The Social Security Swindle

The debt ceiling debate has exposed Social Security as the biggest con job ever perpetuated on the American people.

When Obama said that he couldn’t guarantee that Social Security checks would be sent out if the debt ceiling wasn’t raised, he tacitly discredited something that proponents of Social Security have been saying literally every since FDR instituted SS: Social Security is a type of insurance program. You pay a payroll tax into the Social Security Trust Fund. This fund accrues interest on your behalf and when you retire, you get it back.

If this was true, then it would make no difference whether the country could borrow more money or not. The trust fund has enough money to be self-sustaining. So how could the president make such a statement? For awhile now, many people, including myself, believed that the answer to this question was that Congress simply took the money out of the trust fund. I’m not so sure this is 100% accurate. Why? The best way to answer this is to begin at the beginning.

The seeds were planted in the early 1900’s when Columbia University professor Henry Rogers Seager released a work entitled “Social Insurance: A Program of Social Reform.” Seager’s work, unsurprisingly, was inspired European socialism. In it, he claims that “we need not freedom from governmental interference, but clear appreciation of the conditions that make for the common welfare, as contrasted with individual success, and an aggressive program of governmental control and regulation to maintain these conditions.”

Enter the Great Depression. FDR’s Committee on Economic Security recommended that the country establish a system of “old-age” benefits similar to what Seager proposed. A program like this would dramatically change the relationship between the individual and the federal government. It was being billed to the American people as an insurance program.

This is an important point. FDR was making the argument to the American people that his Social Security plan was an insurance program and not a tax. When the Social Security Act made it to the Supreme Court, FDR’s Justice Department argued exactly the opposite. They made the argument that it wasn’t an insurance program but a tax.

Now we get the to crux of the Social Security swindle. The Supreme Court ruled the Social Security Act constitutional in Helvering v. Davis. In it, the Court revealed the true nature of Social Security. From the majority opinion: “The proceeds of both taxes [income tax on employees and the excise tax on employers] are to be paid into the Treasury like internal revenue taxes generally, and are not earmarked in any way.” This should put to rest any argument that there is or ever was a trust fund. There hasn’t been one since day one! The revenue from the taxes go right into the treasury just like any other tax and are not reserved specifically for Social Security!

Now this seems to me to be pretty cut and dry but the authors of the Social Security Act (SSA) were very sneaky in their wording. Again from the Court’s opinion: “The first section of this title [Title II] creates an account in the United States Treasury to be known as the “Old-Age [p*636] Reserve Account.” ‘ 201. No present appropriation, however, is made to that account. All that the statute does is to authorize appropriations annually thereafter…” Now wait a minute. Since this account was created, why wouldn’t the revenue from the Social Security taxes go directly into it? Why would it go into the general treasury? The SSA does allow for appropriation to be made from the general treasury into the Old-Age Reserve Account but why do it that way? For the answer, we go back to the opinion: “Not a dollar goes into the Account by force of the challenged act alone, unaided by acts to follow.” So the SSA doesn’t even have a means to put money into the account! It’s completely useless. It’s an AINO (Account In Name Only). This is why it technically isn’t accurate to say that Congress took money out of the trust fund. There never was an actual, real, legitimate trust fund in the first place! It’s been one giant shell game since literally day one.


Crossposted at rampartmedia.weebly.com