A flash point for Social Security

When most people hear about the underground economy, they tend to think of drugs, weapons or other disreputable things.  But as government expands its power over our lives, all sorts of good things become contraband.  Perhaps the most perennially sought after are compact, high-value goods that could be used as money.  One smuggler moved Swiss francs across a border, hidden in Polish sausages.  Or diamonds — James Bond’s creator Ian Fleming wrote a book about diamond smuggling.  Gold and silver coins are more popular, since less expertise is needed to determine their value.  For decades, private gold ownership was restricted in the U.S. and other countries.  Journalist Timothy Green reported that “gold travelled amid a clutter of goats and pilgrims on Arab dhows in the Arabian Gulf, or hidden in the engine casing of freighters outward bound from Hong Kong.  One shipment of movie projectors into India was ingeniously filled with canapé-sized bars of gold, while 560 cans of motor grease swung ashore in Yokohama docks — laced with gold.”

At one time or another, contraband goods have included coffee, cigarettes, watches, whiskey, spices, perfume, silks, motor oil, rare stamps and sex hormones.  Whatever the principal reason for such illegal trade, it’s unreported, and taxes aren’t paid.  The point here is that as the years go by, more taxpayers are likely to conclude that Social Security won’t be around for them and that they must start providing for their old age by paying less in taxes.  Federal revenues will fall as a result, accelerating the collapse of Social Security.

Such a scenario will remain a serious possibility as long as Social Security continues to be a system where a declining percentage of the population must pay ever higher taxes to cover everybody else’s benefits.

Jim Powell, a senior fellow at the Cato Institute, is the author of FDR’s Folly, Wilson’s War, Bully Boy, Greatest Emancipations, The Triumph of Liberty and other books.