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Love it or Not, Social Security 75th Anniversary to be Marked Aug. 14

Thomas Paine Called it "Agrarian Justice," Not "More Common Sense"

July 31, 2010       Leave a Comment
By: Dave Rogers

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In Michigan, one in six residents receives Social Security averaging about $1,100 monthly -- more than $13,000 a year, according to AARP.
 

Economic justice has been the goal of mankind since the ancient Greeks stockpiled olive oil for common support during hard times.

In Michigan, one in six residents receives Social Security averaging about $1,100 monthly -- more than $13,000 a year, according to AARP, the American Association of Retired Persons.

Nearly half of the nation's older population would be living in poverty without Social Security. In Michigan, one in four older residents rely on SS as their only source of income.

As the program of the Franklin Roosevelt administration nears its 75th anniversary on Aug. 14, a deeper look is warranted. No doubt, depending on political winds, SS will continue to be somewhat of an issue.

It should not be a political football, in our humble opinion. However, Congress should take steps to end abuses and stabilize the financial basis of SS.

The Mackinac Center, conservative think tank in Midland, is one of many organizations proposing partial privatization of SS.

Many Americans now supplement their retirement nest eggs through investing in Individual Retirement Accounts (IRAs) and employer-sponsored 401(k) and 403(b) pension plans, wrote Kent R. Davis.

"Within the next 20 years great gains can be achieved for lower-income workers by partially privatizing Social Security," Davis wrote.

Mackinac is pushing an "opt out" solution as an alternative to raising taxes.

However, the think tank also notes: "Today, the Social Security trust fund is theoretically in surplus and will continue to be until about 2015 -- "theoretically" because all excess money above what is needed to pay benefits to current retirees is immediately borrowed for other government spending."


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Wouldn't it seem that stopping the borrowing and creating a larger SS surplus would be a solution to the SS system's long term financial stability?

Wouldn't it seem that allowing states and individuals to "opt out" would reduce the base of support of SS?

Mackinac notes: "The real crisis will begin after 2015, when Social Security benefit payments will exceed the amount of money workers pay into the system and large numbers of baby boomers begin to retire. Changes must be made now to keep the current system from going bankrupt and leaving today's workers and tomorrow's retirees both out in the cold."

Congress has raised Social Security payroll taxes repeatedly in an effort to keep the benefits flowing, Mackinac writers state. "The current tax rate of 6.2 percent for both the employer and employee is applied to wages up to $68,400 and marks an amazing 950 percent increase from the initial $60 per year paid to Social Security by employers and employees."

Of that 6.2 percent, 0.94 percent goes toward survivor benefits in the case of death and disability benefits for people unable to work. The remaining 5.26 percent is applied primarily toward retirement benefits for current retirees. An additional uncapped 1.45-percent payroll tax is also levied for Medicare.

Wouldn't it seem to make eminent good sense to lift the cap on the SS tax. Why should higher wage earners be exempt from a fair share of SS taxes? Benefits should be adjusted so this group is fairly compensated for the higher tax, in our opinion.

Oregon in 1997 to become the first of several states to pass a resolution calling on Congress to grant individual states waivers to opt out of Social Security and explore alternative pension plans.

History of the Social Security System

One of the first people in the United States to propose a scheme for retirement security that is recognizable as a forerunner of modern social insurance was Revolutionary War figure Thomas Paine.

Paine's last great pamphlet, published in the winter of 1795, was a controversial call for the establishment of a public system of economic security for the new nation.

Entitled, Agrarian Justice, it called for the creation of a system whereby those inheriting property would pay a 10 percent inheritance tax to create a special fund out of which a one-time stipend of 15 pounds sterling would be paid to each citizen upon attaining age 21, to give them a start in life, and annual benefits of 10 pounds sterling to be paid to every person age 50 and older, to guard against poverty in old-age.

Civil War Pensions: America's First "Social Security" Program

Although Social Security did not really arrive in America until 1935, there was one important precursor. Following the Civil War, there were hundreds of thousands of widows and orphans, and hundreds of thousands of disabled veterans.

A much higher proportion of the population was disabled or survivors of deceased breadwinners in the post Civil War era than at any time in America's history. This led to the development of a generous pension program, with interesting similarities to later developments in Social Security.

(The first national pension program for soldiers was actually passed in early 1776, prior even to the signing of the Declaration of Independence.

The Civil War Pension program began shortly after the start of the War, with the first legislation in 1862 providing for benefits linked to disabilities "incurred as a direct consequence of . . .military duty." Widows and orphans could receive pensions equal in amount to that which would have been payable to their deceased solider if he had been disabled.

In 1890 the link with service-connected disability was broken, and any disabled Civil War veteran qualified for benefits. In 1906, old-age was made a sufficient qualification for benefits. So that by 1910, Civil War veterans and their survivors enjoyed a program of disability, survivors and old-age benefits similar in some ways to the later Social Security programs. By 1910, over 90 percent of the remaining Civil War veterans were receiving benefits under this program, although they constituted barely six tenths of the total U.S. population of that era. Civil War pensions were also an asset that attracted young wives to elderly veterans whose pensions they could inherit as the widow of a war veteran. Indeed, there were still surviving widows of Civil War veterans receiving Civil War pensions as late as 1999!

In the aggregate, military pensions were an important source of economic security in the early years of the nation. In 1893, for example, the $165 million spent on military pensions was the largest single expenditure ever made by the federal government. In 1894 military pensions accounted for 37 percent of the entire federal budget. (The Civil War pension system was not without its critics.)

But these figures based on the federal budget exaggerate the role of military pensions in providing overall economic security since the federal government's share of the economy was much smaller in earlier times. Also, there were features of the system which meant that many veterans did not receive any benefits. For example, former Confederate soldiers and their families were barred from receiving Civil War pensions. So in 1910 the per capita average military pension expenditure for residents of Ohio was $3.36 and for Indiana it was $3.90. By contrast, the per capita average for the Southern states was less than 50 cents (it was 17 cents in South Carolina).


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Despite the fact that America had a "social security" program in the form of Civil War pensions since 1862, this precedent did not extend itself to the general society. The expansion of these types of benefit programs to the general population, under Social Security, would have to await additional social and historical developments.

The Company Pension

One of the first formal company pension plans for industrial workers was introduced in 1882 by the Alfred Dolge Company, a builder of pianos and organs. Dolge withheld 1 percent of each workers' pay and placed it into a pension fund, to which the company added 6 percent interest each year. The plan proved largely unsuccessful since it required a worker to spend many years in continuous employment with the company, and labor mobility, then as now, meant that relatively few workers spend their whole working career with one company.

Not only was the Dolge Plan one of the first formal company pension systems in industrial America, it was also one of the first to disappear when the company went out of business a few years later.

So the company pension was an option not available to most Americans during the time prior to the advent of Social Security. The March of Coxey's Army

The Great Depression of the 1930s was not the only one in America's history. In fact, it was the third depression of the modern era, following previous economic collapses in the 1840s and again in the 1890s. During the depression of the 1890s unemployment was widespread and many Americans came to the realization that in an industrialized society the threat to economic security represented by unemployment could strike anyone--even those able and willing to work. Protest movements arose--the most quixotic and notable being that of "Coxey's Army."

Jacob Coxey was an unsuccessful Ohio politician and industrialist who, in 1894, called on the unemployed from all over the country to join him in an "army" marching on Washington.

The march was mainly a public relations stunt but it did call attention to economic problems.

The "big picture," in our view, is that Social Security is not broke and won't be unless the government keeps sucking money out for other programs. SS could use a little "common sense" fixing, however, taking Thomas Paine'

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Dave Rogers

Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
respected journalist/writer in and around Bay City.
(Contact Dave Via Email at carraroe@aol.com)

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