Observations on life

Roosevelt On Social Security – we need to fix it now🙄

Over the years Social Security has changed many times, usually in ways that improved benefits but did not pay for them. The concept of a self-sustaining system has been lost mainly because politicians do not have the guts to tell people (voters) the truth and voters can’t handle the truth. 

Now we are left with a mess. Still our leaders muddy the waters with misinformation while some seek to turn our primary retirement system into another welfare program.

The concept is quite simple, you pay into the system during your working life and you get back a benefit in retirement that is based on your earnings reflected in your and your employer’s contributions. Does everyone get back what they paid in? No, some get little even nothing; others get far more.

That’s because Social Security is a form of insurance, a giant risk pool quite similar to a traditional pension plan. You could work for an employer for thirty years, retire and die the next day collecting nothing, but you could also live to 95 collecting your share plus the share of other employees not so fortunate.

You may pay auto, homeowners or even health insurance premiums for decades and never collect a penny and that’s a good thing, but you may also face financially catastrophic claims and receive back many times your premium and that too is a good thing.

The fact is if we want Social Security to provide all it has promised, the payroll taxes on working, middle-class people must increase significantly. Is that fair?

Should we means test benefits or raise taxes, but not the eventual benefit, on some Americans and turn Social Security into welfare? Is that fair or consistent with Roosevelt’s vision?

Or should we find a combination of less onerous changes that require all generations to share in the cost of sustaining the system? No, this does not mean cutting anyone’s current benefits. To keep them affordable private pensions have adjusted future (but not already earned or in pay status benefits) routinely. COLAs have been suspended or modified prospectively. Formulas have been changed so that future benefits from a date forward are less, etc. Newly hired employees receive different future benefits.

The bottom line is we have to pay for all the goodies in the bag. We can do it fairly or we can go on our merry way and find ways to let somebody else pay for what we receive. But make no mistake, each day we do nothing it gets worse and if Americans do not support the rare politician telling them the truth, it will get much worse still.


Three principles should be observed in legislation on this subject. First, the system adopted, except for the money necessary to initiate it, should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation. Second, excepting in old-age insurance, actual management should be left to the States subject to standards established by the Federal Government. Third, sound financial management of the funds and the reserves, and protection of the credit structure of the Nation should be assured by retaining Federal control over all funds through trustees in the Treasury of the United States.

At this time, I recommend the following types of legislation looking to economic security:

1. Unemployment compensation.

2. Old-age benefits, including compulsory and voluntary annuities.

3. Federal aid to dependent children through grants to States for the support of existing mothers’ pension systems and for services for the protection and care of homeless, neglected, dependent, and crippled children.

4. Additional Federal aid to State and local public health agencies and the strengthening of the Federal Public Health Service. I am not at this time recommending the adoption of so called “health insurance,” although groups representing the medical profession are cooperating with the Federal Government in the further study of the subject and definite progress is being made.


We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.

This law, too, represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.


5 replies »

  1. First, thank you for the information. If I am not mistaken, it says that the funds will be held by the Trustee and no one can “help themselves” Why then did the funds get put into the general fund where it was borrowed against, and monies taken from the Trust fund no one paid it back?. Who exactly borrowed from the Trust fund and for what projects? Has an audit ever been done on that to determine who owes Social Security monies? That is what I would like to know. Who and how much was taken from the SS fund when they moved it into the General Fund and who owes $’s to the Trust fund and what interest has been set up for a pay back, or was the money put into a the General fund that anyone could help themselves to? I think an audit of when that occurred should be done, the persons (organizations) taking from the fund at that time addressed and interest charged to those that took the money be initiated and pay back required to put SS back into the plus side.. Why hasn’t that ever been addressed when SS is running out of payments to seniors? Why hasn’t an audit been done of the use of these funds? Instead of trying to make SS a welfare program, why not get the groups that borrowed from SS in the first place and let them pay back SS with interest? When the groups that borrowed get their allotted budget, why don’t they immediately take the monies owed to SS off the top of their allotted budget and pay SS plus interest immediately so their budget is lower rather than SS being lowered?Regardless of whether SS was put with other funds into the General fund, I think if an audit was done to see who borrowed at that time that SS was in the General Fund those are the groups/people that should be responsible for putting the dollars back into the fund. Does anyone agree with that? How do we get an audit done for that purpose?


    • I think you misunderstand how Social Security works. The money was not taken from Social Security.

      Look at it this way. Say I give you $1,000, but you only need $900 to live on. What do you do with the other $100? You invest it so you will have interest to use later. You take that money and buy a US Savings bond which pays you interest. However, some day you may need the interest to live on and even someday you may need to cash in your bond to use that money.

      That is exactly how Social Security works.

      Up until a few years ago SS benefits were fully paid from incoming taxes and there was money left to buy special savings bonds. Today benefits are paid using all incoming taxes plus interest on the bonds that were purchased by the SS trust fund. By 2033 or so both the taxes and interest will not be sufficient to pay benefits and the trust will redeem the bonds to pay benefits. Once the bonds are all redeemed of course there will be no interest to use.

      At that point, the only funds available to pay benefits will be incoming taxes which will equal about 75% of the benefits payable.

      So you see, all the money paid in taxes over the years, plus interest paid by the US Treasury on bonds purchased by the trust have been returned to Americans, nobody stole the money.

      The problem is simply that the taxes we pay today are not sufficient to pay the promised benefits, partly because the number of people paying taxes relative to the number collecting benefits keeps getting smaller. That was not true in the past.


      • No, the Treasury Bonds we “invested in” are public debts – meaning that they are nothing more than IOU’s from current and future taxpayers. So, while we may have been paying in FICA and FICA-MED “Contributions”, the federal government has effectively borrowed the money from the trust fund – pledging future taxes to retire/repay the loans. That is what a bond is.

        So, effectively, the trust fund dollars were invested in current period federal government spending. And, despite that, we have been running deficits over and above those amounts – sometimes annual deficits in excess of $1 Trillion. During the seven years of the Obama Administration, in fact, we have doubled the national debt incurred and accumulated over the first 225+ years of the republic – despite the fact that FICA and FICA-MED contributions in years 1984 through 2010 exceeded the payouts of Social Security and Medicare Part A benefits.

        In fact, using the 2014 federal budget tax and spend data, if a median-income family spent and borrowed like the federal government does, it would spend $61,000 despite earning only $52,000. It would pile $9,000 of new debt on top of an already massive debt of more than $311,000–like having a mortgage, only without the house.

        Social Security began running cash-flow deficits in 2010, paying out $51 billion more in benefits than the program received in payroll taxes that year. Without reforms, Social Security’s cash-flow deficits will rise rapidly and will quadruple in less than 20 years, when its combined trust fund would be exhausted. In federal budget year 2014, the net outflow of benefits in excess of “contributions” was just short of $80 Billion.


  2. “… The bottom line is we have to pay for all the goodies in the bag. We can do it fairly or we can go on our merry way and find ways to let somebody else pay for what we receive. …”

    Self defeating logic. The problem is politicians buy votes by adding goodies to the bag without paying for them, or by explicitly or implicitly shifting the burden for those benefit improvements to individuals who will not receive those benefits. That is the concept of raising the cap on wages, without first linking benefits to actual contributions. That is the result of going beyond the system to means test benefit receipt – where the benefit individuals receive is likely to be much more greatly affected by other economic activity than the actual system participation. That is the concept of creating a system that has adequate revenues for this year and the next, but not in the future – shifting the burden to future generations. I will gladly tax others tomorrow tp get your vote in exchange for a benefit today.

    Your problem is your use of the word “FAIR”. You seem to be saying people should fund their own benefits when you confirm it is not fair to order up benefits that others should pay for. However, that is not what most Americans think of when they use the word “fair”. For most Americans, “fair” means treat me as I think I should be treated. Your context suggests you believe in equity – treating similarly situated people the same and differently situated people differently, within the limits of the Social Security tax and benefit systems.

    However, it is the exception where an individual actually contributes just enough to fund her/his benefits – and no, I am not talking about some insurance concept – grouping of like risks. That is because of the “social” concept – the intentional, direct transfer of wealth that is obviously intended from the use of a 10 year “vesting schedule”, an extremely progressive benefit formula, spousal benefit provisions, post-commencement COLA’s, and taxation of benefits. Those provisions have NOTHING to do with insurance concepts.

    So, the argument was, is and will continue to be over the SOCIAL provisions incorporated into the program, and the effect of shifting the financial burden to future generations.


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