SOCIAL SECURITY DECEIT
President Bush's call to allow Americans to take a portion of the money they
pay as Social Security taxes to set up private retirement accounts has to be
a good idea. Why? The more of what a person earns that's in his pocket and under
his control, the better off he will be. At a later date, when the details of
the president's plans are known, I'll address the various reform plans under
debate. For now, let's look at some of the gross political deceit, lies and
unkept promises that have become a part of Social Security.
Here's what a 1936 government Social Security pamphlet said: "After the
first 3 years -- that is to say, beginning in 1940 -- you will pay, and your
employer will pay, 1.5 cents for each dollar you earn, up to $3,000 a year.
... Beginning in 1943, you will pay 2 cents, and so will your employer, for
every dollar you earn for the next 3 years. ... And finally, beginning in 1949,
twelve years from now, you and your employer will each pay 3 cents on each dollar
you earn, up to $3,000 a year. ... That is the most you will ever pay."
Had Congress lived up to those promises, where $ 3,000 was the maximum earnings
subject to Social Security tax, controlling for inflation today's $50,000-a-year
wage earner would pay about $700 in Social Security taxes, as opposed to the
more than $3,000 that he pays today.
The next big lie is from the same Social Security pamphlet: "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." First, there's
no Social Security account containing your money, but more importantly, the
U.S. Supreme Court has ruled on two occasions that Americans have no legal right
to Social Security payments.
In Helvering v. Davis (1937), the court held that Social Security was not an
insurance program, saying, "The 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 a later decision, Flemming v. Nestor (1960), the court said, "To engraft
upon Social Security system a concept of ‘accrued property rights' would
deprive it of the flexibility and boldness in adjustment to ever-changing conditions
which it demands ..." That flexibility and boldness mean Congress can constitutionally
cut benefits, raise retirement age, raise Social Security taxes and do anything
it wishes, including eliminating payments.
If a private retirement company reneged on its promises, we could take it to
court. If Congress reneges on its promises, there's no judicial course of action
whatsoever.
Vital to any Ponzi scheme, like Social Security, is the ability to recruit as
many suckers as possible. In 1999, a little noticed part of President Clinton's
plan to "save" Social Security was to force 5 million previously exempted
employees into Social Security. If they were forced into Social Security, it
would have created billions in additional revenue. Guess what. Twelve senators,
including five Democrats -- Dianne Feinstein (D. Calif.), Barbara Boxer (D.
Calif.), Christopher Dodd (D.-Conn.), Richard Durbin (D-Ill.) and Edward Kennedy
(D-Mass.) -- descended on the White House to demand that President Clinton not
support forcing 5 million of their constituents into Social Security. They warned
of the adverse impact on employees in terms of lower rates of return and lost
flexibility.
Isn't that great? These are the same politicians who are now resisting President
Bush's call to allow Americans to take a part of their Social Security taxes
to put into private retirement accounts. If they'd go to bat for those 5 million
workers to remain out of Social Security, to avoid the adverse impact of lower
rates of return and lost flexibility, why would they fight to deny tens of millions
of workers a right to use a portion of their taxes to do the same?