lilburne's Full Review: John Attarian - Social Security: False Consciousne...
John Attarian will probably get savaged for writing this attack on the Social Security system in the United States. No-one likes the smart-aleck who goes around saying that the Emperor is absolutely stark naked.
The federal government has been playing a con game with the Social Security program that makes Enron’s statements to its stockholders seem honest by comparison. From the very beginning of the system, federal authorities have been giving the public false information about the nature of the Social Security program, and Attarian argues that this misinformation simply cannot be attributed to honest mistakes. With relentless attention to the documentary evidence, Attarian compiles an indictment against federal officials which, in the private sector, would be enough to get the defendants sent away for fraud for a long, long time.
The deal with Social Security is this: Most employees (and self-employed people) pay a federal payroll tax on their earnings. Their employers chip in, so as to give the illusion that the payroll tax is smaller than it is, whereas in fact the employer’s share of the tax is passed on to the employee or to the consumers. The money raised by the payroll tax is used to pay retirees and disabled persons who are currently eligible for Social Security benefits. If there is any money left over after paying current benefits, the surplus is spent on other government expenditures, like the military, farm subsidies, etc. etc. The government issues I. O. U.s to itself, promising to pay back to the Social Security system all the payroll tax money that was spent on non-Social Security purposes. This goes on year after year, and as the ratio of workers to beneficiaries declines, the surplus gets smaller and smaller, and eventually the government will either have to pay off all the I. O. U.s that it issued to itself or else default on its debts to itself. In other words, the expenses of the Social Security program will keep getting greater and greater until, at some point in the future, what the federal government collects in payroll taxes will not be enough to support the system.
To save the Social Security program from bankruptcy, Attarian points out, it will eventually be necessary for the federal government to increase payroll taxes, increase other taxes, or cut benefits. Some degree of benefit cuts, argues Attarian, may turn out to be necessary in order to avoid imposing inordinate tax burdens on the economy. Benefit cuts, however, will meet with strong resistance from the beneficiaries, who have been bombarded with propaganda throughout all their working lives to the effect that their payroll tax payments were equivalent to insurance premiums, giving rise to a legal entitlement to a specified level of benefits. Therefore, any proposal to cut benefits will prompt screams of outrage from folks who will claim that they have been cheated out of something which they have “earned,” and to which they have a vested legal right.
As Attarian points out, the concept of Social Security benefits as a vested right which people earn the way a policyholder in a private insurance plan earns his benefits, is false. The federal government, in portraying Social Security as a vested legal right, has been telling a bald-faced lie.
When Congress first passed the Social Security law in 1935, during the New Deal administration of President Franklin D. Roosevelt, a clause in the law reserved to Congress the power, at any time, to modify the terms of the program. This provision has been in the law from that day to this. In other words, Social Security benefits have never been guaranteed. This hasn’t stopped the Social Security Administration, and its dupes in the press, from assuring citizens that payroll taxes are actually insurance premiums, and that those who pay these taxes acquire a vested right in the benefit levels specified in the law at the time the taxes are paid. This propaganda was being issued from the very beginning. It was issued in the 1936 Presidential elections, when Republicans questioned the soundness of the new Social Security program. President Roosevelt denounced the Republicans for their fear-mongering tactics, and he handily won re-election. Republicans have not dared to mount a full-frontal assault on Social Security since that time.
As Attarian documents, the Roosevelt administration briefly pretended that there was no legal connection between payroll taxes and Social Security benefits. The U. S. Supreme Court was exhibiting great skepticism toward the New Deal, and it would not be likely to uphold an avowed program of “social insurance.” If payroll taxes were earmarked specifically for the Social Security program, instead of being placed into the general treasury, the Court might conclude that Congress had exceeded its legitimate powers of taxation. The Social Security Act, as drafted, maintained a pretense that the payroll taxes were separate from Social Security benefits. It was an accounting dodge, but the Supreme Court pretended to be fooled. The Court upheld the Social Security program on the theory that the payroll taxes and the benefits were legally separate.
Once the Court had upheld the Social Security program, the government began promoting it to the citizens on grounds directly contrary to the grounds on which the Court had upheld the program. The public was told that Social Security *was* an insurance program, and that payroll taxes *were* premiums that gave the worker a legal entitlement to benefits. The public was willing to believe this, since Congress kept increasing the benefits. Except for a small group of unfortunates who had their benefits reduced, but this minor blip, which made a mockery of any claim that Social Security was a vested legal right, was ignored by just about everyone except those who had been subject to the cuts. Everyone else swallowed the “insurance” and “vested right” propaganda. An official inquiry by skeptical Congressmen made scarcely a dent in the popular false picture of Social Security.
In the years after World War II, there were more than enough workers to support the elderly (and, later, the disabled too) out of their payroll taxes. The Ponzi scheme was rolling along merrily, and the marks-I mean, the citizens-were told by government pamphlets and journalistic articles that by paying payroll taxes they were purchasing the legal right to retirement and disability benefits. People were also having lots of babies around this time, not imagining that their cute little infants would eventually age and form a population cohort so enormous as to threaten the viability, and expose the false pretenses, of Social Security.
During the 1950s, the government continued to talk out of both sides of its mouth. Out of one side of the mouth came the usual assurances about insurance and vested rights. Out of the other side came acknowledgements of the true nature of the Social Security system. The Amish in Pennsylvania listened to the wrong side of the government’s mouth. These pious Protestant farmers believed in their Christian duty to pay taxes unto Caesar. However, the federal government was saying that payroll taxes weren’t taxes at all, but insurance premiums. Being opposed to secular insurance programs, the Amish refused to pay their payroll taxes. The federal authorities tried to explain that they were only kidding, payroll taxes were really taxes and not insurance, but many stubborn Amish farmers continued to resist. Those dumb Amish-believing the government’s propaganda!
Also during the 1950s, an immigrant named Nestor, who had been paying payroll taxes all his life, ran afoul of America’s anti-Communist laws. Deported for his membership in the Communist Party, Nestor was shipped off behind the Iron Curtain. At around the same time as Nestor’s deportation, Congress passed a law saying that Communist deportees must not get Social Security benefits. Previously, Communist deportees had been entitled to collect Social Security. In other words, Congress had tightened the eligibility requirements and chosen to deny benefits to certain people who had “paid into” Social Security all their lives. If Social Security had been a private insurance program, this would have been illegal. If you pay premiums to Blue Cross all your life, under a policy which pays out even if you are deported, and just as you become entitled to collect on the policy Blue Cross suddenly decides that deportees are ineligible, you would be able to sue Blue Cross and win. Nestor tried to do something similar with the U. S. government. If Social Security had been a *real* insurance policy, Nestor would have been entitled to win his case, just like in the hypothetical Blue Cross example.
But-surprise, surprise-government lawyers told the courts that Social Security was *not* insurance, and that those who paid payroll taxes acquired no vested rights in benefits. The U. S. Supreme Court agreed, saying in 1960 that Congress was free to terminate Social Security benefits so long as it could come up with a plausible enough reason. Congress had such a reason in this case, said the Court, so Nestor was out of luck. The Supreme Court indicated that it would be very deferential to Congress’ decisions to terminate Social Security eligibility. As Attarian points out, this deference means that if, in the future, Congress decides to cut Social Security benefits, the courts will go along with that decision rather than second-guess Congress.
After the Supreme Court had officially confirmed that the payment of payroll taxes doesn’t give you a vested right in Social Security benefits, and that Congress has a very wide discretion to cut such benefits, one would think that the Social Security Administration would have stopped its propaganda about insurance and vested rights. In fact, the propaganda continued as if the *Nestor* case had never been decided. The government can get more public support for Social Security by portraying it as an insurance program where you purchase benefits. Americans are more comfortable with the idea of an insurance program than they are with the idea of a welfare program. So the Social Security Administration continued to portray Social Security as an insurance program. The fact that this was false, and must surely have been known to the government to be false, made no difference.
On those few occasions when government spokespeople acknowledged, grudgingly, that Congress had the legal power to cut or terminate Social Security benefits, these spokespeople went on to add that Congress would never dare do such a thing, and anyone who suggested otherwise was a fearmonger trying to undermine public confidence in the blah blah blah. It seemed, indeed, that cutting benefits was the furthest thing from Congress’ mind. It upped benefits repeatedly in the prosperous postwar years.
Then, in the 1970s, clouds began becoming visible on the horizon. Social Security was getting more expensive, the Baby Boomers were not getting any younger, and they weren’t having enough children to assure a future supply of American-born workers, which was what would be needed to keep the intergenerational Ponzi scheme going. President Ronald Reagan’s administration suggested maybe, perhaps, cutting some benefits. That idea was met by outrage when the elderly repeated the propaganda they had been fed all their lives: That they had “paid into” an insurance scheme and were legally entitled to full benefits. Some modifications were made to Social Security, under Reagan and his successors, mostly in the form of higher payroll taxes but also in the form of taxing the benefits of more affluent Social Security recipients. The idea of a broad-scale benefit cut, however, was avoided by politicians as a sure way to court political destruction.
As Attarian points out, the federal government is the victim of its own propaganda. Having built support for Social Security by falsely portraying it as an insurance scheme which gives participants the right to a certain level of benefits, the government will have trouble urging necessary cuts to save the system, and the country, from disaster.
One of todayas most important national concerns is the projected bankruptcy of Social Security some time in the next few decades and the resultant ina...More at Buy.com
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