Social Security's Achilles Heel

The System was Financially Unstable from the Start

By now most everyone is aware that the Social Security program is not a sound program financially and that it is only a matter of time until it goes broke.

Even its supporters admit that the only way to keep it limping along is through periodic tax increases.

The system is basically a Ponzi scheme in which the tax contributions of current workers pay the retirement benefits of current retirees, as the contributions of current retirees was used to pay the pensions of those who retired before them.

One only has to look at Ida Mae Fuller, the woman who received the first Social Security check issued, for proof of this. Just go to the Social Security Administration's website where Miss Fuller's Social Security tax payments are listed.

Ida Mae Fuller - The recipient of the first Social Security Check
Ida Mae Fuller - The recipient of the first Social Security Check | Source

Like other working Americans, Miss Fuller, who worked as a legal secretary in Ludlow, Vermont, began paying Social Security taxes when the system started in 1937. In November of 1939 she retired and, upon turning 65 in January 1940, began collecting Social Security.

The sum of Miss Fuller's Social Security tax payments over the nearly three years she paid into the system came to $24.75 and her first Social Security retirement check was for $22.54.

With her first monthly check Miss Fuller got back 91% of what she had contributed, then went on to live to be 100 and, in the process, collected a total of $22,888.92 in Social Security benefits. Even Enron's accountants were not able to devise a scheme that produced returns like this.

Even without the demographic changes which have occurred over the years - the decline in birth rates and advances in medicine which have led to more people surviving to old age and, in old age, people living longer - the system is financially unstable.

In fact this model of paying returns to early participants in the the system with the investments of those coming later, a scheme made famous a decade and a half before Social Security by Charles Ponzi, is so fraudulent that not only was Mr. Ponzi sent to prison for fraud but so has everyone else who has been caught trying to sell these schemes.

The only reason this system has worked so long for the government is because the government has forced most of the working people in the U.S. (with the exception of members of Congress who originally exempted themselves from having to participate) to join the system and, when the system begins to weaken, has forced them to raise their contributions through increases in the tax.

Supreme Court Rulings on status of Social Security

Social Security was originally sold to the American people as a combination of social insurance (the disability and survivors provisions of the law) and a pension scheme.

The government continues to refer to the program as an insurance and pension program and most people continue to believe it to be such.

However, the reality is that the program is really nothing more that a law passed by Congress which provides for a tax on incomes and a welfare system whereby money is transferred from working people to people who are retired, disabled or are young children in families where one of the breadwinners has died.

For proof that the system is not a bonafide insurance or pension program one only has to read the 1937 Supreme Court opinion delivered by Justice Cardozo in the case of Helvering vs Davis in which the Court clearly stated that Social Security was not an insurance or pension plan but was simply a law providing for a tax and a welfare program.

In their opinion the Justices further pointed out that while the law creating Social Security called for the creation of an Old-Age Reserve Account by the Treasury Department, it was up to Congress to allocate funds for the account as it saw fit.

The Old Age Reserve Account was, and still is, nothing more than a place to hold the funds that Congress appropriates each year that are to be paid out that year in benefits. The Court went on to stipulate that Congress was under no legal obligation to allocate the funds collected by the Social Security tax to the account and could spend the funds collected as it saw fit.

Two and a half decades later in the 1960 case of Flemming vs Nestor the Court reversed a lower court ruling and ruled that Congress could, with a simple majority vote, modify, amend or repeal all or part of the law, even going so far as to repeal the welfare provision but keep the tax.

This Supreme Court decision also made very clear that taxpayers who paid into Social Security did not have any contractual right to benefits declaring THE NONCONTRACTUAL INTEREST OF AN EMPLOYEE COVERED BY THE ACT CANNOT BE SOUNDLY ANALOGIZED TO THAT OF THE HOLDER OF AN ANNUITY, WHOSE RIGHTS TO BENEFITS ARE BASED ON HIS CONTRACTUAL PREMIUM PAYMENTS.

In other words, Social Security is not like a 401(k) plan, annuity or other type of private investment plan which the individual owns and has contractual rights to the income and the principal.

High Taxes in Mid-Twentieth Century Forced People to Rely on Social Security

Of course, in the era in which both of these cases were heard there was no question of Congress altering the program to take away people's benefits or using the tax funds collected for other purposes.

Any member of Congress who even dared to raise the the issue of changing Social Security was guaranteed to lose the next election. But the reason for this was that, thanks to very high income taxes (with marginal rates as high as 90%), the vast majority of the population had no choice but to rely on Social Security for their retirement.

Conservatives and libertarians often point out that private property is a cornerstone of freedom in that owning property enables people to support themselves and be independent.

However, when the government confiscates property, as it does through high taxation, people lose their ability to be self-reliant and become dependent upon those who control the property, a concept stressed in Frederic Hayek's famous book The Road to Serfdom.

The urban legend-like story about the brutal communist dictator, Joseph Stalin, and the chicken nicely illustrates the relationship between property and dependency. The story goes like this.

One day while relaxing with associates at his dacha in the former Soviet Republic of Georgia, Stalin was having some difficulty getting his associates to understand the relationship between control and power.

Seeing the chickens running around the courtyard where he was sitting, Stalin decided to demonstrate his theory. Grabbing one of the chickens, he began pulling fistfuls of feathers from the terrified chicken. The chicken struggled and fought back fiercely, but Stalin held it firmly with one hand while he removed the feathers with the other.

To the surprise of Stalin's audience, as soon as all the feathers were removed the chicken stopped struggling and fighting and became very docile, snuggling peacefully into Stalin's hand.

Stalin then explained that without its feathers to keep its body heat inside, the chicken would quickly die of the cold if it stayed in the shade and, lacking any pigmentation to protect its skin from the sun, its skin would be severely burned if it ventured into the sun for warmth.

The chicken, like the millions of people who had had their property taken by the communists, had no choice but to peacefully submit in order to survive.

It is true that people in the era 1930 - 1980 were free to save for their retirement. However, to accumulate the sums needed to support ones self in old age, it is necessary to take advantage of what is known as compounding.

This is the process by which one invests money - either in interest bearing accounts or stocks/mutual funds which pay dividends - and allows the interest/dividend income to be reinvested as additional savings which generate increased interest or dividends in the next cycle.

Unfortunately, interest and dividends are considered income for tax purposes and are subject to the income tax.

Over time the interest and/or dividends steadily increase and not only push the owner into ever higher tax brackets but increasingly force the investor to either pull money from the investment to pay the taxes (thereby reducing the compounding effect) or pay them from current income (thereby severely limiting the person's current spending.

The Seeds of Change are Planted

Despite the fact that people would punish at the polls any politician who threatened to cut their promised Social Security benefits, many did not like the system, especially the Social Security tax which had to be increased periodically to keep the system solvent.

Then three events occurred in the two decades between the mid-1960s and the mid 1980s which laid the basis for undermining the system and weakening the chains the bound citizens to it.

The first was the introduction of IRA (Individual Retirement Accounts) during the Carter Administration. Social Security was in the midst of one of its recurring financial shortfalls and the government realized that they could never raise taxes high enough to provide the comfortable retirement that people were coming to expect.

Therefore, along with the tax hike to fix the immediate problem, the law provided for the creation of Individual Retirement Accounts which people could open and invest up to $2,000 per year (since increased) for retirement.

To encourage people to open these accounts, Congress not only allowed taxpayers to deduct the funds invested each year from gross income for Federal Income Tax purposes (but not for Social Security or Medicare tax purposes) but also allow the income generated by the accounts to grow tax free until they were withdrawn at retirement.

A few years later, during the Reagan Administration, continuing problems with Social Security financing as well as with private pensions, led Congress to again raise taxes for the immediate problem and create a much bigger retirement income savings option, the so called 401(k) accounts.

401(k) accounts allowed employees to contribute a significantly larger amount than the IRA limit AND their employers were given the option of matching, up to 100%, the contribution of the employee in lieu of providing a traditional pension plan.

Like IRAs, contributions were deducted from income for Federal Income Tax purposes and the income generated was allowed to grow tax free.

The third change involved severely restricting an employer's right to insist that employees retire at age 65.

While never a legal requirement, with the introduction of Social Security age 65 became a de facto retirement age which resulted in many people being forced into retirement at age 65. The government also relaxed the penalties on working and collecting Social Security.

It has taken some time for funds invested in IRA and 401(k) accounts to grow but, in the decades since these reforms were initiated, ever increasing numbers of new retirees and workers approaching retirement are finding that they no longer have to rely on Social Security.

Sure, having paid into the system all these years, they would like to collect it, however, since they are no longer financially dependent upon the program for survival they won't fight very hard to defend the system.

Until recently, these people along with younger workers, most of whom are coming to accept the fact that the system will go broke long before they retire, have had an incentive to continue to support the system politically.

These retirees had little choice in that their already retired parents or grandparents, who, because of their age, had little or no opportunity to take advantage of IRA and 401(k) accounts for a long enough time to accumulate sufficient funds to be financially independent, were dependent upon the system for their retirement.

But old age is taking its toll on this group of older retirees and, as they die, the system not only loses their support but the support of their Social Security Taxpaying children and grandchildren.

As time passes, ever growing numbers of people will no longer need to rely on Social Security. Not only will increasing numbers of them not fight to save the system, but many of those still working will push for its demise in order to escape the burden of the Social Security Tax. And tax cuts of any kind are very popular with voters these days.

Adding to the momentum for abolishing the system is the fact that the so called baby boom generation, a big chunk of the population, is giving every indication that many of them have no intention of retiring and ceasing to work for income.

Sure, most will leave their present jobs and begin collecting their pensions and tapping their retirement savings, but these people will also continue working somewhere and often for themselves by starting their own businesses. Not only won't these people need Social Security but will increasingly resent having to continue paying for it.

Senator Barry Goldwater whose Suggestion that Social Security be voluntary cost him the 1964 Election for President
Senator Barry Goldwater whose Suggestion that Social Security be voluntary cost him the 1964 Election for President | Source

Social Security is no Longer Immune from Debate or Criticism

Here is where the Supreme Court cases cited above come into play.

Since Social Security is simply a law providing for a special income tax and welfare program, it is directly under the control of Congress. Once a majority of the members of Congress see that they can get more votes for reelection by opposing rather than supporting Social Security, the law could quickly be repealed.

If provision is made to use general revenues to keep the monthly pension checks going to the dwindling pool of retirees still dependent upon the system, that group will have no reason to oppose dismantling the rest of the system.

Even though the government can keep the system financially viable for the next quarter century or more, it could be terminated politically much sooner.

The writing is already on the wall. In 1964 Republican Presidential Candidate Barry Goldwater, in response to a reporter's question, made an off-handed remark that maybe Social Security should be made voluntary.

That single remark all but lost the election for him and was a big factor in Lyndon Johnson's huge landslide that year.

Opposing Social Security Ceases to be an End to a Political Career

For the following two decades, Social Security was known as the third rail of politics promising instant political death to any candidate who so much as hinted at changing its basic structure.

However, in the 2000 election, George Bush suggested that a tiny portion of a person's Social Security Tax contributions be put into a private account in which the funds in it were the property of the individual contributor.

While this generated considerable criticism, it did not prevent George Bush from winning the election.

Not only was George Bush not punished by the voters for suggesting this idea, but exit polls in that election showed that some other Republican candidates in that election actually benefited from urging the privatization of Social Security.

A final result was that Social Security became a debatable item - no longer could critics of the system be simply dismissed as crackpots as supporters of the system found themselves increasingly being forced to come up with arguments to defend the system.

The 2008 Presidential election witnessed four of the then current eight Republican Presidential candidates come out for full or partial privatization of Social Security in a primary campaign debate.

In fact, of the seven in that debate only Senator John McCain came out in favor maintaining the system with yet another tax increase.

Governor Huckabee went so far as to say point blank that not only should younger workers be freed from the system and told to save themselves for their retirement but also proposed that older workers and recent retirees be offered a one time cash settlement to leave the system.

Congressman Ron Paul stated that the government had an obligation to guarantee the pension for retirees already receiving Social Security and for older workers nearing retirement who were planning on Social Security as their main source of income in retirement.

With that stipulation he then indicated that the Social Security law should simply be repealed. Not only was the audience receptive to these proposals but there was no big outcry over these proposals in the days that followed.

In the years leading up to the 2000 election Social Security ceased to be off limits and became a debatable topic with the emphasis on the best way to reform it in order to save it.

In the years since the 2000 election the debate has increasingly focused on how long it can be kept going. Based upon the recent Republican debate discussed above it now appears that the debate is moving toward how and when to abolish the system.

How Confident are You About Social Security?

If you are a younger person do you expect to receive Social Security OR if you are retired do you expect to receive Social Security for the Rest of your life?

  • I am a young person and I expect Social Security to last until I retire
  • I am a retiree and I expect to collect Social Security until I die
  • I am a young person and I DON'T expect Social Security to last until I retire
  • I am aretiree and I DON'T expect Social Security to last until I die
See results without voting

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Comments 24 comments

Larry Wall 15 months ago

Chuck;

You make an interesting point about the means testing and possible reduction or elimination of benefits for some people, if their income is such that they do not need it. To some extent, we have that in if you have income which exceeds half of your SS benefit. At that point you lose part of your benefit. The richer you are, the less your benefit will be, remembering, that it is unlikely you pay SS taxes on your total income. I honestly do not know if there is a stopping point allowing a person to keep a portion of his benefits or if the interest earned would lead to a benefit reduction. Many would say that is not fair, because if you pay into it you should get some return. We all pay taxes on matters where we get no direct return. I have no children in school, but I pay school taxes. I seldom use the library, but pay a library tax. There are streets in my city and state I never use, but I pay taxes to build and maintain them. Thus it would not be a stretch to have people who pay Social Security Taxes, and if it comes to the point, that the person because of income, other investments, etc., does not need the Social Security benefit, then those funds could go back into the system, to help pay other people. Few of us know when we are in our 20s or 3os if we are going to be mulch-millionaires and therefore, not need the Social Security benefit. If at some point a millionaire or other person with significant income loses a portion of his fortune that would make him eligible for SS benefits, he could be reinstated.

We all pay a lot of taxes for services we do not directly use, but help our communities. The same approach could be used for Social Security and those that are extremely wealthy. The elimination of the benefits could be ruled to be contribution in part and be deductible on income taxes. There are ways to dealing with the problem. We need to stop spending the excess income on anything other that investment in future Social Security payments. The revenue cap should be increased and a small increase in the Social Security tax may solve the problem. I do not have the skills to project possible percentage of people who would have excessive income and the amount of Social Security benefits that would no longer be drawn. However, I think it is an issue worth considering.


Chuck profile image

Chuck 15 months ago from Tucson, Arizona Author

Larry Wall - thanks for your comments. You make many good points. I agree with you that Social Security will probably not disappear anytime soon and that those who are currently retired or near retirement age (as I am) will probably continue to receive some sort of payments from the system for the rest of their lives. However, I have warned my children not to count on receiving Social Security retirement benefits when they retire.

Further, while I don't expect Social Security to disappear in the near future for our generation, I do see some dark clouds on the horizon. The term "Means testing" for benefits is being heard more frequently. Unlike Barry Goldwater whose Presidential campaign suffered a near fatal blow (the Johnson TV campaign ad showing a little girl picking daisies in a field with a nuclear mushroom cloud expanding in the background is what finally guaranteed his defeat) there was very little outcry when NJ Governor Christie recently proposed Means Testing as an option. I do believe there is a risk that those who continue to work after age 70 or have pension and other retirement savings income in excess of a certain amount are liable to see their Social Security benefits cut or eliminated. Then there is the threat of inflation. Even if the current COLA (cost of living adjustment) remains in place and unchanged (and there is increasing talk of changing it) a major inflation will reduce Social Security and other fixed dollar income to pocket change. At the start of the 2007-08 recession a business report on CNBC stated that, in their efforts to shore up their banking systems, central banks (including the U.S. Federal Reserve) began creating and pumping trillions of dollars worth of reserves into their banking systems. As I recall the reporter stated that the total reserves created was greater than the total amount of currency in circulation in the world at that time. If banks ever start aggressively lending these reserves hyperinflation will probably result.

My father-in-law is a retired Soviet Air Force pilot. He retired with, for that place and era, a good pension and the Soviet version of Social Security. The inflation and economic disruption following the collapse of communism and breakup of the former USSR reduced the purchasing power of his pension and social insurance. The economic decline and currency devaluations of the late 1990s and early 21st century forced him to take a job in a television assembly plant which then closed in an economic downturn in 3001 or 2002. My mother and father in law are getting by but have a very modest lifestyle.

Thanks again for your comments.


Larry Wall 15 months ago

I do not totally disagree with you, but your approach concerns me. Years ago, there was a move to allow people to create retirement accounts that would allow them to use part of their Social Security Savings and invest it in a limited number of options. The market crashed, and that idea died. Today Social Security benefits are paid with the money the system receives each year, and the income is still in excess of the payments. Unfortunately, that excess income is going into the wrong place. There is a ledger entry in the Social Security Trust fund, but even those funds may become due. They will not be payable.

It was stated that people should not be forced to work until they were 70 to draw benefits. Unfortunately, there are people like me, who lost their jobs after 23 years at age 60. I started drawing at 62. My wife, a former teacher in the Catholic School system, could draw on her own work credit which equaled about half of what I receive. The point here is that we could not live on that amount. However, the 401K I contributed to for 23 years has served us very well. Furthermore, when my forced retirement we had paid off our house, car, etc. The problem, I encountered, and it has been solved was that when I was 60, insurance companies could turn be down because of my age and prior health. Thus, I happened to end up in the hospital for different reasons about five times in two years. With the Affordable Care Act or Obamacare if you rather, I am paying my share for a pretty good policy, and the amount equals about what my share was for my former group policy. I will be on Medicare next year. I handled Medicare for my mother and mother-in-law. There is a bureaucracy that can be troublesome, but you can work your way through it. If you can keep working to age 70, great. I planned to retire at 62 and to continue using my company insurance. The company changed that by eliminating my position and ending insurance for retirees.

So what does all of this mean.

1. Social Security is going to be around. As Ralph Deeds noted in this Hub and in response to one of my Hubs, that it is necessary to raise the income cap for paying Social Security Taxes. A slight increase in the tax would not be out-of-line. Social Security was never intended to be the sole source of retirement income.

Medicare is not going away--it may one day be part of Obamacre.

Individuals have to plan for their retirement. That is not easy when you have a low-income job, and in those cases, some assistance must take place.

Raising the income cap on Social Security taxes and then devising a method where the excess funding goes into a special account and cannot be borrowed, used as collateral or anything like that will solve much of the problem. People need to save and most of us are not going to be traveling the world when we retire.

Congressional benefits are not the problem. Members of Congress are now in the Social Security System, and yes, they get other perks, but those are 535 people-good whipping boys, but not the whole problem.

The government has to get its spending order. Our overall tax system needs an overhaul, but Social Security and Medicare are the two most sacred of all the Sacred Cows in Washington. They are not going away. They may not be as good as we would like them, but there will be a basis. Obamacare is working and is going to function even better. I have been on it for almost 18 months. I made my share of phone calls, but I have coverage and I plan to use a Medicare advantage plan to have even better coverage when I turn 65 next year. My wife will turn 65 this year so we can see what she can get, I can adjust it for myself the following year and by the next year, we will both be on the same page. My wife comes from a family blessed with good health. Her mother lived to be 92. She had three uncles die when they were 90 plus and one still living--and driving-- who is 103, and very mentally alert.

You offered the following comment:

"Since Social Security is simply a law providing for a special income tax and welfare program, it is directly under the control of Congress. Once a majority of the members of Congress see that they can get more votes for reelection by opposing rather than supporting Social Security, the law could quickly be repealed."

I am not a betting person, but I would wager that scenario is not going to happen.

Finally, everyone brings up what past Presidents and Congress did and did not do. Those are good history lessons, but the only bearing they have on this discussion is that they are part of the Social Security law. It is not going to be repealed. It may and should be amended, and greater protection should be instituted to secure the excess income that it is currently draws and could be drawing if the cap for levying Social Security taxes on income was raised.


OpinionDuck profile image

OpinionDuck 6 years ago

Chuck

You have to update this hub, it needs to be shared once more.

As Social Security and Medicare have been adjudicated as taxes, as you point out, then so will National Healthcare.

FDR and the Democratic Congress of that time, forced Social Security and Medicare on us for the last seventy five years, while they purposely didn't include themselves nor government employees.

The National Healthcare will be the next seventy five years, thanks to Obama and the Democratic Congress.


Ralph Deeds profile image

Ralph Deeds 7 years ago

A recent study indicates that increasing reliance on 401k plan savings may be discouraging people from retiring because of declines in the value of of their accounts, thus destabilizing the economy.

http://www.nytimes.com/2009/09/03/business/03retir...

“One unappreciated side effect of the 401(k) system is that it’s a sort of reverse automatic stabilizer,” says Teresa Ghilarducci, an economics professor at the New School.


David 7 years ago

Chuck, you seem to have a problem with returning peoples' money after it has been used by the government for warmaking and for all kinds of billion dollar handouts to the ultra-wealthy elites and their corporations of this country.

You write this column and ho hum around about how Social Security is a bad idea and that it is bound to fail. Chuck, you are just blowing smoke for the stupid unregulated free market crowd that is dragging this country into the abyss of bankruptcy with their greed and billion dollar cheating.

I paid in uninflated dollars earned with 45 years of real, wealth producing labor. Government periodiocally doubles the money supply to inflate itself out of war debt, three times during my working career. Now, before I die, I should be getting back about what I paid in over 45 years, doubled three times, which is a considerable amount.

You talk about social security being a ponzi scheme. Well, the entire US financial system is a ponzi scheme, and you appear to be a supporter of this scheme. You want people's SS dollars in the stock market so the elites can skim them off and go live on their estates in Costa Rica and elswhere while old people here starve to death. Well luck to you too you heartless, selfish brat.

I'm old now and I want my damn money back.

Thanks for the forum


tech for geek 8 years ago

LOL....is it true or what ??


Confidential Access 8 years ago

Government must fix it .....

i think i gonna save this on my blog....can i have a backlink ???

Regards,

http://www.confidential-access.com


Job Nigeria 8 years ago

What a system....thanks for sharing it


jordan 8 years ago

The road to even beginning to improve the social security system will be a very long and difficult one, despite what anybody else says. It's gonna force Bush to pull his head out of his ass so he can see what he's doing!!!!


College politico profile image

College politico 8 years ago from Alexandria Virginia

Social security in a nutshell:

Government: The American people are clearly too stupid or lazy to save money for themselves... We must take the money they have earned and put it into our own horribly flawed system (which is a lot closer to an IOU system than any kind of savings system). That way when they go to collect their money (if they're lucky enough to retire before the system self-destructs) they will always be reminded of how truly stupid and unable to care for themselves they are and how much they really need us to do everything for them.

American Public: yay sign me up! After all FDR is a God and everything he does is brilliant!


cpa profile image

cpa 8 years ago from Brooklyn, NY

Excellent hub. Now if only someone in Congress would listen and fix it.


darron profile image

darron 8 years ago from New York City

Wow, well written hub!


Ralph Deeds profile image

Ralph Deeds 8 years ago

Oops! Wrong link. Here's the correct link to Paul Krugman's op-ed http://www.nytimes.com/2007/11/16/opinion/16krugma...


Ralph Deeds 8 years ago

Paul Krugman's column this morning (11-16-07) is entitled "Played for a Sucker" is linked below. Krugman is critical of Obama's receent statements that major action is needed to avert a "crisis" in Social Security...

Krugman continues "To understand the nature of Mr. Obama's mistake, you need to know something about the special role of Social Security in American political discourse."

"Inside the Beltway, doomsaying about Social Security--declaring that the program as we know it can't survive the onslaught of retiring baby boomers--is regarded as a sort of badge of seriosness, a way of showing how statesmanlike and tough-minded you are....

"But the "everyone" who knows that Social Security is doomed doesn't include anyone who actually understands the numbers. In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided.

"As Peter Orzag, the director of the Congressional Budget Office, put it in a recent article co-authored with senior analyst Philip Ellis: 'The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country's financial health will in fact be determined primarily by the growth rate in per capita health care costs.

"How has conventional wisdom gotten this so wrong? Well, in large part it's the result of decades of scare-mongering about Social Security's future from conservative ideologues, whose ultimate goal is to undermine the program.

"Thus, in 2005, the Bush administration tried to push through a combination of privatisation and benefit cuts that would, over time, have reduced Social Security to nothing but a giant 401k. The administration claimed that this was necessary to save the program which officials insisted was 'heading toward and iceberg.'

"But the administration's real motives were, in fact, idological. The anti-tax activist Stephen Moore gave the game away when he described Social Security as 'the soft underbelly of the welfare state,' and hailed the Bush plan as a way to put a 'spear' through that soft underbelly.

"Fortunately, the scare tactics failed....

"That should have been that. What Jonathan Chait of The New Republic calls 'entitlement hysteris' never seems to die. In October, the Washington Post published an editorial castigating Hillary Clinton for, um, not being panicky about Social Security--and as we've seen, nonsense like the claim that Social Security is a Ponzi scheme seems to be back in vogue, [Even in new trendy media like HubPages!]

"Which brings us back to Mr. Obama...

"I don't believe Mr. Obama is a closet privatizer...

"But Social Security isn't a big problem that demands a solution; it's a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders."

http://salon.com/ent/feature/2007/11/15/sexiest_ma...


Ralph Deeds profile image

Ralph Deeds 8 years ago

The 61 percent was for keeping Social Security as it is without private accounts, not for "keeping it alive." Obviously, the percentage for "keeping it alive" would have been much higher. Your phrasing "Keeping it alive" is quite revealing of where you are coming from--i.e., out to kill and bury Social Security at a time where defined benefit pensions are disappearing along with company paid health care for retirees. I'm sure you're an admirer of Grover Norquist and the "starve the beast" crowd who advocate tax cuts even in the face of growing federal deficits out of the hope that programs like Social Security and Medicare will be starved to death. Not to mention the FDA, SEC, OSHA, EPA, etc.


bihargyan profile image

bihargyan 8 years ago from India

A 4 yr old child i so demanding i am inspired to know u have time 4 urself.


Chuck profile image

Chuck 8 years ago from Tucson, Arizona Author

Ralph,

Thanks for your additional comments.

The situation still comes down to freedom and choice. As I recall the Bush plan, individuals would first have a choice as to whether or not they wanted to have a tiny percent of their Social Security contributions directed toward a private account within the system. They could choose to keep everything within the current Social Security plan. Second, if they chose to go with the option of putting some amount (and it was a small percent of their current contribution) into a private plan, there were a range of investment options to choose from besides stocks. I think that the fierce opposition by the left to the Bush plan is due to the fear that a large number of people would take advantage of the plan and, when they saw how the earnings from that part of the plan compared to the paltry returns from Social Security they would demand major change.

As to the 61% to 29% favoring keeping Social Security as it is rather than letting younger voters choose, that is revealing in a couple of ways.

First of all it could be interpreted as an example of "tyrany by the majority" a practice by which the democratic process allows the majority to lay claim to the property of the minority simply by having more votes. The Founding Fathers were very concerned about this and tried to put controls in place to prevent this from happening. Again, this is an example of not allowing people to decide how to allocate their own money which they have earned through their labor.

Second, the numbers can be looked upon as further evidence of the argument I made in my Hub that the numbers are changing. Social Security is now a debatable issue and no longer a sacred cow that is beyond question. Sixty one percent support for a program may be good for keeping a program alive for today, but that number is a significant drop from a few decades ago when the support was nearly 100% and the program beyond question. Also, if the question was whether or not to let younger voters choose the poll numbers probably break along generational lines which would naturally leave the younger generation in the minority. But if most of the 29% opposed are in the younger generation and most of the 61% in the older generation, then demographics will close that gap in the next few years and it won't be too long until the magic 51% shifts to those opposed to the program.

As always, it's a pleasure exchanging ideas with you.

Chuck


MrMarmalade profile image

MrMarmalade 8 years ago from Sydney

I do believe that Australian social security is way out.

The politicians of Australia have no trouble accepting an increase in their own income.The excuse it it is given by an independent body and they have no say in it.

I have seen over the years only Political person refuse to take what was granted to. The mayor of a local council.

A ACA programme featured several young people on the dole, and they were proud of being able to skin the public purse for their benefit.

I live by the beach and it's amazing how many young people are out in the surf.

I often wonder how many are on holidays or just on benefits.


aglocoincome profile image

aglocoincome 8 years ago from Ostrava Poruba

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Ralph Deeds profile image

Ralph Deeds 8 years ago

You are correct that public opinion is divided on what needs to be done about Social Security. Here is a Newsweek poll on various Social Security issues. [I couldn't get the link to work.] One of its conclusions was that 56 percent of Americans believe that investing Social Security money in the stock market is too big a risk.

Social Security is one of the most popular programs (outside the Cato Institute)in U.S. history and nearly everyone suports keeping it solvent. But a consensus has yet to emerge on what approach the government should take.

A Princeton Survey Research Poll conducted in January 2005 showed

61 to 29 percent of voters say that keeping Social Security Solvent as a program with a guaranteed monthly benefit is more important than letting younger voters decide for themselves how some of their Social Security contributions are invested.

And by 61 to 24% voters say that Bush's November (2004) election victory does not mean that American people support his ideas on Social Security.


Chuck profile image

Chuck 8 years ago from Tucson, Arizona Author

Thanks for your comment Ralph. However, the fact is that many people don't like Social Security and the current trends seem to be in their favor. Also, while the interpretation of the facts in the article is mine, all of my facts came from the official website of the Social Security Administration. It is just a tax and welfare law and not only is there no trust fund like a legitimate investment fund would be required to have but, according to the U.S. Supreme Court and as clearly stated on the Social Security Administration's website, Congress and the Treasury have no obligation to maintain such a fund. Congress also has no legal obligation according to the Court's decision to fund the program yearly as it has been doing.

The fact that Social Security is mandatory, is sufficient evidence that it is not popular. If it was popular, people would willingly participate in the program.

Also, if Social Security is such a good program, why has Congress exempted it members from the system from the start and, instead, created its own Enron-style retirement program? One way to shore up the Social Security fund would be to merge the billions from the Congressional fund into the Social Security program and let members of Congress retire on the same Social Security pension as the rest of the nation. This would also mean that, unlike their current overly generous retirement plan which is funded entirely by the U.S. taxpayers, members of Congress would have to start paying Social Security taxes on their Congressional incomes which in 2007 are $165,200 for rank & file members, $183,500 for House and Senate leaders and $212,100 for the Speaker of the House Nancy Pelosi. It should be pointed out that the 2007 income cap for the Social Security tax is $97,500. The government only taxes the first $97,500 of income for Social Security tax purposes making the Social Security tax the ultimate regressive tax in that it hits the poor the hardest by applying the tax to the first dollar of income and continuing to tax, at the rate of 6.2% per individual for Social Security, up to the $97,500 cap after which additional income for that year is free of the tax. Of course, if you are a member of Congress whereby, despite the fact that your income would then be among the top 5% of incomes in the U.S. you would pay no tax for Social Security AND would have the taxpayers fund your retirement plan completely and from which you and your spouse can expect to receive millions in retirement pay.

As to Medicare, I heard Alan Greenspan comment during an interview promoting his new book that unless Medicare quickly introduces means testing for benefits it will be bankrupt within the next 3 - 5 years. This would make Medicare a pure welfare program and leave all of us who have been forced to pay into this pseudo insurance program all these decades have to turn around and pay again for real medical insurance when we retire. Is it any wonder that only 14 percent of the population feels that the members of Congress are competent and doing a good job?


Ralph Deeds profile image

Ralph Deeds 8 years ago


Ralph Deeds profile image

Ralph Deeds 8 years ago

Social Security is one of the most effective and popular programs ever adopted. It does need some small changes to assure the adequacy of its funding long into the future. Several alternatives can do the trick individually or in combination. They include the following: increase or remove the income cap to which the the FICA tax applies; increase the eligibility age for full benefits; or modify the formula for cost of living benefits to dampen the increases which currently exceed increases in consumer prices.

Libertarian ideologs and Wall Street persuaded George Bush to propose privatizing Social Security, but his program which was as full of holes as a Swiss cheese never got off the ground. Another of Bush's many missteps.

The real funding problem for which there are no simple or painless solutions is Medicare, not Social Security.

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