled by their government. However, countries like France and Germany are considered democratic socialist governments. They allow private ownership of property, but the government does provide some essential services for free and advocates for redistribution of wealth.
With the passage of the Affordable Care Act, some Americans started to believe that the country was headed more toward a socialist economic system. This view continues as the economic stimulus payments were sent out as a result of the Coronavirus outbreak during the Donald Trump presidency and now president Joe Biden. Some even view public schools as a form of socialism because they are run by the government. However, make no mistake, the private sector is alive and well in America today.
The Libertarian party has gained popularity in recent years, so how do they fit in? Their views are typically in direct contrast to socialism. Libertarians favor personal responsibility and small government. They prefer that the government stays out of things as much as possible, while socialists want the government to control almost everything. Now that you understand what socialism is and how it works, we can dive a little deeper into Social Security to determine whether it is a socialist program.
Who Is Running The Social Security System?
Here is how the Social Security system works. The federal government runs Social Security. While it is technically the Social Security Administration who runs the program, this agency was set up by the federal government and all its authority comes from the government. The SSA does contract with some private companies to perform certain services, but overall, the system is run by the government. This applies to retirement benefits and disability benefits alike. Many people confuse food stamps with Social Security, but that program is administered by the U.S. Department of Agriculture.
Social Security was established in 1935 and signed into law by President Franklin D. Roosevelt (FDR). At the time, the country was in the midst of the Great Depression, and many retirees had no way to provide for themselves or their families. The first taxes were collected in 1937, and the first payments went out soon afterward – just before the start of World War II. The idea for the system came from 19th century Germany who set up the idea of the old-age insurance program. At the time, Germany set up the program to help prevent the implementation of some socialist ideas being presented.
Fast forward to America today, and the government still fully manages the Social Security program. This includes health insurance for the program as well. You often hear the government programs Medicare and Medicaid referred to together, but Medicaid is not associated with Social Security. Medicare, on the other hand, is the health care provided as part of this social insurance program. The government mandates that a certain percentage of your earnings be paid toward these programs, and taxpayers have no choice in the matter. Many people wonder, “Is Medicare socialism?” Although it may be a social program, at its essence, it is not pure socialism.
Who Decides How Much Social Security You Will Receive?
Many people wonder how much Social Security will pay when it is time to start reaping the rewards of all those years paying into the system. Again, the government decides how much you will receive from the program when it is time to begin receiving your benefits. For retirement benefits, your benefits are based on your earnings during your lifetime, and there is a formula to determine how much you will get after retirement. The government developed the formula, and it is quite complicated to most people. Regardless of your income, there is a maximum amount that you can receive in benefits.
When it comes to disability insurance, the formula is a little more of a secret. It is nearly impossible to determine exactly how much you will receive in disability benefits should the need arise for you to use those. The calculation is still based on your past earnings and work history, but it seems that no one really knows for sure how to calculate the exact number. There is a limit to how much you can receive, and the average payment for SSDI benefits in 2021 is $1,277 per month.
Can You Opt Out Of Paying For Social Security?
There are many people out there who would rather save money for retirement on their own without the government telling them exactly how much to put away. They also do not want to depend on the government for their retirement income, so they would prefer to opt out of the system and not participate at all. Unfortunately, that is not really an option. In general, you cannot opt out of paying Social Security taxes. There are a few minor exceptions to this rule.
Certain religious organizations can claim a religious exemption to paying these taxes. The Mennonites and Amish are two examples of religious groups who often opt-out of the system. However, in order to opt-out, certain other requirements must be met as well. You must not only claim a religious objection, but you must also waive your right to ever receive benefits from the program as well. In addition, you may be required to prove that you have never received any benefits from the program in the past. If you have received previous benefits, then you will be required to repay those before being allowed to opt-out of future participation in the program.
There are a few other exemptions as well that we will briefly discuss. Foreign government employees working in the United States are not required to participate. Neither are college students who work for their school or university. Some non-resident aliens are not required to pay into the system, and people who renounce their U.S. citizenship can opt-out of the system. Again, opting out of the system also prevents you from being able to receive benefits in the future. You cannot have your cake and eat it too, i.e. you cannot choose to not pay into the system and then receive the benefits of the system later in life.
Do I Still Need A Private Retirement Account?
Since you are required to pay into Social Security, many people wonder whether they still need a private retirement account. The consensus is yes! In many cases, the amount that retirees receive from their Social Security retirement benefits is barely enough to cover their basic living expenses. Saving money in a private account like a 401(k) or IRA is still a necessity. In addition, private accounts have many advantages over the government system.
First, you choose how much money you contribute to your own personal retirement account. You can choose to save more and retire early if you wish. You also choose how much money you withdraw from your retirement accounts each month. This is in contrast to Social Security where your benefit amount is determined by the government, and you cannot change this amount. Lastly, you have greater flexibility around when you can start receiving your benefits. You may choose to start receiving your benefits sooner or wait until later to receive them. Your options are much more wide open when using private accounts.
In addition to the things mentioned above, saving money in a private account also helps you ensure that you will have enough money to live comfortably. Since Social Security is only fully funded until around 2035, it might begin to run out around that time. Benefits might have to be cut after that. Many Americans feel that they will end up receiving no benefits at all from the system. Congress will need to make some changes to the program to keep it running, although no one knows for sure what those changes look like. Republicans and Democrats tend to disagree on what those changes should be. The American people do not like hearing about any cuts to the program, but some changes are inevitable in the coming years.
The Bottom Line: Is Social Security A Form Of Socialism?
After hearing all the facts, it is evident that Social Security is at the very least a form of democratic socialism. The program is mandatory, and it is wholly run by the government. The government decides how much you must contribute to the system, and it decides how much you will receive from the system in benefits. While it may not be to the full level of socialistic views pushed by some politicians like Bernie Sanders, it certainly contains aspects of socialism. That being said, it has become an accepted social program within the country, and it is likely not going away any time soon. Too many people rely on the system, and doing away with it could have dire consequences. It will be interesting to see how the system evolves over the coming years, but it is almost certain that it will not go away.
Frequently Asked Questions
What is the difference between socialism and Social Security?
Many people ask the question, “Is Social Security a socialist program?” One of the key differences between the two is the fact that you must qualify for Social Security benefits. While the government does administer the system, it is funded by individuals and employers. You must have paid into the system to receive benefits from the system. If you do not have the proper work history and have not paid the taxes, then you will not be able to receive payments from the program upon your retirement.
This differs from socialism because in a pure socialist scenario, the government provides for everyone. There is no need to qualify for the program. The government provides the funds, and they distribute them to all the citizens as they see fit. Social Security is simply a social program that is administered by the government though it is funded by private citizens. Though Medicare may receive some government subsidies, the vast majority of the costs are paid by the taxes from private citizens and companies.
How do I pay the “Social Security Tax”?
Payment of the OASDI tax is simple, and you really do not even have to worry about it if you work for a company. This tax is automatically withheld from your earnings and remitted to the IRS on your behalf by your employer. Your employer also pays the same amount as you – 6.2% each for a total of 12.4% tax. If you are self-employed, things are a little different. The tax is not automatically withheld from your earnings, so you will need to pay the tax when you file your tax returns each year. In addition, you’ll be required to pay both the employee and employer portions of the tax.
What are some of the problems with socialism?
While socialism sounds great in theory, there are some problems with it. First, it tends to stifle innovation because there is no incentive for individuals to work harder. If everyone receives the same amount of wealth from the government, then people tend to only do enough to get by. Many people also distrust the government, and they do not want to rely on the government for their basic needs. In some cases, the government officials become power hungry and begin keeping things for themselves while their citizens go without. In extreme cases, it eventually leads to communism and the citizens no longer have a voice in the leadership of the country at all.