A nasty and pernicious blog that is full of lies about Social Security has been floating around the internet for years. The latest version is called “Who took my money?” It claims to be bipartisan, but using one lie after another, it blames the Democrats for all of Social Security’s perceived problems. Let me address the allegations one by one.
It starts out with a brand-new twist. And it’s a whopper. It says that President Kennedy used Social Security money to create the Peace Corps and that since then, “our Social Security money has been taken from Americans and given to foreign nations.” Later in the column, I will address the issue of Social Security financing, But for now just take my word for it — this Peace Corps story is pure bunk!
The blogger then takes several swipes at Franklin Delano Roosevelt, the president who introduced America to Social Security as part of his New Deal in the 1930s. He claims that FDR promised that Social Security would be voluntary. Although there was some discussion of making it voluntary in the very early stages of planning, everyone, including FDR, quickly realized that for a national social insurance system to work, it had to be mandatory — as are all other Social Security programs around the world.
The blogger also says that FDR promised the tax rate would stay at the initial level of 1 percent of a maximum taxable base of $1,400. This is just pure baloney. Everyone, including FDR, knew that as the program matured and as the number of beneficiaries grew, the tax rate and wage base would have to go up. Are you paying the same amount of money today for a car or for a house that your grandparents were paying 80 years ago? Of course not. This blogger needs to take a course in basic economics.
And maybe as part of that course, he will learn how Social Security is financed. And when he does, maybe it will stop him from trotting out the timeworn argument that Social Security money has been “stolen and used for other government purposes.” Here are the facts:
Every day, almost $2 billion in Social Security payroll taxes are funneled into the government.
So what happens to that money? I guess the blogger thinks it should be buried under a mattress. That’s silly, of course. Just like any other pension system, Social Security money is invested. And because we are talking about trillions of dollars, the money cannot be invested in the private markets. (Would you really want the U.S. government owning half of Wells Fargo or Apple or Philip Morris?)
Instead, every nickel of that money is invested in U.S. Treasury bonds. And those bonds earn the prevailing rate of interest. (For those who really want to know the nitty-gritty of these investments, go to http://www.socialsecurity.gov and under the “Menu” option, click on “Actuarial Resources.”)
Millions of Americans have their money invested in government bonds. Do they think the government is stealing their money? Of course not. They know the government is using their money to run all its operations. And they also know that they have put their money in the safest of all investments. The same holds true for Social Security monies, except on a much larger scale.
The blogger can’t help taking a swipe at President Lyndon Baines Johnson. LBJ is the whipping boy for people looking to blame politicians for pilfering Social Security. He writes, “Under President Johnson, a Democrat, the (Social Security) money was moved to the general fund and spent.”
All LBJ did was to change an internal government bookkeeping practice. Up until the 1960s, Social Security’s income and expenditures had always been kept on a separate set of government books. Johnson merely moved Social Security’s accounts to the general government ledgers. But this is the important (and almost always overlooked) point: He did not change, in any way, the method used to invest and spend Social Security money. In other words, Social Security funds were not touched. By pulling off this bookkeeping maneuver, LBJ was able to disguise the growing deficit caused primarily by all the spending for the Vietnam War.
Now you can shame him for that if you want. But all presidents since, Republicans and Democrats, have done exactly the same thing — hidden deficits under the umbrella of the Social Security reserves. And I can’t repeat often enough — it’s just some bookkeeping shenanigans and has nothing at all to do with how Social Security money is spent.
The blogger then tells a half-truth. He says the Democratic Party under President Clinton raised the amount of Social Security benefits subject to income tax to 85 percent. What he doesn’t say is that the taxation of benefits (at a 50 percent rate) came about in 1984, during the Reagan years.
And if he really knew his history, he would understand that benefit taxation was one part of a package of changes that grew out of the bipartisan 1983 Commission on Social Security Reform. Those changes, which included raising the retirement age, saved a program that was then on the brink of bankruptcy and have kept the system in the black for the past 35 years. Now, as 10,000 baby boomers are retiring every day, more reforms are needed. And those reforms can only come about with an informed public; not a public bamboozled by bombastic bloggers like this guy.
And speaking of bamboozlement, he ends his blog by blaming “Jimmy Carter and the Democratic Party” for supposedly authorizing Social Security benefits to “immigrants who moved to this country and never paid a dime into it!” That’s just flat-out wrong. If you haven’t worked and paid into Social Security for a minimum of 10 years, you will never qualify for benefits. The blogger is confusing Social Security with the Supplemental Security Income program, a federal welfare program that, in very limited circumstances, can pay a small monthly stipend to legal immigrants. SSI is not a Social Security program and is not funded by Social Security taxes. And, by the way, the SSI program was signed into law by President Richard Nixon in 1973.
