Three Historical Social Security “Whoppers”

The other day, I ran across the text from an interesting little historical document on the Social Security Administration’s web site.  In 1936 the Federal Government published a short pamphlet describing the “new” Social Security system.  That pamphlet said – in plain, easily-understandable English – a few things that turned out to be . . .  well, lies.  Big,  big lies – think whoppers good enough to make the Burger King proud.  (smile)

Since things on the SSA website seem to get revised periodically, I thought I’d go also ahead and save a copy of this pamphlet.  I’ve printed that particular SSA webpage to a downloadable PDF file.  It can be downloaded here.

Here’s the first “whopper” that jumped out at me.  From the above pamphlet:

The checks will come to you as a right. You will get them regardless of the amount of property or income you may have. They are what the law calls “Old-Age Benefits” under the Social Security Act.

Well, obviously that’s not exactly the case.  The SCOTUS says otherwise – see Fleming v. Nestor.  Bottom line:  if Congress says you don’t get Social Security, you don’t get it – regardless of whether or not you’ve paid into the system enough to qualify.  You have no contractual right to “your” Social Security – because it’s not “yours”.  It’s a government benefit, and Congress can change the rules (or the benefits paid) any time it likes.  It’s not something you own.

The correct way to phrase this would have been, “The checks will come to you as an entitlement.  But Congress will tell you how much you get, and can end your benefits at any time if they like.”

Here’s the second “whopper”.  Again, from the 1936 Social Security pamphlet published by the Federal government:

YOUR PART OF THE TAX

The taxes called for in this law will be paid both by your employer and by you. For the next 3 years you will pay maybe 15 cents a week, maybe 25 cents a week, maybe 30 cents or more, according to what you earn. That is to say, during the next 3 years, beginning January 1, 1937, you will pay 1 cent for every dollar you earn, and at the same time your employer will pay 1 cent for every dollar you earn, up to $3,000 a year. Twenty-six million other workers and their employers will be paying at the same time.

After the first 3 year–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. This will be the tax for 3 years, and then, beginning in 1943, you will pay 2 cents, and so will your employer, for every dollar you earn for the next 3 years. After that, you and your employer will each pay half a cent more for 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. (emphasis and underlining added)

Gee – a 3% tax on the first $3,000 of income is “the most you will ever pay”.  Even adjusting for inflation and the fact that a dollar in 1936 is worth $16.48 in 2012, that translates to a 3% employee tax rate on the first $49,440 of earned income  – not the 6.2% employee tax rate applied to the first $110,110 of earned income we have today.  (Yes, I know – it’s been temporarily reduced to “only” 4.2% until the end of the year.)

Obviously that rather clear promise also turned out to be bullshit.

Here’s the third “whopper” – and it’s my personal “favorite”.  From near the end of the pamphlet:

What you get from the Government plan will always be more than you have paid in taxes and usually more than you can get for yourself by putting away the same amount of money each week in some other way.  (emphasis and underlining added)

Yeah, right. Ask most people retiring today if they agree with that statement.  We all know that’s total bullshit.  The average guy or gal retiring today will get less in Social Security benefits than they paid in in taxes.

 

Oh, and in case you’re wondering, insipid:  the 1936 Social Security pamphlet doesn’t say a damn thing about “insurance” or “premiums”; those words don’t even appear in the pamphlet’s text.  (The pamphlet does, however, sell Social Security as a de facto national retirement plan.) The payments made to retirees are termed “Old-Age Benefits”; payments made by employees and employers are clearly identified as “taxes”.  Even at this early date, Social Security never called itself – or sold itself as — some type of “insurance”.  Calling Social Security “insurance” is simply a bogus smokescreen used by those who wish to obscure Social Security’s true nature:  a inter-generational income transfer program, AKA welfare.

Why?  Probably because it’s easier to sell insurance than welfare.

Category: Politics, Reality Check