Saturday, May 14, 2011

What would FDR do to fix Social Security? Maybe not what many of today’s Democrats might think.

With the Social Security Trustees Report to be released today, the question of how to fix the program gains new visibility on the national radar screen. Sylvester Schieber, a noted expert on retirement policy and former head of the Social Security Advisory Board, asks “What would FDR do?” The answers, I thought provide some real insight. Writing for the Progressive Policy Institute, Syl begins:

"In recent months, Jack Lew, director of the White House Office of Management and Budget, and Senate Majority Leader Harry Reid have asserted that Social Security is not part of the federal budget problem. The federal government’s biggest program, they say, has ample resources to cover legislated benefits over the next 25 years. Therefore, lawmakers need be in no hurry to tackle Social Security’s long-term funding gap."

"As a long-time analyst of U.S. retirement policy, I believe these claims are fatally flawed. In fact, Social Security’s financing costs already are adding to the federal government’s overall debt burden. Moreover, the longer we wait to rebalance the program, the higher the economic and political costs of the adjustments that must be made."

"From a progressive perspective, I find it disconcerting that, instead of strengthening Social Security for future generations, leading Democrats are instead finding excuses not to deal with the system’s real but quite manageable fiscal gap. Having studied and written about Social Security’s history, I can’t help but compare such evasions with the rigorous sense of fiscal responsibility and intergenerational justice shown by the system’s creator, Franklin D. Roosevelt."

Schieber then illustrates how Roosevelt might have felt about our current situation:

"In the early 1930s, Roosevelt openly criticized and opposed two popular national retirement plan proposals because they included financing that would create significant future liabilities for taxpayers and the federal government. In early 1935, as FDR reviewed the initial draft of the legislative package which established Social Security, he discovered the plan would result in projected cash deficits beyond 1960 and that the system would require outside funding beyond the payroll tax by 1980. He felt that it would be “dishonest” to set up a program that would create burdens for future congresses and presidential administrations to deal with, burdens that would limit their ability to manage the government’s fiscal operations or other obligations. He understood the fundamental truth of any publicly-financed, universal retirement system: the government’s costs ultimately would have to be borne by workers. FDR therefore demanded that his own administration’s Social Security proposal be altered so the program would be fully financed through the end of the projection period, then 1980, and be balanced at that time."

The whole article is really well worth checking out – very good stuff.

I myself asked what FDR would do, in the context of President Obama’s proposals to address Social Security, here. A common thread of both articles is how contexts have changed over time, even for those who see themselves as inheritors and protectors of FDR’s vision.


WilliamLarsen said...

There is one question that need to be asked, but it is never asked. Should Social Security be saved. I have asked many people this question and after a long pause get many different answers. Some immediately say yes, but when asked how, clam up.

The article clearly shows FDR would not approve of the current SS-OASI program. Based on historical records, FDR wanted a fully funded program paid for by workers who would receive benefits. The belief was that workers who paid for and received the benefits would make it more difficult to dismantle the program.

SS-OASI has morphed far from FDR's objective. We now have non working spouses receiving 50% of a working spouses benefit. We have early retirement age. Congress delayed the legislated increase in the SS-OASI tax of 2% to 6% between 1937 and 1949.

Those who are now turning 62 this year failed to make their voice heard in 1983 when Social Security after running negative cash flows between 1970 and 1983 exhausted the OASI trust fund and borrowed $11 Billion from Medicare and SS-DI trust funds. The big fix of 1983 proposed by Greenspan Commission did not solve the problem that has plagued OASI since its inception, but simply covered up the black hole with a coating of paint waiting for the next generation to step on it anf all through.

Those potential voters aged 46 and under out number boomers and seniors by a large majority. If you count people like me who are boomers, close to retirement who support repealing social security, the number who could potentially support repealing Social Security grows dramatically.

It is not a question of saving or preserving social security for future generations. The hidden agenda like it was in 1950, 1957, 1976 and 1983 is how to fool the current workers into thinking that politicians care about their future. Politicians only care about being re-elected.



john said...

I personally have no problem with the total phasing-out of social security, but with 1 important caveat.
Return all the money I've paid into it with interest. Interest being a nominal amount I could have received elsewhere. Better yet, let's go back over 30 years when another debate raged about S.S. when many self employed like myself wanted to exit the system and save for our own retirement and medical needs. I get angry when people want to take away something we didn't want to begin with.