Suckered into Social Security
You know you are a senior when a company advertises that it has been in business since the year you finished college or when the waiter goes out of his way to suggest the seniors' menu. And you know you are a senior these days when you are called a member of "the greediest generation." The current deficit crisis is being laid at the feet of seniors due to the obligations of Social Security and Medicare.
We seniors think we are "entitled" to benefits since we have been forced all our working lives to contribute to Social Security and Medicare. Without our consent, a portion of our income and our employer's income has been paid into Social Security and Medicare. Now we are to believe that we are cheating the federal government by expecting them to uphold this forced contract when it turns out to be unrealistic!
The fact that everyone pays into the system gives the false impression we have been funding our benefits. When Social Security was being designed, the idea of being "on the dole" was a moral no-no. Language used in promoting Social Security stressed the word "insurance" to avoid promoting a welfare scheme. Even the name was changed in 1939 from the Old Age Benefits program to the Old-Age and Survivors Insurance program as part of the Federal Insurance Contributions Act.
President Roosevelt promoted the idea as "insurance." Roosevelt himself stated in a speech on November 14, 1934 that the program should encourage employment based on sound insurance principles and avoid the commingling of insurance and relief elements. Despite such statements, President Roosevelt understood that Social Security, etc. would be a transfer of wealth:
I want to save our system, the capitalistic system; to save it is to give some heed to world thought of today. I want to equalize the distribution of wealth.
The designers of Social Security went to great pains to separate the tax and benefit provisions for fear that the courts would rule against wealth redistribution. As late as May 1935, the Supreme Court had ruled the Railroad Retirement Act unconstitutional because "it violated the due process clause by taking the property of one and giving it to another."
To the designers' surprise, the court ruled in May 1937 (Steward Machine Co. v. Davis) that Congress had such power under Article III, Section 8 to "provide for the common welfare." Evidently, due process can be violated if the court feels like it.
Insurance-like or not, funding the program has always been an uphill battle against reality. Upon learning the original 1935 recommendation by the Committee on Economic Security would require government subsidies in the future, FDR said:
This is the same old dole under another name. It is almost dishonest to build up an accumulated deficit for the Congress of the United States to meet in 1980. We can't do that. We can't sell the United States short in 1980 any more than in 1935.
The use of the word "almost" is revealing.
As it turned out, this was exactly what happened. The Social Security trustees warned in 1982 that by July 1983, there would not be enough money to send out checks, resulting in the 1983 Social Security Amendments, which, among other things, taxed benefits for the first time.
As time went on, Social Security drifted toward a total pay-go system. The development prompted Edwin Witte, the original executive director of the Committee on Economic Security (which developed the original concepts of Social Security), to warn of a Santa Claus state, where benefits could be expanded without the government having to face the true cost.
Many of the Social Security chief actuaries resigned over the direction of the program and funding disagreements. One, A. Haeworth Robertson, stated in his book, The Big Lie: What Every Baby Boomer Should Know About Social Security and Medicare, called Social Security "one of the greatest frauds every perpetrated on the American public."
Social Security has been called a Ponzi scheme. A Ponzi scheme requires recruiting ever-increasing numbers of suckers. Under Social Security, the new suckers are forced to invest, but they are not in increasing numbers. The government seniors' menu has offered us a feast of benefits the system cannot deliver.
Those of us whose moral standard is to accept only what we have earned can accept less. Others will claim that whatever is offered has been earned, or worse, become full converts to the moocher class.
The fact that beneficiaries have paid into the system makes changes difficult. President Roosevelt stated:
Those taxes were never a problem of economics. They are politics all the way through. We put those payroll taxes there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.
This unrealistic situation has resulted in seniors being put into the moocher class, a portrayal we naturally resent. Despite what the AARP and Democratic politicians would have us believe, we are not helpless and can exist without government handouts.
Having been forced into this contract, seniors rightly expect to receive some benefits. After all, we have paid into the system. Seniors have every right to be angry that Social Security is not a pre-funded program, but an intergenerational transfer of wealth. We have been suckered, given the impression that the system was self-funded and not a welfare scheme. The nation has moved from a society which took care of and respected older family members to one which pits generation against generation. Most seniors would be disgusted at the idea of being carried on the backs of our grandchildren, yet that is where we are. Voilà another "victory" for the Progressives.
Schlesinger, Jr., Arthur. The Coming of the New Deal. Houghton Mifflin: Boston, 1959.
Schieber, Sylvester J. and Shoven, John B. The Real Deal, The History and Future of Social Security. Yale University Press: New Haven, 1999.