Antisocial Security

...Much effort goes into maintaining the fiction of insurance...

...That doesn’t mean we shouldn’t help the aged poor, of course-Barry Goldwater notwithstanding, the idea of caring for people through the government is a worthy one...

...In towns across the country, people set up Townsend Clubs...

...It was a masterful piece of political sleight-of-hand by Franklin D. Roosevelt, designed to placate the left and the right...

...A two-percent tax on business was to pay for the pension...

...Federal employees can retire with handsome benefits at 55, but social security benefits don’t come in full until 65...

...In theory, social security was not a giveaway program but a governmentrun insurance policy...

...The rationale for this is that to get people to accept paying the taxes, the government has to guarantee them the benefits, but that seems like a high price to pay for the continuing acceptance of the program...

...and benefits went only to retired people or their survivors...

...For the last three years, the system has been losing money-about $3.2 billion last year...

...Benefits have increased greatly and are now tied to the cost of living...

...The Social Security Administration insists that its benefits are a “floor” for retirement plans, not a living allowance...

...Its benefits are based more on past contributions than on need, so they help the well-off more than the bad-off...

...I’m not going to commit myself to a program and then ask you to accept it, he should say...

...The,amount of money it would take old people, probably the prime beneficiaries of a guaranteed income, to get by comfortably, is certainly not enough to tempt a younger worker with a family into a life of idleness...

...A recent example came in late October, when the House, under intense pressure from the federal employee unions, voted to shelve a plan to bring 2.6 million civil servants into the social security system...

...Because it was an issue about which civil servants felt strongly, he got a lot of help...

...Thus President Carter deals with issues like energy or welfare reform by coming up with a cast-in-ganite solution and then, through the hard sell of lobbying and speechmaking, trying to push it through...

...Townsend claimed he had gathered 25 million signatures on petitions supporting the plan...

...The goodness of the system is a longstanding article of faith among liberals, and major criticism of it was for years confined to the Barry Goldwaters of the political world (when Goldwater proposed the abolition of social security in his 1964 presidential campaign, it was considered a suicidal blunder ranking with his statement that “extremism in the defense of liberty is no vice...

...Meanwhile, people who do have sufficient nest eggs in their old age get benefits too, although they don’t really need them...

...The dignity of the old and the needy is what’s genuinely important...

...But there are times when leaps of public opinion have to precede specific reforms, because those reforms can’t succeed without them...

...Similarly, mo s t mid d 1 e-cl ass w ageearners already think they’re supporting the les9 well off with some of their tax money, so the government’s making that the explicit case would hardly be a great sHock for them...

...The minimum wage would prevent employers from cutting wages in response to the dole...

...The tax is at this writing 5.85 per cent on the first $16,500 of annual income, and it is going up this year...

...The system didn’t work according to its stated economic logic, he once said, but social security taxes “were never a problem of economics...

...it’s also the arrogance of the federal employees, the idea that what’s good enough to be foisted on the American people isn’t good enough for them...

...This means a doctor really pays less into the system than a field hand, though in retirement he receives more...

...they go not only to the retired but to the disabled, dependents, and the elderly sick (Medicare is part of the system...

...This idea need not have any trappings of moral worth or lack thereof Attached to it...

...Dozens of Others To understand how difficult a guaranteed income would be to implement, add to that worker’s hostility the hostility of dozens of other people: the veteran who sees his benefits as a reward for service to his country, the person just out of one job who expects generous unemployment benefits while looking for another, the welfare mother who is sure any change in her benefits from the Food Stamp and Aid to Families with Dependent Children programs will force her into total desperation...

...The plan, Townsend said, would help the aged, reduce unemployment by opening up jobs for the young, and stimulate the economy by infusing cash into it...

...Our Whole Concept Changing social security is simple compared to changing our whole concept of income maintenance, but the concepts involved in both are similar...

...Social security is a messfunctionally, it’s going broke...

...If Americans can accept that they’re part of a national community whose success each person cares about and has a stake in, a guaranteed income can work...

...Another boon to the rich is that the tax on self-employed people is 7.9 per cent...

...So Roosevelt came up with a plan in which working people would pay money into a trust fund while they were working and then draw benefits out of the fund when they retired, proportional to their contributions...

...Executives at Lockheed know the government is paying their salaries, and farmers-if they’re not fiercely independent, who is?-are 44 trying to get,the same deal...

...And the dignity of young people who could find employment shouldn’t be of prime concern here anyway-if receiving a guaranteed income is a little undignified for them, all the better, they’ll have to think hard about choosing not to work...

...If the program is supposed to be for only people who need it, there’s no reason to extend it to people who don’t...

...The amount of money you have in old age isn’t very much a product of how good you are...

...Last year the Social Security Administration paid out $75 billion in cash benefits, making it by far the largest of the many government programs that give citizens goods and services...

...To federal employees, coverage under social security meant one of two things, both bad: either they would be in social security in addition to their present plan, which would mean paying almost 13 per cent of their paychecks for pensions, or they would have their own plan taken away and have to struggle through old age 40 on the meager benefits of social security alone...

...At the time that he sent social security legislation to Congress, in January 1935, Roosevelt was under great pressure to provide a stipend to the aged...

...Luck-the circumstances of birth and happenstances along the way-plays a huge part in life and greatly affects people’s economic status...

...Because it is financed through a flat percentage tax with an absolute upper limit, the poor pay a far greater percentage of their incomes into the system than the rich...

...Of course, one reason we don’t have a guaranteed annual income is the flaws of the government...

...But judged by liberals’ rather than Goldwater’s criteria-assuming, that is, that the government should act to help through old age and sickness those who need help-social security’s stated virtues don’t stand up to hard scrutiny...

...I’d like to know what the problems are and let you think and talk them over...

...Although this might drive income taxes up slightly, the tax burden would be distributed more fairly than it is now, and a net gain in federal taxes would be extremely unlikely since so many needless benefit payments would be cut...

...The issue came up early in the fall, when the House Ways and Means Committee was looking for a way to stop the Social Security Administration’s precipitous slide towards bankruptcy...

...So Jimmy Carter ought to tell us what’s wrong with the way we care for the needy-which it’s clear he knows-and what might be done about it...

...The veteran has to decide for himself that somebody else really needs that benefit money more than he does...

...It pays hundreds of thousands of people to supervise the handing out of money...

...This is supposed to ease the burden on working people and increase it for their bosses, but most economists agree that the worker actually pays both ends of the tax-employers figure in social security taxes as part of the cost of hiring an employee and deduct their half of the tax from an employee’s pay...

...An issue sometimes has to be thrown before the public unresolved, so that intelligent discussion can take place in the press, in classrooms, in speeches, and around dinner tables and new attitudes can start to emerge...

...Stores extended generous lines of credit to the elderly, on the assumption that the Townsend Plan’s passage was imminent...

...For those who are annoyed by government deception, the fiction that social security is an insurance program is also an important strike against it...

...The social security bill it sent to the House floor in October contained a provision to do that...

...And it isn’t only the gnawing feeling that we had been lied to about the virtues of social security, that as people catch on, will rankle...

...Carter isn’t the only President to see this as the way to exercise leadership-when a politician is having trouble figuring out the answer to something, he is usually loath to admit it publicly and instead floats trial ballooqfi so that the pews of his uncertainty isn’t made public...

...Goods and Services Since the New Deal, social security has grown and grown...

...Kindness and Dignity So the really knotty doubts are abstract ones having to do with kindness and dignity...

...In addition, federal employees can become eligible for social security too, by moonlighting or working in private industry before or after their government employment...

...Social security was conceived in compromise...

...Milton Friedman, after reading the prosocial security literature put out by the government and others, was moved to say, “Men who would not lie to their children, their friends, or their colleagues, whom you and I would trust implicitly in personal dealings, have propagated a false view of social security-and their intelligence and exposure to contrary views make it hard to believe they have done so unintentionally and innocently...

...By trying so hard to hoodwink Americans into believing that the money they pay social security is money they’ll get back one day, the government is passing up the chance to run a sensible relief program...

...Seen as a relief program, social security is full of contradictions...

...I’ll tell you what I think the answer might be, but if I’m wrong, tell me and I’ll change my mind...

...That way, social security admits to servicing only one human frailty, which is people’s natural disinclination to lay away sufficient money for the future...

...The Flaws of the Government Just as this is an attractive solution to social security, it’s also an attractive way of handling all the government’s social-welfare programs...

...Politicians act this way partly because they think that to appear honestly undecided is to appear incompetent and partly because they view the country as made up of warring interests who will never agree on anything if left to themselves...

...Increase payments up to a decent living level to the people who do need it...

...A year earlier, an itinerant, elderly doctor-entrepreneur named Francis Townsend had set up an organization called Old Age Revolving Pensions, Limited, whose purpose was to pay people over 60 $200 a month if they would retire...

...Because social security works by taking money from young workers and paying it to old retirees, it depends on the workers outnumbering the retirees...

...If that stops being the case, it’s hard to imagine how the system will survive...

...done by increasing the number of people who pay social security taxes (an easier remedy than greatly increasing the tax on the rest of us...

...A guaranteed annual income is seen as fundamentally inconsistent with the American-or even the human-character...

...A government pensioner can also get social security payments as a survivor or a dependent of his spouse...

...Usually, when a problem this tough confronts the nation, our political leaders think it’s their responsibility to figure out the answer and talk everyone else-the Congress, the public-into accepting it...

...the tax was one per cent of the first $3,000 of a worker’s annual earnings...

...That argument is the most plausible one standing in the way of the obvious solution tb social security’s problems: instead of tinkering with the taxes and benefits, just do away with its insurance disguise...

...the self-protective urge of employees who administer them keeps them opposed to simplification ; and the government often assumes it’s better equipped to decide what citizens’ financial needs are than the citizens are themselves, which is why it’s reluctant to give them money outright...

...If we see ourselves as each being responsible only to a community of one, then we have to stick with the present mess...

...Therefore, the logic goes, it’s imperative to make everyone paying social security taxes think they’re laying aside money for themselves (which isn’t true), and everyone receiving benefits think they’re getting their own money back (also not true...

...The idea is that most Amel-icans will sheepishly admit they need to be forced to put money aside, but won’t accept the idea that they should pay non-workers’ living expenses...

...Rich people tend to start working later than poor people and to live longer, so they also usually spend fewer years paying taxes to social security and more years receiving benefits...

...Is the dignity of the elderly such that they wouldn’t accept payments they didn’t feel they’d earned, as opposed, again, to having the truth hidden from thew...

...Practically, the drawbacks to a guaranteed income are that it would take away people’s incentive to work and encourage employers to pay low wages, with the government making up the differences between low salaries and its minimum income...

...But most government social programs also share the fiction of social security- they’re designed not to look like a dole, on the grounds that that’s something neither the taxpayers nor the beneficiaries will stand for...

...Social security is a program that congressmen and bureaucrats continually insist is a wonderful, universal, painless form of governmentadministered old-age insurance -but the clear message they were sending was that they wanted to stay out of it themselves...

...Because the government has extended its benefits so broadly, to rich and poor alike, it’s hard to believe there are many people left to whom the notion of getting a favor from Washington is shocking and repugnant...

...Social security’s regressive structure, for instance, apparently stays in place mainly because it seems to resemble the structure of an insurance plan, though the resemblance is only on the surface...

...There would be too many people instinctively opposed to it-people who, if they’re not convinced the idea is a good one, can stop it from becoming law...

...The fact presented to us is that we’re putting away money while we’ve got it to help ourselves later, when we need it...

...Social security just isn’t the way to do it...

...OriginalIy it covered only workers in business and industry...

...They are politics all the way through...

...Even a $1 5 , 000-a-year federal employee, which is pretty low-echelon, can retire after 30 years at $703 a month...

...Many people do in fact live on their social security benefits, but they’re forced to live close to the bone...

...Thsse are easily dealt with, however...

...Regressive Taxation As is becoming more widely understood, social security, rather than being a progressive form of insurance, is in fact a regressive form of taxation...

...That can and will be corrected, but there’s a longer-term and more important problem too: the population is getting older...

...Some people are born rich or smart, and others aren’t...

...Obviously his hostility to change would be immense...

...Whatever the plan’s flaws, it led old people to expect some support from the federal government...

...Are healthy working people kind enough to buy the explicit notion that they are supporting the old and infirm with their taxes, as opposed to having that fact hidden from them by the government, as is now the case...

...That’s the best way for us to move toward a new definition of generosity and self-respect 45 -without being ordered to...

...From the workers’ standpoint wages in America are sufficiently high-and the government’s guarantee could be made sufficiently low-that the incentive to work would remain firmly in place...

...Right now, 157 federal agencies spend nearly $250 billion* a year giving people money or services...

...The birth rate has been falling, and by the early part of the next century the children of the post-World War I1 baby boom will begin to glut the system...

...So while social security reform is possible through conventional means, a guaranteed income certainly isn’t...

...So the tax on the self-employed is lower than the real tax on those employed by others...

...The Townsend plan was financially impracticable-it would give the aged 60 per cent of the national incomebut nonetheless it caught on...

...The employee unions lobbied hard...

...So far the losses have been paid for out of Social Security Administration reserves, but without any changes those reserves will run out in the early eighties and the government will have to pay for social security out of general revenues...

...Most federal employees participate in the civil service retirement system, under which they pay seven per cent of their paychecks while they’re working for the government and can retire after 30 years at pensions as high as $2,216 a month...

...As of December 31, 1975, 44 per cent of retired federal workers were drawing both government and social security pensions...

...Accepting a Dole The justification for social security is that people won’t accept a doletaxpayers will bridle at paying for it and recipients will feel degraded when they accept it...

...Knowing we probably can ’t have social security for very much longer, it becomes possible to see that we also shouldn’t have it...

...Fisher was unable to persuade the Ways and Means Committee to change its mind (it voted him down 22 to 13), but when he brought his case to the House floor-in the form of an amendment substituting a two-year study of the matter for immediate federal employee inclusion in social security-it passed 386 to 38...

...Now The Washington MonthlylJanuary 1978 social security includes agricultural and domestic workers, doctors and lawyers, railroad workers, military personnel, and most state and local government employees, whose participation is voluntary...

...By contrast, the maximum individual social security retirement benefit is $442 a month, and the average is $221 a month-hardly enough to live on...

...So their wanting to stay out was perfectly understandable, if not admirable...

...The government subdivides people’s ,needs with immense complexity, and no doubt with immense inefficiency, insufficiency, and overlap too...

...Just reforming social security would be a major task...

...At the same time, the right was unalterably opposed to a giveaway plan like Townsend’s on the grounds that it would force the working population to support the non-working and destroy the dignity of those on the dole...

...Certainly both notions, especially dignity, have changed a lot in America since the New Deal...

...if the government decides for him, he won’t accept it...

...With the wolf thus at the door, it becomes easier to strip away the aura of good that envelops social security and examine it closely...

...and logically, it’s a tangled mass of contradictions...

...For 30 years, he has been carefully balancing his pension at work and his IRA account at the bank with the social security money he was sure he’d get, so as to guarantee a retirement that would be comfortable-with vacations and meals at good restaurants-instead of just adequate...

...To federal employees, the delay aspect of the Fisher amendment was a greater cause of joy than the detailed-study aspect...

...for individuals, it’s usually either unnecessary or insufficient...

...Stop payments to the millions of people who don’t really need the money...

...That w o n ’t happen, because Congress passed a greatly increased social security tax last month that will pump money into the system, but the losses are frightening anyway...

...We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits...

...Real change would mean turning what the government now presents to us as a personal fact into a broader metaphor instead...

...Imagine how a 5 5-year-old middle-class worker would feel about suddenly being told he wouldn’t get the social security benefits he had been counting on because he doesn’t need them...

...Our leaders have to help us work this out, but they have to be willing to let us do much of the work ourselves...

...Abolish the social security tax and pay the bills out of general revenues from federal income tax...

...The idea was that people would never set aside enough money for their retirement unless forced to do so, but that the money a retired person got out of the system was linked to the money he had put into it...

...When this happens, newspaper readers start to notice that James Reston and Joseph Kraft are suddenly talking about, say, whether we should revive the draft, apparently apropos of no thing...

...The largest chunk of people who don’t pay the taxes now is federal employees, so the Ways and Means Committee decided to bring them in...

...To persuade these people, we need a new approach to reform...

...They have come about partly because when Congress tied the program’s benefits to the inflation rate in 1972 it made a drafting error that gave some people, in effect, two sets of benefits increases for every rise in the cost of living...

...This has obvious economic problems, of course, but it also helps keep social security from efficient performance in helping people, which is its real function...

...On the other hand, the federal employees have a point-it just doesn’t seem to be in their interest to participate in social security, and their behavior on the issue is a comment not only on their character, but on our largest domestic program as well...

...Although Fisher, a calm and reasonable economist, says he wants civil servants to be brought into social security eventually and just proposed his amendment to make sure the details are ironed out properly, two years seemed like an awfully long time to accomplish that task...

...This, again, helps the rich more than it does the poor, since the rich are most likely to be receiving unearned income in retirement...

...The obvious solution was to increase the revenues of the social security system, which is most easily Nicholas Lemann is an editor of The Washington Monthly...

...When Joseph Fisher, a congressman from the Virginia suburbs of Washington who probably has more federal employee constituents than anyone else in the House, got wind of the provision, he immediately began organizing to kill it...

...Just providing people with a guarantee that their income would always be at a certain level-and covering* in ,addition major expenses like medical care _would be a much simpler and cheaper way to do it, and it would also, as Michael Nelson points out elsewhere in this issue, help lessen the hostility people feel toward federal bureaucrats...

...Clearly the intention of the program, and its main good, is helping people who can’t work and have no savings-but the government won’t give those people a decent amount to live on...

...In fact this was not true-social security would pay the benefits of the old out of the wages of the youngand Roosevelt knew it...

...The metaphor would be that those of us who have a little money to spare should willingly give some of it up to help those of us who need money desperately...

...Antisocial Security by Nicholas Lemann Every once in a while, the federal government will do something that seems to have been calculated to foster bitterness and hostility among the populace as they realize what’s being done to them...

...if it’s supposed to be for everybody, the omission of people like federal employees is unconscionable...

...So generous a giveaway is the system that the government’s unfunded liability for its share of the benefits is now on the order of $106 billion and growing...

...At the moment, employees pay a 5.85 per cent tax out of their paychecks, and employers match their employees’ contributions...

...If the real goal of the program is providing for old people who need money, provide them with that money, by the simplest possible formulas, according to need...

...His office received hundreds of letters opposing the inclusion of federal employees in social security, and other offices received hundreds more...

...Welfare programs have been put together piecemeal...

...With those taxes in there, no damn politician can ever scrap my social security program...

...People also make conscious choices that affect their material prosperity but not their personal quality-some people decide to be sculptors, and others decide to be bankers...

...It’s now extracting taxes from people who can ill-afford to pay them, and giving benefits to people who don’t need them, all in the name of disguising its real purpose...

...Roosevelt had to deliver...

...Retired people lose their eligibility for social security benefits if they’re still receiving a certain amount of earned income-but unearned income, such as stock dividends or insurance premiums, doesn’t affect eligibility for benefits...