The Humble Libertarian

Building a small army to take over the world and... leave everybody alone.


Monday, April 9, 2012

FDR Would Have Opposed Today’s Social Security

According to economist Robert Samuelson, FDR never intended for Social Security to be an entitlement. What Samuelson does't understand or address is that SS was always intended to be a big cash cow of a slush fund for congress who spent the money on wars and other slop. Today, the SS Trust Fund is left with a big pile (trillions) of worthless IOU's that will never be paid. LBJ cleaned out the SS Trust Fund to fund the Vietnam War. Reagan implemented the biggest SS tax hike in history. That money has been squandered.
That's the provacative claim by Washington Post econ columnist Robert Samuelson...When Roosevelt proposed Social Security in 1935, he envisioned a contributory pension plan. Workers' payroll taxes ("contributions") would be saved and used to pay their retirement benefits. Initially, before workers had time to pay into the system, there would be temporary subsidies. But Roosevelt rejected Social Security as a "pay-as-you-go" system that channeled the taxes of today's workers to pay today's retirees. That, he believed, would saddle future generations with huge debts — or higher taxes — as the number of retirees expanded. Discovering that the original draft wasn't a contributory pension, Roosevelt ordered it rewritten and complained to Frances Perkins, his labor secretary: "This is the same old dole under another name. It is almost dishonest to build up an accumulated deficit for the Congress ... to meet." But Roosevelt's vision didn’t prevail. In the 1940s and early 1950s, Congress gradually switched Social Security to a pay-as-you-go system. Interestingly, a coalition of liberals and conservatives pushed the change. Liberals wanted higher benefits, which — with few retirees then — existing taxes could support. Conservatives disliked the huge surpluses the government would accumulate under a contributory plan.
Read the rest here
Bastiat Institute