Before anyone can honestly attempt to offer intelligent, long-term solutions, though, we must first take a thorough and in-depth look at the many problems that this system has faced over its lifetime.
The Social Security Board began its life at 3:30 p.m. on August 14, 1935 when President Roosevelt signed the Social Security Act. Originally, the SSB was designed as an independent agency but, four years later at the order of Congress, was folded into the newly created Federal Security Agency which also encompassed the Public Health Service, the Office of Education, the Civilian Conservation Corp. and the U.S. Employment Service. Renamed the Social Security Administration in 1946, the SSA was again moved into the newly created Department of Health, Education and Welfare (HEW) in 1953 under the Eisenhower administration. Finally, in 1995 President Clinton signed legislation allowing the Social Security Administration to regain its status as an independent agency.
Originally, the SSA was designed to be funded by an accumulation of capital into a reserve fund. This fund would grow according to the amount collected from workers and employers minus benefits paid with the total of the reserve having no upper limit. As the total reserve grew, though, political pressure grew to raise benefits for qualified Americans and to expanded the number of eligible recipients, both by lowering the age at which one could initially begin drawing from their account as well as providing subsidies for the children of deceased workers and for those who were too disabled to begin or to continue to earn a wage.
By 1939, even before the first benefits were paid, Congress became angry that the huge reserves of capital were virtually untouchable by them. This anger resulted in legislation that converted the Social Security fund from a ever building reserve into a system which was only required to hold a "contingency reserve" equal to "three times the highest annual expenditure anticipated in the ensuing five-year period." This new type of reserve consisted not of actual funds but rather mere debt obligations issued by other government funds. In fact, the continuation of the term "reserve fund" was only a political ruse to protect Congress from the factual charge that they were misspending Social Security funds.
In reality, the fund was to use a different and nearly impossible to achieve accounting method of zero sum, meaning that the fund could only consist of debt obligations equal to the balance of incoming revenues and outgoing benefits, no matter how much revenue was actually being received. All excess revenue was no longer to be considered in relation to the fund and, instead, became another source of income into the federal government's general revenues.
Between 1939 and 1942, high employment rates due to the war effort had created a fund five times larger than that believed necessary for the next five years of current benefits (this sounds as if it doesn't agree with the last paragraph but government accounting methods and logic seldom intersect). The Roosevelt administration favored raising benefits for recipients in as much as it was American worker's money in the first place. Congress, however, wanted to use the surplus to fund government programs unrelated to Social Security. An increase in payroll deductions scheduled for 1943 thus became a point of contention between Roosevelt and Congress in that the administration wanted to use half of that increase to help fund the war effort. Congress, however, wanted to delay the increase in federal revenue because, even should other taxes be raised to meet the needs of the war machine, the national debt would appear to be falling but would, in fact, remain the same and the debt owed by the fund was larger that required and, again, Congress wanted any surplus for their use. Congress favored raising other taxes since, in their view, the increased revenues for the Social Security reserve would tempt them (Congress) to raise the benefits once again. The problem was deftly solved by Congress by simply passing legislation delaying the increase until the next Congress was seated and then continued to delay it again in 1943, 1944 and 1946.
(Please note that the cry from Congress that they need to be restrained by law from over spending isn't a new phenomena. They were raising the same non-issue of their own negligent self-control fifty years ago, as well.)
In the next five decades, through recessions and inflation and boom times and bust, the benefits were raised when sufficient funds appeared to be available and revenues increased by law when the fund appeared to run short By 1975, Congress admitted that they could not restrain themselves from raising benefits to Americans simply because revenues became available to do so. This resulted in the legislation creating COLAs (cost of living adjustments). These adjustments would allow Social Security recipients to keep up with inflation, insuring not only that they would not fall further behind but also insuring that they would never again be allowed an opportunity to attain a bit better level of living, either. Another change in Social Security's funding was that the three year guaranteed funding was altered to a requirement of only one year's guaranteed funding, meaning that any decrease in revenues would have to be made up by future Congresses and administrations and removing the responsibility of that current group of politicians.
Finally, by the 1980's, the fund held only enough debt obligations to fund less than six months worth of benefits. In the 1990's, though, an expanding economy created a rising level of obligations until the fund could now pay out fifteen months of benefits. Congress immediately raised benefits and the fund's long term instability was once again in great danger. The answer by Congress and the President?
In 1997, rather than repair the system by simply removing the debt obligation method of financing future and present benefits and returning to a fully funded and separate reserve made up of all revenues collected for the fund from income, these two inept and mean spirited collections of professional dissemblers just changed the manner in which the COLAs were figured. By the disgraceful but effective method of including only slowly increasing segments of the economy in the Consumer Price Index (the CPI), the increases in inflation and, consequently, the increases in the COLAs, could be artificially and shamefully deferred. This delay, of course, causes massive pain and suffering to the elderly but has kept the government from having to make hard decisions regarding the platform of the Republican Party (smaller government) and the desire of the Democratic Party to retain control of the White House.
So, gentle readers, how shall we encapsulate this sad history of an ingeniously created but quickly politicized government program? With the foundation being a reserve of funds untouchable by Congress except in the process of returning more to the taxpayer in benefits in exchange for increases in revenues from those same taxpayers, the system would have grown and offered a real sense of security for the retired and a guarantee that they would not be forced into poverty simply through the process of aging. As the fund grew beyond its obligations to current and future recipients, the benefits paid would have risen and the security for the elderly constantly assured.
Instead, by the Congressionally mandated method of stealing all funds determined to be in excess of future obligations and placing that plunder into general revenues where it could be wasted along with all of our other taxes, Congress has created a system constantly teetering on the brink of insolvency. It has also created a system which must rely on the intelligence and decency of our elected officials, a process long established as doomed from the onset as we simply cannot find any candidates possessing these qualities. The answers, of course, are simple and obvious.
First, remove Social Security from the control of Congress and the President. Enact legislation that firmly mandates that Congress may only increase those taxes contributing to the Social Security fund and/or benefits to Americans pending from the fund but can never, under any circumstances, reduce them.
Second, realign the CPI to reflect the reality of America's economy so that any future COLAs will follow the nation's actual financial trends and not the nation's political winds.
Third, return the fund to a reserve which is completely and utterly untouchable by any future Congresses. Eliminate the constant temptation to steal your retirement funds to pay for ill advised and destructive "across the board" tax cuts or new programs aimed at issues completely unrelated to your best interests as you grow older.
Finally, establish the age at which individuals are qualified to receive their funds and legislate that age as unchangeable. The fact that you may live longer should not become a factor that forces you to work longer. The length of time that you receive benefits, once retired, should not remain static by the foolish and harmful act of increasing the age at which that retirement will be funded.
As some well-maintained pension funds have demonstrated, creating a system and a set of firm rules by which the system is operated with a long term view related only to the pension fund's original charter will result both in a fund balance at which all those enrolled are guaranteed a high level of income at retirement but also can eventually become self sufficient in that revenues from interest alone is equal to any and all future obligations.
It could be at that point only at which the government could borrow (in the truest sense of the word) from any funds in excess of those necessary to pay life time benefits to all enrolled Americans. These loans could only be instituted through a super majority vote in both houses of Congress and repaid from general funds at the interest rate determined by the federal reserve board for long term federal lending. The feasibility of these loans, however, may not be in the best interest of the American people and the option to allow this practice should, thus, be put forth before the American voters.
All in all, even I was surprised at the true history of the Social Security Act and of all of the twists and turns this legislation has been through as the political winds altered what the government determined its mission to be. What I brought from this new knowledge was the fact that the original proposition put forth by President Roosevelt was the very best form that a national retirement system could have taken in that it was protected from the pushes and pulls of poorly informed politicians and voters. Those two groups, however, altered the roots that would have fed the system and placed them firmly in the hands of those we should, sadly, trust the least with our futures; career politicians.
Oh, by the by. Want two more reasons to return the Social Security fund to a system far outside the political arena? First, the mirage of a budget surplus falls apart when you realize that the "surplus" not only doesn't exist but is twice as large as it could possibly be. The "surplus" is only that amount of money taken in by Social Security that is in excess of the currently mandated funding period's expenses. This "surplus" is then injected into the federal budget process and counted, once again, as another distinct "surplus", and the amount magically doubles. To pretend that you can spend half of it on pork barrel politics and then "return" the other half in order to "SAVE SOCIAL SECURITY" is smoke and mirrors at its worst. In point of fact, there may not even be this illusory "surplus" since it is founded, not on deposited revenues, but on revenues that may or may not come to pass in the near and distant future. If these revenues do not magically arrive or do not arrive on time or in the expected quantity then the next administration and the next Congress will again get to fight over what programs to cut and by how much in order to repay the debts incurred with these insane budgetary tricks.
Secondly, by allowing the debate to center on saving Social Security, we are allowing the focus to be removed from the millions of children going hungry and homeless every single night of the year, to ignore the 40,000 children who die every single day of the year all around the globe from easily preventable diseases and starvation, to tolerate the horrors of more single mothers and their families falling between the cracks of our once proud "safety nets" and to subsist within lives of hopelessness and despair in what we proudly proclaim to be the richest nation on Earth, and to allow every progressive and decent urge still left within the hearts of so few Americans to find no help or assistance emanating from our government simply because it cannot afford the costs, no matter how low.
You can't look to your President or your Congress because Social security isn't a serious issue to solve but only an issue to use against the other party come election time. The rest of the time it is either forgotten or given mere lip service in hopes that the elderly will just quietly die and the uninformed voters go along with the insane individual savings accounts meant only to make the vastly over valued stock market reach even new heights before the next depression comes along, a depression that will make the Thirties seem pastoral.
Gentle readers, we can return the Social Security system to permanent solvency and to face, head on, the many deficiencies within our sad system of government when we speak about the needy and the children and the elderly, but it will take a truly concerted effort by a knowledgeable and well informed voting public. Those requirements, in and of themselves, will probably doom our futures to forever be ruled by the whims of fully bribed politicians.(1 - 4)
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