THE PEOPLE'S HISTORY OF SOCIAL SECURITY

By: Jon Thomas-Weger

Central New Mexico Labor Council

People used to have to work themselves to death. There was virtually no social net, other than under funded charitable institutes. When people got too old to work they had to be cared for by their children, if that wasn’t possible, they died an early death.

Prior to Social Security people did as best they could to prepare for the day they could no longer work. Then a normal work week was 55 to 60 hours without overtime. Most working people, then about 50% of the population, did as best they could to save for the day when they could no longer work. Most private employers had no retirement plans. Federal Employees did not even have a retirement plan until 1923.

When the stock market crashed and most banks failed in 1929, people lost what retirement savings they had. Parents and grandparents were forced to live off their children, since there were few jobs to go around, this only increased depression era poverty. But finally, in 1936 the Social Security Act was passed by Congress that would help guarantee a person the right to retire before dying, and give a measure of dignity in retirement and to surviving spouses and children.

Initially the law only covered wage earners in industrial and retail establishments in the private sector, and the contributions were half what they are today. But the law became so popular, it was gradually expanded to include farmers, the self-employed, small business owners, agricultural workers public employees and then in 1986, to even Federal Employees. Now the vast majority of people in this country pay into Social Security.

Unlike other areas of government, the Social Security Trust Fund has always been solvent and runs a surplus.  For this reason, Congress was able, over the years, to expand and extend benefits to virtually all wage, salary, commission, and self-employed people in the nation. By the early 70’s, Social Security had annual cost-of-living increases, paid benefits for disabled and injured people, paid for the college education for children with a deceased parent, and paid a reasonable portion of funeral costs.

 

Conservatives Kick and Scream

When Social Security was originally introduced, conservatives were kicking and screaming against the law, calling it a “public dole” and “Communistic”. In other words, they preferred a work force, entirely dependent on employers for their well-being, and also they didn’t want to have to pay the matching contributions. The Republican Party, in their platforms opposed Social security right up to 1952, when Dwight Eisenhower was nominated. It wasn’t until the Goldwater candidacy that Republicans began more openly to call for the repeal of the Social Security Act.

Goldwater’s overwhelming defeat convinced Republicans to take another tactic, privatization. Certain pundits and the Heritage Foundation started floating the lie, that if a person had simply put their SS contributions in to a savings account (which at the time paid 5.5% interest they would have much more money at age 65 than they would get back through Social Security. And they could invest the money themselves. This was appealing to the self-employed, but by the wayside when interest rates declined.

 

BI-PARTISAN COOPERATION

Perhaps the most disastrous “early-strike” against Social Security came in 1968, when a bi-partisan coalition decided to lump the Social Security Trust Fund in with the rest of the budget. Prior to 1968, Social Security was a separate budget fund and was not figured as part of the general budget. But as the National Debt grew, conservatives and liberals co-operated on a way to conceal the growing annual deficits (caused largely by the Vietnam War). Since Social Security had a healthy surplus, deficit spending looked much smaller.

Shortly before the election of 1976 came the first dire predictions of the ultimate demise of Social Security. Since Social Security is funded by employer and employee contributions a high spike in unemployment will show a decrease in the relative contributions to the fund. And following the end of the Vietnam War unemployment began to grow, Furthermore the minimum wage had not increased (and the proportional payments in to the Social Security Fund) to keep up with the massive inflation of the late 70’s. This caused an actuarial shortfall. The predictions were that unless things changed Social Security would be bankrupt by sometime after the turn of the century.

 

Bush Claims SS Broke by 1988

Bush II, got in to the act in 1978 when he ran for Congress in Texas. He proclaimed that unless Social Security was privatized the fund would be broke by 1988. This was his first experience at alarming the public and apparently he was not too convincing this time, as he was overwhelming defeated. But his “passion” to reform Social Security would remain.

Ronald Reagan came in the political spotlight when he first made an impassioned nationwide television appeal to vote for Barry Goldwater. A year later he did the same thing, this time urging Congress to vote against the passage of Medicare. His passion against Social Security and Medicare was to increase once elected President.

 

Reform It to Kill It

The new tactics adopted by the Reagan Administration recognized what a popular and successful plan Social Security was, therefore the best way to eliminate Social Security was to “reform” it. The massive layoffs that resulted from the “shock therapy” given to the economy by Reagan caused more actuarial doom and gloom for Social Security. They began predicting a bankrupt System within the first twenty years of the 21^st Century. It was then when the propagandists started proclaiming how unfair it was for the baby boomers to be paying for Social Security, as the System would be bankrupt by the time they retired. (Now that baby boomers are beginning to retire, the right-wing is saying it is unfair for the youth of today to pay for the Baby Boomer’s retirement.)

And, this is when the idea of setting up “private accounts was first seriously floated, in order to “save” Social Security. The idea was, by pandering to the fears and prejudices of baby boomers, Social Security could be gutted in favor of privatization. Fortunately, the House of Representatives was still dominated by Democrats and a number of moderate Republicans. Thus, some sincere, though largely misdirected efforts were made to insure SS’s solvency. In 1982, individual and employer contributions were increased .2% and the self-employed contributions were increased from 11% to more than 12%. Furthermore, there were several delays in cost-of-living increases. However, there was probably no need to take these measures, in fact the Social Security Fund continually increased.

Up until the mid-eighties, the Federal Government had never borrowed from the SS Trust Fund. It had been sacrosanct, until the Reagan Administration tried to borrow several billion$ from it in order to pay for some Dept. of Defense expenses. They promised to pay it back, and they did within a short period of time. But, this test laid the groundwork for the future and now the Bush Administration seems to be borrowing on a regular basis. No one knows how much, or if it has ever been paid back. The Social Security Administration claims that no money from the SS Fund has ever been spent on anything except Social Security.

 

Making Social Security More “Fair” for the Wealthy

As time progressed between Reagan and Clinton additional changes were made to both “save” SS and to make it more “fair”. The retirement age was increased to 67. And although the SS Fund was supposedly facing a shortfall, Social Security was changed from a social benefit to an entitlement. That is a person could begin receiving Social Security when they were eligible even if they were working and no matter their income. Prior Social Security was denied to wealthy people as clearly they didn’t fit the “means” test. But, all means tests were eliminated thus making Social Security available to rich people even they only pay a small percentage of the 6.2% tax that most working people pay. This was a Republican maneuver to make Social Security fair to rich people.

 

Clinton Helps Republicans

While the Republicans had been touting some form of privatization for years, it wasn’t until Bill Clinton that Democrats also floated this balloon. Clinton went around the country to public forums where he touted the possibility of private accounts for Social Security. The public forums convinced Clinton and other Democrats that private accounts did not have much support and he withdrew his proposals. Nevertheless, Clinton’s desire to co-operate with Republicans (during the height of his impeachment hearings, ed.) opened the door for more debate on this subject. But that is all that it had been, until now.

 

The Second Weapon of Mass Destruction

During the 2004 presidential election Bush II barely mentioned Social Security except that he intended to preserve it. But after his “election” he came out all guns blazing for privatization (read: dismantling), and has equated the Social Security “crisis” with Weapons of Mass Destruction. As we now know, there were no weapons of mass destruction, and there is likewise no crisis in Social Security.

Logic says that the viability of the Social Security System depends, not on turning your retirement future over to stock brokers, but on continued contributions in to the fund that are enough to ensure that those who are retired now will be able to receive an adequate retirement. There are many ways to ensure that the Social Security Fund is healthy.

Here is what affects that Fund: the level of unemployment; the incomes of workers and the self-employed; the level of income on which contributions are made; the restrictions on who is eligible for Social Security; cheating the Fund; and government borrowing from the Fund. To ensure a future for Social Security, we need to address these issues, not the profitability of brokerage firms and corporations.

Only by addressing the above issues, can we proceed to improving Social Security, to ensure that all people entering the workforce today will no have to work longer, for less, and retire at a later age if at all. So families will have some security for disabilities or untimely deaths of breadwinners. Social Security is not your money or our money, it is a Social Insurance for future generations.