Government

How Congress has screwed up FDRs vision of Social Security

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. FDR Message to Congress January 1935

The Act does not offer anyone, either individually or collectively, an easy life–nor was it ever intended so to do. None of the sums of money paid out to individuals in assistance or in insurance will spell anything approaching abundance. But they will furnish that minimum necessity to keep a foothold; and that is the kind of protection Americans want. FRD radio address August 1938

“We put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions. … No damn politician can ever scrap my Social Security program.” FDR.

Of course, much of FDRs vision has been changed by Congress over the years. Worker contributions (taxes) do not pay for the worker’s benefits, but for current beneficiaries. Today there are even calls to pay benefits by simply printing money, some advocates want higher benefits paid for by a small segment of workers, and Congress has failed to raise payroll taxes to match growing obligations and changing demographics.

The fact is that a lot of “damn politicians” have royally screwed up Social Security and it appears the worst is yet to come.

Advertisements

3 replies »

  1. FDR called it a pension, which it is not. The US Supreme Court ruled that Congress can change the amount formula at any time. SS is now and always has been a social welfare system for citizens that reach the age required to get a check. Since almost no one pays enough in SS taxes (employee and employer) except maybe the self-employed, all benefits should be cut when the trust fund hits zero. Problem solved!

    “Today there are even calls to pay benefits by simply printing money to pay benefits.”

    That is what is already happening, as trust fund bonds are cashed, new bonds (debt) are created out of thin air to cover benefits.

    Like

  2. Obviously, FDR intentionally lied when he said “No damn politician can ever scrap my Social Security program.”

    Had he intended that result, a program that could not be scrapped (or emasculated), Social Security would have been created as a legally enforceable contract between the federal government and each of its citizens. The federal government would have “sold” us an insurance policy and each of us would have “bought” the policy by paying the required premium (FICA, not taxes). Think of it as a contributory defined benefit pension plan that also provides disability and death benefits. As is the situation there, the pension, disability or death benefit to be paid is based on a defined benefit formula that need not be closely related to the employee’s actual contribution (except in situations where the employee’s contribution, exclusive of any employer contribution, plus imputed interest exceeds the benefit provided under the formula – Internal Revenue Code Section 411(c).)

    Of course, as is the situation with any defined benefit pension plan, unless such a program is made to be a condition of employment (citizenship?), a worker (taxpayer) should have had the opportunity to opt out. Don’t forget, many public employees did have, and did exercise that option. Is there some reason why they should have alternatives that are not available to workers of non-public employers?

    That he intentionally did not pursue a legally enforceable contract structure confirms that he intended future Congress and presidents would have the ability to muck it up as they desired. In fact, you could argue that given America’s history of changing programs (as of 1935), he knew full well that his program would be modified and misused in the future.

    Like

What's your opinion on this post? Readers would like your point of view.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s