Social Security unmasked; Roosevelt was a crafty politician indeed

I don’t know if Franklin Roosevelt was a smart man, but he certainly was a smart politician. If you think about Social Security, one of the most massive entitlements ever conceived, Roosevelt crafted it so that it would be virtually impossible to repeal or significantly modify, except to improve it as Congress has done over the last seventy-five years. Not only has Congress improved it, it has set improvements on automatic via the COLA.

Whenever I write about modifying Social Security to make it sustainable I get comments like “I earned those benefits.” “I paid in my whole life, that’s my money you’re talking about.” Seniors tend to forget that their employer paid as much as they did in taxes. Therein lies the genius of Roosevelt. By including what started as a very modest payroll tax he provided Americans with a sense of paying for their own entitlement and if that is the case, how can any current politician take away what was earned? No matter that the tax payments one makes are recouped in only a few years after starting benefits.

If Social Security were not a welfare program (or more accurately a Ponzi arrangement) disguised as a participant paid insurance plan then it would be perfectly feasible for each of us to save 6.2% of our earnings and live off the accumulated assets starting at age 66. Of course that is a myth, as is the notion that we paid for our own Social Security.

If we are paying for our own benefit, how can the already insufficient tax rate be trimmed under the guise of job creation? If we are concerned about the stability of our self funded entitlement how can we so quickly put it in greater jeopardy for a possible short-term gain? Why isn’t the AARP protesting the reduction in Social Security funding as loudly as it does when someone talks about adjusting the COLA formula?

Given we are already at the point where incoming payroll taxes from working Americans are insufficient to pay current beneficiaries, it will become increasingly apparent that general tax revenue is providing this entitlement.

But wait, even as we argue that all Americans earned at least some benefit from their contributions, there are calls for means testing. The great recession has unmasked this charade so some openly see a new solution, take from the well off who have contributed during their entire working lives and give to the less well off who have also contributed relative to their income. However, let us not forget as we mangle this monster that some people pay income tax on up to 85% of their Social Security benefit and others on much less of the benefit.

It will be the extraordinary political leader who can overcome the genius of Roosevelt. But I suspect even Roosevelt would be appalled at what has happened to his grand safety net Hey, we’re all entitled are we not?