Michael Laybourn: The Real Facts About Social Security


This letter from FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794 hit the internet a couple of years ago and I answered it. Maybe we need to do it again…

The letter starts:
Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program.  He  promised:
1.) That participation in the Program would be completely voluntary,
2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the program,
3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,
4.) That the money the participants put into the independent “Trust Fund” rather than into the general operating fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other government program, and,
5.) That the annuity payments to the retirees would never be taxed as income.

ML A: Wrong. Originally, President Roosevelt called for “social insurance.” He envisioned a plan through which workers would contribute and provide for their own future economic security. He specifically disdained the idea of reliance upon welfare. The original SSA embraced the idea of Social Security being an insurance program under which a group of individuals were insured against identifiable risks: disability and old age. Workers paid for their own insurance.

The original 1935 statute paid retirement benefits only to the primary worker. Many types of people were excluded, mainly farm workers, the self-employed, and anyone employed by an employer of fewer than ten people. These limitations, intended to exclude those from whom it would be difficult to monitor compliance, covered approximately half of the civilian labor force in the United States.

This had to change of course: In 1939, the 1937 Federal Insurance Contributions Act (FICA) tax was amended in three important ways:
1. The widowed, nonworking spouse of a someone  entitled to an old-age benefit also became entitled to an old-age benefit.
2. Survivors (widows and orphans) became eligible for a benefit. This feature was very popular among the millions of elderly Americans hard hit by the Great Depression. Yep that was Democrats helping widows and orphans.

In 1956, the tax rate was raised to 4.0% (2.0% for the employer, 2.0% for the employee) and disability benefits were added. Also in 1956, women were allowed to retire at age 62 with reduced benefits (70%). In 1961, retirement at age 62 was extended to men, and the tax rate was increased to 6.0%. Medicare was added in 1965 by the Social Security Act of 1965, part of President Lyndon B. Johnson’s “Great Society” program. Yep another Democrat… now you have Medicare added in.

Since many of us have paid into FICA for years and are now receiving a Social Security check every month –and then finding that we are getting taxed on 85% of the money we paid to the Federal government to
“put away” — you may be interested in the following:

Q: Which Political Party took Social Security from the independent “Trust Fund” and put it into the general fund so that Congress could spend it?
A: It was Lyndon Johnson and the democratically controlled House and Senate.

ML A: Real Answer: There has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government. The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been “put into the general fund of the government.”

Most likely this question comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the “unified budget.” This means that every function of the federal government is included in a single budget.

Social Security taxes are paid into the Social Security Trust Fund maintained by the U.S. Treasury. Current year expenses are paid from current Social Security tax revenues. When revenues exceed expenditures, as they have in most years, the excess is invested in special series, non-marketable U.S. Government bonds, thus the Social Security Trust Fund indirectly finances the federal government’s general purpose deficit spending. At the end of 2004, the cumulative excess of Social Security taxes and interest received over benefits paid out stood at $1.7 trillion, which is plenty to finance Social Security.

Q: Which Political Party eliminated the income tax deduction for Social Security (FICA) withholding?
A: The Democratic Party.

ML A: Sorry…Try again… Real Answer: There was never any provision of law making the Social Security taxes paid by employees deductible for income tax purposes. In fact, the 1935 law expressly forbid this idea, in Section 803 of Title VIII. Even the benefit payments to the retirees were therefore intended not to be taxed as income in the year of receipt. But…Beginning in tax year 1984, with the Reagan-era reforms to repair the system’s solvency, retirees with incomes over $32,000 generally saw part (50%–85%) of the retiree benefits subject to Federal  income tax.

Q: Which Political Party started taxing Social Security annuities?
A: The Democratic Party, with Al Gore casting the “tie-breaking” deciding vote as President of the Senate, while he was Vice President of the US Clinton had decided that all those “rich” people needed to pay higher taxes.

ML A: Sorry. Wrong answer. Try again. Real Answer: The taxation of Social Security began in 1984 following passage of a set of Amendments in 1983, which were signed into law by President Reagan in April 1983. These amendments passed the Congress in 1983 on an overwhelmingly bi-partisan vote. This bill passed by Congress based upon the recommendations of the Greenspan Commission taxed some Social Security benefits, included federal employees in the definition of employees for Social Security payroll tax purposes, and scheduled increases in the retirement age in the next century.

In 1993, legislation was enacted which had the effect of increasing the tax put in place under the 1983 law. It raised from 50% to 85% the portion of Social Security benefits subject to taxation; but the increased percentage only applied to “higher income” beneficiaries. Beneficiaries of modest incomes might still be subject to the 50% rate, or to no taxation at all, depending on their overall taxable income.

Q: Which Political Party decided to start giving annuity payments to immigrants?
A: That’s right!  Jimmy Carter and the Democratic Party. Immigrants moved into this country, and at age 65, began to receive Social Security payments! The Democratic Party gave these payments to them, even though they never paid a dime into it!

ML Wrong! Real Answer 1: Neither immigrants nor anyone else is able to collect Social Security benefits without someone paying Social Security payroll taxes into the system.

Real Answer 2: Hello… During the Carter administration, immigrants who had never paid into the system became eligible for SSI (Supplemental Security Income) benefits when they reached age 65. SSI is not a Social Security benefit, but welfare, because the poor elderly are entitled to SSI regardless of work history. Likewise, SSI is not an entitlement, because there is no right to SSI payments.

The question confuses the Supplemental Security Income (SSI) program with Social Security. SSI is a federal welfare program and no contributions, from immigrants or citizens or anyone else, is required for eligibility. Under certain conditions, immigrants can qualify for SSI benefits. The SSI program was an initiative of the Nixon Administration and was signed into law by President Nixon on October 30, 1972.

Then, after doing all this lying and thieving and violating the original contract (FICA), the Democrats turn around and tell you that the Republicans want to take your Social Security away! And the worst part about it is uninformed citizens believe it!

ML Answer: Talk about uninformed! Whoever wrote this is either ignorant or stupid. Ignorant is uninformed and stupid should know better. Probably stupid. Go ahead trust ole Wall Street for your retirement. I’ll continue with my good old Social Security.