Social Security at 75: Don’t Mess With Success

by Sandy Levin

In the mid-1980s, someone at the Coca-Cola Company had the bright idea of changing the formula of the nation’s most popular soft drink.

In one of the biggest public relations debacles of all time, the company’s effort to convince Americans to switch to New Coke fell flat on its face.

As it turned out, people liked the taste of Classic Coke just fine.  The lesson here is obvious: You don’t mess with success.

The same lesson applies in the case of retirement security. Seventy-five years ago this month, President Roosevelt signed the Social Security Act.

By any yardstick, Social Security has been the most successful domestic program in our nation’s history, lifting millions of seniors out of poverty.

Through good times and bad, American workers and their families have been able to rely on Social Security to provide guaranteed protection against the loss of earnings due to retirement, disability, or death.

Yet every few years, some politicians in Washington decide that Social Security needs to be dismantled and privatized.

The last person to try that was President Bush, who, in 2005, proposed cutting traditional Social Security benefits and diverting substantial sums from the Social Security trust funds into private accounts.

Democrats fought the Bush plan with everything we had, but the effort to turn back privatization wasn’t truly won until Americans themselves came forward and demanded that Social Security be protected.

Privatization turned out to be the New Coke of retirement plans.

Had President Bush’s dream of replacing Social Security with private accounts succeeded, millions of Americans would have been left exposed to even greater losses on Wall Street during the economic collapse.

Over the last 18 months of the Bush presidency, the stock market (as measured by the S&P 500) lost nearly half its value. Trillions of dollars of Americans’ retirement savings were wiped out.

Retirement security is often compared to a three-legged stool supported by Social Security, employer-provided pension funds, and private savings.

While the stock market has regained some ground, most Americans’ 401(k) account balances are still a long way from recovery, and many traditional pension plans suffered huge losses as well.

Imagine how much worse things would be if we had listened to President Bush and gambled what’s left of Americans’ retirement security by cutting traditional Social Security benefits and diverting Social Security funds to Wall Street.

The amazing thing is that some Republicans in Congress are back at it, once again pushing for changes to Social Security that would cut benefits and divert money into private investment accounts.

Privatization was a bad idea five years ago, and it’s still the wrong way to go today.

For three-quarters of a century, Social Security has been the foundation of a secure retirement in America.

Rather than dismantle it, we should work to strengthen the program for the next 75 years. You don’t mess with success.

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8 comments for “Social Security at 75: Don’t Mess With Success

  1. allenwsmithphd
    August 21, 2010 at 9:51 pm

    The Ugly Road to Social Security’s Current Problems: Part VI

    President Obama has, so far, not officially changed the practice of his four predecessors. However, this year, for the first time in nearly three decades, there is no Social Security surplus to loot. The severe recession has resulted in a reduction in payroll tax revenue at the very same time that many senior unemployed workers are choosing to retire earlier than they otherwise would have, thus raising the total cost of benefits.

    Over the past quarter-century, the United States government has embezzled $2.5 trillion of the Social Security contributions of working Americans and used the money to fund wars and other government programs. Unless that money is fully repaid, with interest, the future of Social Security, as we now know it, is doomed, and some politicians are already making plans to dance at its funeral. The American public must not allow that to happen. They must demand that the first priority of the deficit commission be to make provisions for the orderly repayment of the stolen money. Beginning in 2016, payroll tax revenue will be insufficient to make full Social Security benefit payments. Unless at least some of the money is put back into the fund by then, benefits will have to be cut.

  2. allenwsmithphd
    August 21, 2010 at 9:50 pm

    The Ugly Road to Social Security’s Current Problems: Part V

    George W. Bush became the new president, but he reneged on his promise to protect Social Security, despite ongoing assurances that he would not touch the surplus. During his State of the Union address on February 27, 2001, Bush said, “My budget protects all $2.6 trillion of the Social Security surplus for Social Security, and Social Security alone.” Yet he spent every dollar of the approximately $1.5 trillion in Social Security surplus that came in during his presidency. During his 2005 campaign to partially privatize Social Security, President George W. Bush openly admitted that all of the Social Security surplus was being spent. In a speech in Pennsylvania, on February 10, 2005 Bush candidly admitted the raiding with the following words: “Every dime that goes in from payroll taxes is spent. It’s spent on retirees, and if there’s excess, it’s spent on government programs. The only thing that Social Security has is a pile of IOUs from one part of government to the next.” On April 5, 2005, during a speech in West Virginia, Bush said: “There is no trust fund, just IOUs that I saw firsthand that future generations will pay—will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs.’

  3. allenwsmithphd
    August 21, 2010 at 9:49 pm

    The Ugly Road to Social Security’s Current Problems: Part IV

    A far better solution, for Senator Reid and the public, would have been some arrangement that legally prevented the government from looting the money. But President Bush wanted no part of any kind of arrangement that would have kept him from using the surplus Social Security revenue. So the 1990 opportunity to end the raiding of Social Security was lost.

    President Bill Clinton continued the raiding of the Social Security surplus throughout his eight years, but the opportunity to change policy came up again in the 2000 presidential election campaign. Al Gore acknowledged the ongoing looting of Social Security and promised to end it if elected. Gore’s promise to end the practice of using Social Security revenue for non-Social Security purposes became so popular that candidate George W. Bush felt he had to make a similar promise. So it appeared that, no matter who was elected President in 2000, the Social Security surplus revenue would be saved and invested, from that point on, as was the intent of the 1983 Social Security legislation.

  4. allenwsmithphd
    August 21, 2010 at 9:48 pm

    The Ugly Road to Social Security’s Current Problems: Part III

    Moynihan’s position was that, if the government could not keep its hand out of the Social Security cookie jar, then the jar should be emptied so their would no longer be any Social Security surplus to raid. Moynihan’s proposal was supported by the conservative Heritage Foundation, the liberal Institute of Policy Studies, and the U.S. Chamber of Commerce. But it was not popular with the Bush administration. “It is an effort to get me to raise taxes on the American people by the charade of cutting them, or cut benefits,” Bush told reporters. “And I’m not going to do it to the older people of this country.” The real reason that Bush opposed the legislation was that, had it passed, he would have lost his large secret slush fund

    During the debate on the Moynihan bill, senator after senator characterized the ongoing raiding of Social Security as “embezzlement,” “thievery,” and “stealing,” and that is exactly what it was. Money paid for the purpose of building up a reserve for the baby boomers was instead going into the general fund and being used to offset the lost revenue that resulted from Reagan’s unaffordable income tax cut that benefited mostly the rich.

  5. allenwsmithphd
    August 21, 2010 at 9:47 pm

    The Ugly Road to Social Security’s Current Problems: Part II

    The first surpluses came in, almost unnoticed, during the second Reagan term. Instead of being saved and invested, the surplus money was deposited into the general revenue fund and used for other government programs. When George H.W. Bush became President, he followed in Reagan’s footsteps with regard to the mishandling of the surplus Social Security revenue. As the surpluses became larger and larger, criticism against Bush became louder and louder. The first significant Social Security surplus came in 1985 in the amount of $9.4 billion. By 1990, the surplus had shot up to $56.6 billion and was projected to grow larger and larger over the next two decades.

    This was Social Security money, generated by the regressive payroll tax, and intended to be used exclusively for the payment of future Social Security benefits. For the Bush administration to blatantly violate the intent of the law, and use the Social Security money for other government programs, was nothing short of embezzlement. The whole issue came to a head in 1990 when Senator Daniel Patrick Moynihan of New York introduced legislation that would rescind the 1983 payroll tax increase and return the Social Security program to a pay-as-you-go system.

  6. allenwsmithphd
    August 21, 2010 at 9:46 pm

    I hope the moderators will allow me to reproduce, in parts, my article “The Ugly Road to Social Security’s Current Problems,” which appeared in “Dissident Voice,” July 24, 2010. This is important information that the public has a right to know about.

    The Ugly Road to Social Security’s Current Problems: Part I

    The 1983 Social Security amendments included a “fix” for the baby-boomer problem, in the form of a hefty payroll tax hike. Prior to 1983, the obligation of each generation of Americans had been restricted to paying for the Social Security benefits of the generation that preceded it. However, since the baby-boom generation was much larger than any preceding generation, the 1983 tax hike required the boomers to prepay most of the cost of their own benefits, in addition to paying for the benefits of the generation that preceded them. The boomers got hit with a double whammy, and they have paid more into Social Security than any other generation.

    The surplus revenue was supposed to be saved and invested to build up a large reserve with which to ultimately fund the retirement of the baby boomers. If the intent of the legislation had been followed, Social Security would now have enough money to pay full benefits until at least 2037. Unfortunately, the plan was not followed. Unscrupulous politicians have been stealing the surplus Social Security revenue and spending it for non-Social Security purposes for the past 25 years.

  7. allenwsmithphd
    August 21, 2010 at 9:43 pm

    I participate in the commentary on most of the Social Security articles that appear on the internet and invite comments. As one who has devoted the past ten years of my life to trying to educate the public about the true status of the Social Security trust fund, I am dismayed at how few people understand what is really wrong with the program. First let’s look at the two basic myths that are repeated day after day on many internet sites.

    MYTH I
    “There is nothing wrong with Social Security. It has $2.54 trillion in Treasury bonds in the trust fund that will enable Social Security to pay full benefits until at least 2037.”

    “Social Security in unsustainable in its present form. It is on the verge of going broke and it is in urgent need of major reform with privatization being one of the reforms that should be considered.”

    Over and over, we hear one or the other, or both, of those arguments. Articles are published stating emphatically that one or the other of these two statements is “the truth, the whole truth, and nothing but the truth.”

    Neither of these statements is true. I have been researching and writing about Social Security for more than a decade. Allan Sloan quoted me and referred to my latest book, “THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse” in his August 10, 2010 Washington Post column.

    MYTH I is the closest to the truth. In 1983, Congress enacted legislation which included a hefty payroll tax increase. The purpose of the 1983 legislation was to require the baby-boom generation to prepay most of the cost of their own benefits, in addition to paying for the benefits of the generation that preceeded them. As a result, the baby boomers have paid more into
    Social Security than any other generation. The plan was to save and invest the surplus Social Security revenue over the next 30 years to build up a large reserve in the trust fund that would be available for paying benefits to the baby boomers.

    If the plan had been followed, then MYTH I would not be a myth at all. The 1983 payroll tax hike has generated $2.54 trillion in surplus Social Security revenue. If the government had saved the money and invested it in public-issue, marketable U.S. Treasury bonds, as it was supposed to do, the trust fund would now hold $2.54 trillion of these “good-as-gold” bonds which the trustees could re-sell as needed to raise money with which to pay benefits. And that sum of money would have been sufficient to pay full benefits until at least 2037.

    The problem is that crooked politicians with sticky fingers have “borrowed” or “stolen” every dollar of that $2.54 trillion in surplus Social Security revenue and used it to fund tax cuts for the rich, wars, and other government programs. Not one penny of that money was invested in anything, which means that the Social Security trust fund is empty. It contains no real assets of any kind. As a result, beginning in 2016, the cost of full benefits will exceed the annual payroll tax revenue, and benefits will have to be cut unless the government raises taxes, cuts other government programs, or borrows large additional amounts from the public. This is the reason for the deficit-reduction commission. This is why so many members of Congress are calling for benefit cuts. The government has made no provisions for repayment of the looted money, so they would rather cut future benefits than to have to raise taxes.

    Allen W. Smith, Ph.D.
    Professor of Economics,Emeritus
    Eastern Illinois University
    Phone: 1-800-840-6812

  8. pappyg2
    August 21, 2010 at 3:13 pm

    With all due respect the author of this story is factually challenged. Don’t mess with success; INDEED??
    “Today, all of us can look each other square in the eye and say, “We kept our promises.” We promised that we would protect the financial integrity of social security. We have. We promised that we would protect beneficiaries against any loss in current benefits. We have. And we promised to attend to the needs of those still working, not only those Americans nearing retirement but young people just entering the labor force. And we’ve done that, too”.
    That was President Ronald Wilson Reagan, at the signing of SS reform legislation in 1983, and that marked the official beginning of the assault on middle class Americans, their families, and the communities they call home. 2.5 trillion of potential SS assets turned into 2.5 trillion dollars of SS IOU debt. SS has one generations (mine) financially water boarding another, all in the name of saving SS. It’s time for a real comprehensive, community based solution, promoting generations working together.

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