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.
MESSAGE TO CONGRESS ON SOCIAL SECURITY. JANUARY 17,1935
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.
PRESIDENTIAL STATEMENT SIGNING THE SOCIAL SECURITY ACT. AUGUST 14,1935
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.