Setting the Record Straight: YOUR political party ruined Social Security!

How do we know what political party you belong to?  We don’t!  But we know for a FACT that whichever one it is, it is almost certainly responsible in some way or another for the current abysmal state of Social Security.

“Oh, ho-HO,” you might be thinking.  “I’m unaffiliated!  I don’t even BELONG to a political party.”

Hmm.  Well, you’ve got us there.  But you’ve still probably voted a time or two.  And if you’ve voted for any Presidential candidate at any point that has gone on to win the election, you’re directly responsible for the actions of a leader that has somehow, in some way, broken Social Security.

Way to go.

You see, for years and years people have found reasons to stick Presidents, their administrations, and the party they belong to with all sorts of accusations related to Social Security.  Based on just what we’ve seen, we’d venture every single President since FDR (and INCLUDING FDR, the President who CREATED Social Security) has been blamed for Social Security’s problems or changing the rules somehow to detriment beneficiaries.

Why?  Well, because nobody likes to see the party they’re not part of in the White House.

In this country, we have hideously partisan attitudes about everything.  Take the past four years for example.  We are now so mind-numbingly partisan in our loyalties, it’s almost impossible to get anything done legislatively—even when we mostly agree on something.  Many people are willing to believe almost anything about an opposing political party if it’s negative.  And not too many of those people are concerned with verifying those claims.

But that’s exactly why we’re doing this series: to verify the claims.  And today, we’re specifically looking at partisan claims made about specific parties and their Presidents to see if there is indeed one dastardly individual (or party) responsible for RUINING Social Security for everyone.

Claim: John F. Kennedy stole money from Social Security to start the Peace Corps.

No.  JFK did NOT pay for the Peace Corp with Social Security.  It was paid for with mutual security funds established in 1951 to provide aid to developing foreign nations.

The only thing we could possibly think caused this claim is “Social Security” and “mutual security” both have the word “security” in them.  But we think it would be safer to assume the originator of this claim probably didn’t know anything about mutual security funds.  This claim materialized out of thin air.

Claim: Bill Clinton was the first U.S. President to tax Social Security.

Social Security benefits first became taxable in 1984.  The decision to begin taxing benefits was made by the 1982 National Commission on Social Security Reform, headed by Alan Greenspan under the Reagan Administration.

Now, before you Democrats get excited, the Greenspan Commission was a BIPARTISAN commission formed to route Social Security from insolvency in the early 80s.  Bill Clinton wasn’t responsible for it.  Ronald Reagan wasn’t responsible for it.  And neither was any party in particular.  This one was a group effort.

Claim: Franklin Delano Roosevelt claimed we’d only have to contribute 1% of the first $1,400 we make to Social Security AND that it would be completely voluntary.

Not even the guy who made Social Security is safe from the finger-pointing.

At no point was Social Security ever pitched as being totally voluntary.  We have no idea where that one came from.  If Social Security was voluntary—especially during the Great Depression—it wouldn’t have worked.  Absolutely nobody would have chosen to contribute and there would have been zero dollars in the coffers to pay anyone’s benefits.  Social Security would have been dead on arrival.

And as for the “1% only on the first $1,400” claim, the original Social Security Act called for contributions to be made on the first $3,000 in income with provisions to gradually increase the contribution rate over time.  The payroll tax rate was never meant to stay at the level it was at when the program was started.  If it did, the program would have been insolvent WAY before the crisis of the 1980s.

Speaking of, the Greenspan Commission was also responsible for setting our current payroll tax contribution rate of 6.2%.

Claim: Jimmy Carter was the one who started giving Social Security to undocumented immigrants/immigrants who have never contributed to Social Security.

Negative.  Jimmy Carter did no such thing.  Mostly because NO President has EVER done this.  We’ve already busted this myth, so we won’t go into too much detail except to say that it is not and has never been legal for an undocumented worker to claim Social Security benefits.  Any claim to the contrary is a lie.  And as for legal immigrants, the rules for who can claim Social Security retirement benefits still apply the same as they would for citizens.  You must have contributed to Social Security through payroll taxes to receive your Social Security benefits.

But why is Jimmy Carter being blamed for this specifically?  …We actually have no clue.  It’s possible the claim that immigrants can claim Social Security without working comes from SSI—not OASDI.  SSI is NOT the same thing as Social Security.  Supplemental Security Income is a federal welfare program that anyone can be eligible for based on need, including legal immigrants.  But Jimmy Carter didn’t create SSI.  SSI was created under the Nixon Administration.

Claim: Lyndon Baines Johnson used Social Security funds to pay for the Vietnam war.

The source for this widespread belief is most likely a book written by former Senator Jim DeMint.  In his book, Now or Never, the Senator explicitly stated the reason the government puts Social Security contributions into the general budget is because LBJ needed a piggy bank to pay for a war in 1968.

Unlike some of the other claims we’ve looked at here, this one has some legitimate context.  But it’s not so simple as saying he stole from the Trust Fund.

What he DID do is fundamentally change the way we treat Social Security from an accounting standpoint.

Prior to LBJ’s presidency, Social Security was an “off-budget” program.  Because Social Security is self-funded, its in-goings, out-goings, and obligations have no effect on the general federal budget.  Social Security was kept in a different set of books and wasn’t ever part of the general budget.

When he was elected, LBJ immediately inherited the Vietnam war from JFK—and its huge price tag.  The federal budget faced growing debts that didn’t look too great on paper, and his solution was to create a unified budget combining Social Security with the general budget.

Where this claim falls flat is in no way did this unified budget change the way Social Security contributions were already being invested and spent.  All it did was combine a large sum of “revenue” with a large amount of going out for war-related spending.  From an accounting standpoint, adding Social Security’s revenues to the general budget made the war debts look a lot less alarming than they were.

Social Security continued to be managed, funded, and spent the way it always was.  All LBJ did was use a clever accounting trick to cover up the true cost of the war.

Did LBJ actually USE Social Security funding to pay for the war effort?  No.

And as of 1990, Social Security is once again completely separate from the general budget.

Claim: The Democratic Party eliminated the income tax deduction from FICA withholding.

False.  There has NEVER been a provision in Social Security allowing you to deduct payroll tax withholding on your income taxes.  This has been explicitly PROHIBITED since 1935.  This is another myth that seems to have appeared out of nowhere.

The bottom line

These are FAR from the only claims being made about U.S. Presidents and their political parties relating to Social Security.  If we tried to list and explain them all, we’d be here all day—and you’d probably have a sore finger from using your scroll wheel.

Most of these claims—those we’ve listed and those we haven’t—are really the exact same claim: So-and-So stole from Social Security to pay for X.  And they almost always come down to a failure to understand how Social Security is legally required to deal with surplus contributions.

All contributions collected in excess of what is needed to pay immediate benefits is LEGALLY REQUIRED to be invested into Treasury bills.  When the time comes to use that money to pay benefits, those bills are redeemed and paid to beneficiaries. 

The money invested into those T-bills DOES end up in the Treasury and is not earmarked for any particular purpose.  Any administration in office has access to that money to do with it what it pleases.  It isn’t “stealing” because it’s 100% legal.  As of right now, absolutely nothing else can be done with that surplus.  It MUST be used to buy T-bills.  There is no traditional “savings account” that money sits in.

Secondly, it’s important to note that every President and every party in power does this.  Singling out a specific party or President for spending that money is cherry-picking.  These claims are meant to target a specific political enemy for the purpose of making them look bad, but the reality is that money is in the Treasury legally and can be used for anything.  Absolutely no administration isn’t going to use money they can legally use.

Instead of politically biased attacks against specific people and organizations, we need to be examining how we can change this funding mechanism entirely—and in a way that will financially benefit the Trust Fund’s surplus.  One thing that can be said about the T-bill strategy is T-bills generate critical interest revenue.  But we can assuredly come up with a strategy to invest those contributions in a way that continues to grow the surplus WITHOUT handing all our money to politicians to do whatever they want.

But THAT is a WHOLE different article.

For now, we’ll just say be wary of specific accusations about “stealing” made toward any specific person or party. Even if it is true that an administration has used money original gained via payroll tax contributions, it’s a legal feature of our current Social Security funding system.  But a lot of times, these specific accusations aren’t even remotely true in the first place.

Both parties are responsible for Social Security’s financial decline.  And both parties are responsible for implementing a solution to it.  Anyone telling you otherwise is likely trying to convert you to a highly partisan agenda.

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