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gt book non-review
   

NO CURE FOR
Social Security

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©2006 gtslade
THE BATTLE FOR SOCIAL SECURITY
From FDR's Vision to Bush's Gamble

by Nancy J. Altman

 

gt slade

That Social Security is the greatest advance since asprin is easily established, provided you are selective and flexible with the truth. Fantasy is super-popular these days. So move over Harry Potter, here's The Battle For Social Security.

Nancy J Altman delineates her view in the subtitle, referring to FDR's "Vision." Rarely bothering with dissenting views, she does include Alfred E Landon's remark: Wage earners, you will pay and pay in taxes... and when you are very old, you will have an IOU which the government may make good if it is solvent. Landon's prediction is ridiculous; the IOU is dependent on whether or not a future government wishes to honour it.

Altman provides a thorough biased history of Social Security's serpentine route through Congress, greased with political chicanery, like deceptive testimony, anonymous votes and the usual rule-bending. One example of its promoters' dishonesty was the omission from their committee's recommendation of a paragraph which included: "...it is reasonable to assume that if a sound programme of old age security can be projected, our system of constitutional law will evolve in time to support that programme." Finally, a creative reason to ignore inconvenient laws.

To add credence to her view, entitlement programme supporters are wonderful(1), opponents evil. The opposition are tainted with using "dirty tricks" and "misleading" information. The tricks used by promoters are clean and essential, in her opinion.

She loves FDR. One of Roosevelt's acceptance speeches, she says, was "stirring, with numerous memorable lines." You'd think during the Depression FDR would have employed at least one speechwriter to boost employment.

Yet she is compelled to describe Barry Goldwater's Conscience of a Conservative as ghostwritten. [Great book, by the way. It impressed me, which is difficult.] Mentioning John Kennedy's book, Profiles in Courage [read that, too], she omits Ted Sorenson's considerable contribution. When an author distorts little things, how can you trust her?

After Social Security's introduction, "election-savvy" politicians kept postponing the scheduled payroll tax increase, so voters wouldn't revolt. Altman fails register the tainting of her beloved programme by politics.

"Altmeyer was fond of saying, in an unartful, though well-meaning way, those punch-card operators were not punching cards; they were punching people."

No Constitutional Amendment establishes the government's right to promise pensions, unlike the income tax, covered by the Sixteenth Amendment, supposedly ratified in 1913. As promised, less than 1% of the population paid 1% of their income in tax. For awhile. Franklin Roosevelt, who never met a tax he didn't like, " was the first president to make serious use of the income tax in peacetime." There were 4 million taxpayers in 1939, over ten times as many in 1945. The war brought more taxes. Even people who owed none sent money to help the government win the war. I wonder how well voluntary taxes would fare today. We should try it.

In passing, she reports that Roosevelt raised war funds by "expanding the Social Security payroll tax." Notice she calls it a tax; it was administered by the IRS. Roosevelt said, "I oppose the use of pay-roll taxes as a measure of war finance unless the worker is given his full money's worth in increased social security," presumably if the US won.

What about all the actuarial bullshit and projections? Those seemed to go out the window, like most tax money received. Social Security is supposed to be self-supporting, like the Postal Service.

Altman explains why, in her opinion, an amendment establishing Social Security would have been bad, mostly because it would have failed. Mentioning the dearth of amendments, she totally neglects the Twenty-Second amendment, assuring no President would ever serve more than two terms, like FDR. I guess term limits were popular then, too. Describing Roosevelt's attempt to pack the Supreme Court with more flexible justices, she refers to a message the President gave to Congress as "lacking candor about motive." Heroes don't lie. She seems to regard the Supreme Court as more of an obstacle than a crucial check on the government's other branches.

Screw the Constitution. "Although the breadth of federal undertakings today obscures the fact, the Constitution not only defines the structure of the federal government, but also limits its reach." Then Altman mocks the Supreme Court of the 1930s for their narrow interpretation of the document, "sometimes straining the common-sense meaning to limit the power of government." Common sense? Social Security makes no sense to me and to millions of Americans. The Constitution protects the minority from having their rights stripped by the majority, with schemes like Social Security. Unless you ignore it.

Altman mentions a Long filibuster, in which Huey lectured about the Constitution. Will Rogers commented that a lot of the senators "thought he was reviewing a new book."

 

jacket   


Speaking of dirty tricks, Roosevelt had one year's Democratic platform organised around the sentence "we hold these truths to be self-evident." One of "these truths" was that the government was obligated to provide "economic security for all our people," sort of amending the Declaration of Independence to a "Declaration of Dependence." Conversely, the Republican platform was "cagily drafted." One of their "cagey" points was that the "so-called reserve fund... will contain nothing but the Government's promise to pay, while the taxes collected in the guise of premiums will be wasted by the Government in reckless and extravagant political schemes." She's right. They were devilishly clever. Politicians should never resort to honesty.

Altman glosses over the pivotal issue of the reserve account. One Social Security screed:

The special securities issued to the old-age reserve account are general obligations of the United States Government, which differ from other securities of the Government only in the higher rate of interest they bear and in the fact that they are not sold in the open market.

Presumably saving commission fees. But who pays the higher interest rates? Taxpayers. And who is responsible for repaying the principal? Taxpayers. States love this trick. They don't want to raise revenue through unpopular taxes, or cut wasteful pet projects, so they issue bonds for future taxpayers to cover. It is like giving yourself an IOU for your mortgage payment and spending the money on a new television set. Oh, wait, that's different. You get a tv out of the deal.

And:

The creation of the Social Security trust was a meaningful, as well as symbolic, decision by the government to hold and protect assets contributed to Social Security in accordance with well-established principles of trust law.

What good are projections when the "trust fund" money is spent – and Congress adds "coverage" whimsically for political gain?

D-DAY
On January 31, 1940, the first monthly benefit checks were issued. "What was destined to become American's most successful domestic programme had begun." Sure, what politician could resist a universal entitlement? But "successful" compared to what? Welfare? The Federal Election Commission?

Americans do not trust Social Security because it is run by the government. When the Social Security Board [now Administration] began, Altman writes that Arthur Altmeyer "always chose the best people. The programme was too important to do otherwise." Even if this were true [call me skeptical], that is no guarantee of future performance. For instance, she mentions that after September 11, 2001 the Social Security bureaucracy worked overtime to get money to families of the victims. If they are so efficient, why couldn't they do it without racking up overtime pay?

"The work of all these supporters and defenders has always been backed by Social Security's most important champion, the American people," she writes. As an American person, I certify that my view of Social Security has never been sought or supportive. When I have volunteered my opinion, it was ignored. The year I was born, Congress voted overwhelming to expand Social Security's reach, adding more "benefits" and more "members." I was not consulted.

Initially, social dependency promoters claimed that their scheme was supported by the ten million persons over 60, another ten million who were supporting parents over 60 and so on. Of course someone over 60 would support a giveaway to which he would contribute almost nothing. Social Security's Jo Anne Barnhart says, "Social Security is a compact between generations." The perfect compact, in the same way cotton candy is the perfect food.

In my government school, I learned that Huey Long was a bad guy, as most Southerners were. I went to school in New York City. This book suggests that Long opposed Social Security and had a shot (no pun intended) at the Presidency. Until he was assassinated and the pro-choice movement with him.

The author never lets facts slow down her arguments. FDR's advisory council "was to consist of an equal number of business and labour representatives with other members representing the public." She claims there were ten "prominent" members of the public (Richard Moley, a Presidential advisor; John Winan, New Hampshire governor; Frank Graham, president of the University of North Carolina). They don't sound like members of the public, they sound like fat cats and politicians.

After Social Security was foisted on the populace, commercial retirement plans became popular. The author says the public "began to think about methods to supplement the promise" of Social Security. Of course, the payroll tax was miniscule compared to over 15% (FICA+Medicare) today, so Americans could afford to save, even during the Depression. Surprisingly, Altman finds no room in her history to discuss the cost of so-called security. Liberals have insisted that we only pay half (7.5%) of these taxes. First, if you are self-employed, you pay it all. Second, if your employer pays, that counts as payroll. Remember, liberals think raising the minimum wage will increase workers' earnings without reducing employment. Also, something your boss pays is free to you. Try convincing your boss of that.

SOUND?
Altman claims Social Security is necessary because employer pensions could be underfunded or unfunded, the company could go bankrupt and so on. She ignores the obvious solution of regulating pensions, which Congress did until 1974. Unlike businesses, "The government, in contrast, has a continuous flow of workers, is in no danger of going out of business and, most important, has the power to tax and so can always satisfy pension promises." All of which is true, if you believe the government can increase taxes without opposition or economic impact, and that future governments will be more trustworthy than today's.

She omits, until much later, what our Social Security Commissioner reminds us annually, "Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change..." Reducing benefits is as easy as increasing them.

 
...our once prosperous nation has become the world's largest debtor. Despite record production, government outspends its revenue by $1.79 billion per day. The national debt now exceeds $8.3 trillion. Even while spending goes unchecked, future obligations accumulate, with today's workers promised a retirement income their children would have to be heavily taxed to provide.
– Harland Harrison, Libertarian Party Congressional candidate

 

In all fairness, Altman objects to this notice because it interferes with the feeling of security.

One "principle" insisted on by Social Security's architects was that old-age insurance be universal, in order to "provide everyone with important protection and to establish a broad insurance pool over which to spread the risk." Social Security pretends to be insurance, and Altman plays along, but it is not insurance, it is a pyramid scheme which only a government could implement. At its inception, there were exceptions for federal workers covered by civil service retirement, state and local workers and, of course, Congress. She never mentions the exemption of the body that was so enthusiastic about this plan (for others).

Democratic Senator Bennett Clark proposed allowing individuals or companies to opt out (providing their own benefits). Altman calls this amendment a "secret killer... because it would have undercut [Social Security's] universality and uniformity." Except for those privileged exclusions.

Nowhere does the author explain how real insurance works. Aside from not being compulsory (she prefers "mandatory), insurance companies make money by investing the premiums. They do not spend the money and hope to get more when claims occur. Even worse, real insurers must comply with regulations that they do not write themselves.

For cosmetic reasons, it was and is important to maintain the fiction that Social Security is insurance, not a welfare program. That is why the tax payments are called "contributions" and the payouts are not means-tested, except in certain cases, like disability or when Congress feel like it.

While the author briefly mentions opponents' assertions "that the payroll tax would be too burdensome on business," no one mentions the burden of a regressive tax on workers. Maybe it never occurred to the university president or presidential advisor reporting to Congress.

One group she rails against is the AMA, the medical union. I don't like the AMA, either, but she adores the "well-respected and popular AARP," never mentioning that they recruit members by selling cheap insurance.

As she approaches the present, her misrepresentations become more transparent.

Lyndon Johnson enumerated JFK's dreams including: the dream of education of all of our children, the dream of jobs, the dream of conquering the vastness of space and, of course, "the dream of equal rights for all Americans." That last is crucial, except when your equal rights conflict with their dreams.

Summarising Barry Goldwater's campaign, she makes no mention of the infamous nuclear bomb commercial or other Johnson campaign dirty tricks and lies. She quotes Ronald Reagan supporting Goldwater on Medicare, saying that "we're against forcing all citizens, regardless of need, into a compulsory government program." Then adds that "the electorate apparently was in favour of being forced," giving the impression that the election was a mandate on Medicare, not because Johnson (ironically) portrayed Goldwater as a war-monger, who would escalate the Vietnam conflict.

Of the 1968 election, one I remember well, she writes that on 31 March "President Johnson shocked everyone," when he announced that he would not be seeking reelection. I was not surprised or shocked. The consummate politician, LBJ knew he would lose, so he provided a lame reason for quitting saying, "With America's sons in the fields far away, with America's future under challenge right here at home" [blah blah blah], "I do not believe that I should devote an hour or a day of my time to any personal partisan causes." What a crock of shit! He didn't care about America's sons when he sent them. And people wonder why Americans don't trust "their" government.

TRUST US
In 1964, 75% of Americans believed they could trust the government in Washington DC. "The numbers started to slip into the low 60s and 50s along with the escalation of the Vietnam War." Notice, no mention of Johnson, the escalator; he liked Social Security, so he was a good guy. In 1995, only 15% trusted the government, probably those who work for the government. Then again, probably not. Altman acknowledge that the wily Johnson [okay, my adjective] managed to commingle the Social Security "surplus" with the general fund, to camouflage "his budget-busting Vietnam War." [her adjective]

She distorts every presidential election, building up to George W Bush. Thus, his administration's appealing names for its programmes, like "'No Child Left Behind,' an initiative that many educators thought hurt children's education." Does she take us for idiots? They all do that. The New Deal – ring a bell, Nancy?

One argument against Bush, and it's as dumb as anything he could come up with, is that "every president, irrespective of party" understood the value of Social Security. They understood that a huge block of voters were mistrustful of any changes to their entitlements. Bush wants to convey an image of political courage in taking on the "third rail of American politics." Agree or disagree with his proposals, it was courageous. Unlike Congress.

As with so many political writers, Altman equates Democrats with liberals and Republicans with conservatives, even when it belies her text. For instance, President Nixon was not a conservative. He was an opportunist.

Another group on the Nancy Altman shit list is the Heritage Foundation. Its mission: to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defence." The author claims that "virtually all Americans embrace" these values. Really? Altman is so ensconced in her liberal cocoon that she actually believes "limited government" and "individual freedom" exist. I'd also question the strong defence, as illustrated by the government's impotence during the 9/11 attacks.

PRICELESS
Horrible conditions during the Depression have been "replaced by an era of financial independence and dignity in old age. Milton Friedman, the Cato Institue, and other libertarians who have opposed the programme throughout its history claim that Social Security curtails freedom. In truth, it does the opposite." Okay! So freedom is slavery? And presumably, ignorance is strength. "People who have independent income have more freedom, not less." Wrong! Government dependency is not free. Contrary to Altman's claims, Social Security "beneficiaries" do not have "freedom from worry." Perhaps she can add that to the Declaration of Independence, too. I worry that the government will finagle its way out of paying what they sort of promised. When will I be freed from worry? When I'm dead?

According to the author, one of the biggest benefits of this Federal boondoggle is "security." But these days, employed workers don't feel secure. High taxes fund reckless and extravagant political schemes, while politicians ignore critical problems, preferring to introduce fag-burning amendments.

In one chapter, Altman refers to those calling for reforms or abolishment as "Leninists." When intelligent discourse fails, name-calling sometimes works. Daniel Patrick Moynihan said, "As the 1990s arrived, and the long stock market boom, the call for privatisation of Social Security all but drowned out the more traditional views." Pretend the other side are the radicals. Maybe their wisdom will be ignored.

In Altman's alternative reality, attacks on social security invariable contain "misinformation" or "factoids." "For Social Security purposes, the correct question is not how many live to age 65, but rather how long those reaching 65 live thereafter."

Forget that there is no trust fund. Somehow the money will appear. Like other Social Security apologists, Altman says that explaining that the trust fund is the Treasury lending itself money "overlooks the legal character of a trust." What she overlooks is that legality rarely apply to government. If breaking promises, treaties and laws are inexpedient, they change the laws. Bonds must be safe because "banks in Japan, China and Great Britain currently hold over half of all privately-held US treasuries." What happens if Chinese banks cash in all their bonds on Thursday? The other holders might react by cashing in theirs. Where does that leave the trust fund on Monday? Of course, it's the government, so they can refuse to honour their international debts, like the other countries do, or they can do the same to retirees left holding the empty bag.

The important thing about a trust is not its legal character, it's the "trust" part. And government is not trustworthy.

In fairness, the author has a pain-free way to fix [she says strengthen] Social Security. Mostly, it involves charging the rich more, uh, premiums. It is so totally confusing that I recommend you borrow this book from the library and read Chapter 16. If you can understand it, please explain it to me. One suggestion is that the government "diversify the portfolio" by investing in mutual funds, on the principle that government "experts" can pick a better mutual fund that you can. And, of course, assuming they stop spending the money on pork.

No less a windbag than Ronald Reagan said, in 1983, of a "reform" bill, "This demonstrates for all time our nation's ironclad commitment to social security. It assures the elderly that America will always keep the promises made." And "[T]his legislation will allow social security to age as gracefully as all of us hope to do ourselves." Inspiring. And Reagan sure aged gracefully.

Although not means-tested, there have been limitations on how much you can earn and taxes on benefits. It is not the straightforward system the author describes.

Altman mentions President Clinton's boast in the nineties that the Federal deficit was zero. In fact, there was a surplus, he said, for saving Social Security which, according to his party, needs no saving. This is like the guy who budgets carefully and has money left at the end of the month. Where should he put that? Well, he could make payments on his mountainous debts. In the government's case, that mountain was in the trillions. The only thing balanced was the current fiscal year, and even that was questionable. In fact, Clinton wanted to do what politicians always want to do: spend it.

We can be forced to pay for this ill-conceived system; we cannot be forced to like it.

Reading The Battle For Social Security did not reassure me or remove any doubt. For if this is the best its proponents can offer, we are in far worse trouble than I feared.

 

(1)
pro
Richard T Ely "perfect teacher"
Robert J Myers "a national treasure"
Henry W Farnam "renowned economics professor"

con
Senator Thomas P Gore asked, "Isn't this Socialism?" Good question. Unlike other politicians mentioned in the book, there is no description of Thomas Pryor Gore, not even an answer to the obvious questions. No. He's not related to Al Gore or Richard Pryor. He was Gore Vidal's grandfather.

for: Another view by Nicola Moore.


 
 
 
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June 2006

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