FRONT PAGE CONTRIBUTOR
The Bipartisan Social Security Demagoguery Must End Now
The source of the 76-year old monstrous lie
The recent Social Security demagoguery that has been propagated by Mitt Romney and other big-government apologists is truly repugnant. Accusing those who desire to preserve and expand personal retirement – of eliminating Social Security for seniors is akin to an arsonist blaming firefighters for fanning the flames. It was the very big-government statists like Romney who obfuscated and corrupted the original intent of Social Security; it is the modern day constitutional conservatives who desire to solve the SS insolvency – with a solution that corrects those vices.
On October 29, 1936, in a campaign speech that was rife with virulent class warfare, FDR spoke at length of his one-year old Social Security Act. He told the assembled crowd of blue collar workers in Wilkes-Barre, PA that their payroll taxes would be “held by the Government solely for the benefit of the worker in his old age.” He referred to Social Security as an insurance program numerous times throughout the speech, concluding that “in effect, we have set up a savings account for the old age of the worker.” (emphasis added)
It’s a shame Congressman Joe Wilson wasn’t around during the speech. He would have bellowed out an emphatic “YOU LIE.” As Walter Williams noted, from the inception of Social Security, its advocates lied to the American people by categorizing the program as a secure savings account or insurance plan, with a defined distribution commensurate to the original contribution, which would be guaranteed as an irrevocable right. The original government pamphlet on Social Security promised that “Beginning November 24, 1936, the United States government will set up a Social Security account for you. … The checks will come to you as a right.”
It is conservatives – those who criticize its current stewardship as a Ponzi scheme – who seek to preserve and restructure the program to reflect the way it was originally advertised. Unfortunately, the original Social Security Act was written by malfeasants who deliberately misled the public about the true nature of the law.
In Helvering v. Davis (1937), the Supreme Court confirmed that FDR had indeed lied about Social Security being an insurance program and/or a fixed savings account. They concluded that “proceeds of both (employee and employer) taxes are to be paid into the Treasury like internal revenue taxes generally, and are not earmarked in any way.” In fact, the entire rationale for upholding the constitutionality of the program was predicated on the notion that payroll taxes were like any other general revenue taxes. Thus, it became clear that FDR had told a whopper when he promised that the money would be held “solely for the benefit of the worker.” The law was purposely written so that the revenue would be muddled together with all other expenditures. This is what led to the depletion of the Trust Fund. And once the surpluses vanished in 1983, the entire concept of a Trust Fund became a myth.
In the other landmark Social Security decision, the Supremes ruled in Flemming v. Nestor (1960) that Social Security benefits are not considered “accrued property rights,” thereby revoking any “contractual right” to benefits. They observed that Congress drafted the original bill in a way that would preserve their right to change our taxes and benefits at whim. This is why Congress has raised the payroll tax 40 times, and could cut benefits or raise the retirement age at any time. It was this SCOTUS decision that allowed Congress to begin taxing benefits in 1983, thereby creating a perverse incentive not to work or invest money beyond retirement. Nestor also made it abundantly clear that the recipient’s heirs would not be entitled to inheritance because there were no “accrued property rights.”
Nevertheless, the first two generations of Social Security recipients were largely satisfied with the program. The fact that the money was not held “solely for the benefit of the worker” in a “savings account”, but instead, held in the general fund, cut both ways. Congress was able to award benefits to retirees any way they chose, irrespective of the original personal contribution. As such, those at the beginning of the Ponzi scheme were able to earn sizable windfalls. This is how Ida Mae Fuller, the first SS recipient, was able to collect $20,993 in benefits, even though she paid just $44 into Social Security.
Consequently, most people benefited from the lack of a confined and defined insurance plan or savings account (even though most continued to think of it as a defined trust fund; many still do). This was done by design to preclude opponents from criticizing the program when it would face its inevitable shortfalls. Anyone who pointed out the tenuous structure of the program, like Barry Goldwater did in 1964, was subjected to populist accusations – by liberals like George Romney – of stealing people’s hard earned money.
Today, we are witnessing the collapse of the Ponzi scheme. Current recipients are collecting benefits that barely account for inflation; while future recipients will actually lose substantial sums off the program.
Senior citizens rightfully express outrage towards proposed changes with the popular rallying cry, “it’s our money!” As conservatives, we absolutely agree with them; it is their money. Unfortunately, Congress wrote the original law granting themselves full authority to indiscriminately take away those savings. It is this very vice that we conservatives seek to rectify. It is this very problem that the original big-government arsonists seek to exploit and demagogue. Much like the original bad actors, liberals like Obama and Romney seek to perpetuate the same lies about the “Trust Fund,” even as they simultaneously propose ideas that will force us to continue raiding the general fund and contribute to the debt. In fact, they are the ones who want to cut benefits and raise the retirement age, without offering the option to hold a secure, albeit regulated, personal account.
We agree with FDR’s words; not his deeds. In his January 17, 1935 speech to Congress, FDR promised that the system would be “self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation.”
Let’s restore the promise for self-sustained savings accounts that will provide a commensurate and prosperous guaranteed right to recipients.
Let’s have our Republican candidates discuss the details and intricacies of such a plan, instead of misleading the public with disproven antiquated demagoguery. That would be a welcome departure from the original iniquities of the father of the modern day Democrat Part.