Social Security

FDR Would Have Opposed Today's Social Security

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Ah, but we were so much younger then

That's the provacative claim by Washington Post econ columnist Robert Samuelson, riffing on a new book by Sylvester Schieber entitled The Predictable Surprise: The Unraveling of the U.S. Retirement System. Excerpt from the Samuelson col:

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. […]

What we have is a vast welfare program grafted onto the rhetoric and psychology of a contributory pension. The result is entitlement. Unsurprisingly, AARP's advertising slogan is "You've earned a say" on Social Security. The trouble is that contributions weren't saved. They went to past beneficiaries.

Whole thing here. Reason on Social Security here. Samuelson in Reason on "Lessons From the Great Inflation."