Right Wing Lies about Social Security
OK. I responded to this on another site, and I think it is worth a blog. So here is the initial piece of right-wing garbage on Social Security, together with my reply.
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The propaganda:
SOCIAL SECURITY:
Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised:
1.) that participation in the Program would be completely voluntary,
2.) that the participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program,
3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,
4.) That the money the participants put into the independent "Trust Fund" rather than into the General operating fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other Government program, and,
5.) that the annuity payments to the retirees would never be taxed as income.
Since many of us have paid into FICA for years and are now receiving a Social Security check every month -- and then finding that we are getting taxed on 85% of the money we paid to the Federal government to "put away," you may be interested in the following:
Q: Which Political Party took Social Security from the independent "Trust" fund and put it into the General fund so that Congress could spend it?
A: It was Lyndon Johnson and the Democratically-controlled House and Senate.
Q: Which Political Party eliminated the income tax deduction for Social Security (FICA) withholding?
A: The Democratic Party.
Q: Which Political Party started taxing Social Security annuities?
A: The Democratic Party, with Al Gore casting the "tie-breaking" deciding vote as President of the Senate, while he was Vice President of the U.S.
Q: Which Political Party decided to start giving annuity payments to immigrants?
MY FAVORITE:
A: That's right! Jimmy Carter and the Democratic Party. Immigrants moved into this country, and at age 65, began to receive SSI Social Security payments! The Democratic Party gave these payments to them, even though they never paid a dime into it!
Then, after doing all this lying and thieving and violation of the original contract (FICA), the Democrats turn around and tell you that the Republicans want to take your Social Security away!
And the worst part about it is, uninformed citizens believe it!
Perhaps we are asking the wrong questions during this 2004 election year!
If enough people receive this, maybe a seed of awareness will be planted and maybe good changes will evolve.
How many people can YOU send this to?
Keep this going clear up through the 2004 election!! We need to be heard!
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My reply
That is so much hooey it is hard to believe. This piece of propaganda is pure sophistry. There are so many lies and misconceptions linked together that it would takes weeks and a good research library to refute them precisely. However, I will try off the top of my head.
As personal qualification to answer this, I am an ex-employee of Social Security (1971 until 1979), and my father was a district manager from 1937 until he retired in 1974. I also have an MBA, an undergrad degree in Economics, and training in statistics and insurance. But I am working from memory right now.
I don't think you will find me far wrong, however.
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Look at:
http://www.ssa.gov/history/InternetMyths2.html
for the official take from the Social Security Administration, but here is mine below.
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My response:
1. Never voluntary. It was known from the beginning that it had to be mandatory to be actuarially successful.
2. The first tax was 1% of the first $3,000 in income for employees. That remained the case until some time in the 1950's. Farm workers and self-employed were exempt until the Eisenhower administration.
3. FICA taxes were never tax deductible.
4. It was always put into an independent "Trust fund" and still is. (see www.SSA.gov) The issue was what did the trust fund invest it in. Wall street wanted then money in the 1930's and still does, but who could you trust to decide which stocks or bonds got the money? It was clear from the beginning that the sums involved would be large. Also, how much risk could the treasury take with such public money?
The answer was to place it in the lowest risk investment in the world - US government bonds.
Even today, if you ask any qualified finance, economic or actuarial professional what the accepted standard for the risk-free interest rate is, they will tell you it is US government bonds.
So that is where the money in the trust funds in invested.
As long as the money in the Trust funds was reported separately from the government debt, there was no confusion. LBJ had the two budgets combined in 1968 into the "unified budget" to conceal or minimize the level of the deficit being run to pay for Viet Nam. But it didn't take effect until 1969 when Nixon took office. He could have stopped it, but didn't. After a while the politicians got semi-honest and instituted the 10% income tax surtax to pay for Viet Nam.
I notice no such effort towards honesty under Bush.
5. There was a promise in 1935 when the law was first passed that social security benefits would not be subject to the income tax.
Reagan, reacting to the danger that the baby boomers would not be able to collect Social security, called for the 1983 Social Security Commission.
That 1983 Social Security Commission under Reagan decided that for high-income retirees the 50% of the income paid for out of the employer half of the FICA tax would be taxed. Note that this portion of the FICA tax was not previously taxed to either the employee or the employer.
Nor was the income from it taxed to people whose only income in retirement was from Social Security. Only the income for higher income retirees that resulted from untaxed FICA taxes.
Therefore NONE of the money that the employee paid into FICA is EVER taxed. Even now. For anyone. Even Donald Trump.
----The money in the trust fund has ~never~ been placed in the General Revenue fund. That hasn't happened. That the government ~borrows~ the money is explained above in the section on how it is invested in the most risk-free investment in the world.
The requirement is that the money in the trust funds be invested in the lowest risk investment possible. When the trust fund buys treasury bonds, that is accomplished. There is no other equally safe investment. Not even close.
Remember, higher return comes ~only~ with higher risk.
----The FICA tax has never been deductible under the income tax. This is pure fantasy.
----Taxing half of social security benefits for people with higher retirement income occurred in 1983. Al Gore became Vice President in 1992. Someone needs to cut the crap. George Bush was President of the Senate then.
----SSI (Supplemental Security Income) is not Social Security. It is the older set of programs dating back to the 1930s called Aid to the Aged, Blind and Disabled. They are welfare programs paid out of general revenue funds, and they were transferred from state administration to federal administration in 1972 under Nixon. (http://www.ssa.gov/history/pdf/ssi.pdf)The fourth program, Aid to Families with Dependent children (AFDC) was NOT included in the shift to federal administration. It was replaced by TANF under Clinton in 1996.
SSI has never been social security, but when federalized it was given to the Social Security Administration to Administer. It is a ~general revenue fund~ welfare program funded out of non-FICA money just as it always was (since the 1930's). The Social Security Administration is fully reimbursed for the cost of administering the program. Which, by the way, is a lot lower than when the states administered it because of the consistent nation-wide standards.
[As an aside, a similar savings in ~cost of administration~ would occur if private health insurance were replaced by a single-payer federal health insurance plan. The estimates are that the savings would be ~at least 25%~ of the current cost. Which would still leave the US the highest cost health insurer in the world on a per capita basis.]
It wasn't federalized under Jimmy Carter, or even under Gerald Ford. It was done under Nixon. And by the way, when it was done, Reagan was Governor of California and sharply increased the payments under SSI to the recipients in that state.
Originally Wall Street tried really hard to get the trust funds of Social Security invested with them (at about 1.5% per year fee on the total balance.) Congress decided that placing those funds in the safest investment in the world at no fee was a lot better investment.
Wall street still wants that money. That is what the privatization arguments are all about.
Do you want Enron or Michael Milkin taking your retirement money? That is what the Republicans are proposing. But hey, they will get Arthur Anderson to account for what they do with it. What more could you ask??
----Let's look at retirement planning.
What you want to do as a priority is manage your risk. You want your basic minimum retirement funds placed in an investment or other vehicle that first, minimizes risk on the basic minimum of your retirement.
You want something that guarantees you a benefit no matter what - even in the event of bankruptcy or other catastrophe. If you are sensible, that means you recognize that you have to give up some chance of high return. Otherwise, why not just 'invest' all your retirement money in lottery tickets? Does that meet the test of security for your retirement funds? No.
Social Security meets this test. It won't make you rich, but you can't spend it and it can't be taken from you. Ask divorced retired military what happens to their pensions during the divorce. Ask investors what happens to their real estate and stocks when they declare bankruptcy.
Social security is not going to make you rich. But it will guarantee you a minimum income. NO OTHER USE OF YOUR MONEY WILL GUARANTEE THAT!
If you want more, then rents, other pensions, and investment income can supplement the minimum.
But the Republicans want you to put your Social Security tax money into higher risk investments ~that they get commissions on. ~
Guess what? The promise of those possible higher commissions allow them to spend a lot of money to convince the suckers to give up their guaranteed minimum Social Security and exchange it for mere promises of higher income.
That is simply bad retirement planning.
I hope this helps.
posted by Richard at 8:44 PM
