Social Security's value
MANY AMERICANS today, with dim memories of the Great Depression, cannot recall the social and economic conditions that led to the creation of Social Security. American society, while far wealthier than it was then, still features the inequities and abrupt dislocations of everyday life that make government-guaranteed pensions a necessity of old age.
Historical anmesia helps explain the continuing push by President Bush and other free-marketers to privatize the Social Security system. Their initiative first came to public prominence in the 1990s, when the stock market was reaching the high point of a 20-year boom. Wealth appeared to be in every investor's grasp, so why wouldn't it make sense to allocate part of the Social Security tax to individual private accounts?
Any adult in 1935 knew the answer to that. They had lived through the stock market boom of the 1920s only to see that paper wealth vanish in a few weeks and then watched hopelessly as the crash became the depression. A quarter of the work force was unemployed. The New Deal policies of Franklin Roosevelt offered some improvement, but unemployment remained high, and many older people who did work were forced into poverty upon retirement.
By the mid-1930s, many Americans wanted protection, guaranteed by the government, against this dreadful prospect. "Therefore, we are compelled to employ the active interest of the nation as a whole through government in order to encourage a greater security for each individual who composes it," Roosevelt said in 1934 as he began to consider creation of the Social Security system. He introduced to the United States the concept of social insurance in which the government would pool the resources of the people to protect them against impoverishment because of old age or disability. "I am convinced that social insurance should be national in scope . . . leaving to the federal government the responsibility of investing, maintaining, and safeguarding the funds constituting the necessary insurance reserves," Roosevelt said in a message to Congress.
Roosevelt made sure that money for the program would not come from general taxation. Rather, all workers would make contributions via payroll taxes in the expectation they would receive retirement benefits from taxes contributed by younger generations.
The program has evolved over six decades to encompass more of the work force and to include workers' dependents and disabled people. It provides a better level of benefits than was first envisaged with an additional protection against inflation. But Social Security remains in essence what the Roosevelt administration designed: A pension that cannot be taken away or eroded because it is guaranteed by all the people as represented in their government.
Undergirded by Social Security, old age is no longer a predictor of impoverishment. Last year the poverty rate among the elderly was 10.2 percent, 2.3 points lower than that of the overall population. Continued...