October 6, 1996

Critical Campaign Issue Needs Social Security Facts

When the Billy Bob show gets underway tonight, it is hoped they skip one-liners about Medicare and balanced budgets.

These have been milked of political mileage already.

Instead, Americans need to know the candidates' proposals to separate Social Security from the national debt.

Regardless of who gets elected, the winner must face up to the problem of repairing the mother of welfare entitlements, without bankrupting the nation.

Americans need facts, not rhetoric.

Lawrence Lindsey, a director of the Federal Reserve, has to help balance the economic ratio. In an article for Forbes magazine, he warns of a future shortfall of Social Security funds to pay benefits.

"At present value, Social Security is $2.7 trillion in the hole with respect to current retirees," he says.

"The fund's own actuaries estimate that it would have to raise a further $4 trillion to pay the claims of everyone who has paid into the system but has yet to receive benefits.

"And the $6.7 trillion total does not include the government's unfunded Medicare liabilities which are part of Social Security," he avers.

Compare these figures with the current national debt of $5.5 trillion. Interest on money borrowed for past welfare payments eats up one-third of all federal tax receipts.

And this total does not include $22 trillion in "off-budget" federal guarantees for loans to farmers, students, small businesses and home owners.

If the country's sales of goods and services don't speed up to increase the tax base -- or if another worldwide economic depression should cripple commerce -- the United States would have to default on its obligations.

This would be an economic disaster too devastating to contemplate.

Don't laugh. Economic collapse resulting from excess welfare has occurred dozens of times in history. The most recent example is that of the Soviet Union.

Social Security was the foundation of President Franklin D. Roosevelt's program to pull the nation out of the Great Depression of the 1930's.

His initial proposal was limited -- meant primarily to encourage older workers to retire and make their jobs available to unemployed workers.

Social Security Insurance -- note the last word --was passed by Congress in 1935 with the first payoffs to be made in 1942.

By that time, of course, the United States was embroiled in World War II. Excess manpower was channeled into the military. All other able-bodied men and women worked overtime to manufacture war material. That ended the Depression, not a potpourri of welfare plans.

There were many critics of the plan states Bruno Stein, professor of economics at New York University and director of the Institute of Labor Relations.

"New Deal proponents saw Social Security as a foundation on which a larger and more comprehensive (welfare) structure might be built," he writes in his book 'Social Security and Pensions in Transition.'

"They were right, as opponents feared," declares Stein.

"As the years passed, the act has been amended many times to add new provisions, liberalize existing ones, and, incidentally, depart from the original principle that the insurance portion be funded on a full-reserve basis."

Liberals kill worthwhile programs by overindulgence -- while bashing conservatives trying to preserve that which is possible.

President Truman confiscated the real money in the retirement insurance fund and put it into the general fund -- to be withdrawn as claims for benefits are presented. He assured us it was OK because "we owe it to ourselves."

Thus, Social Security became a pay-as-you go "trust" -- as in: trust us to find the money when you need it.

This worked well when each generation of workers was larger than the preceding one. The post-WW II baby boomers are paying aid handsomely for current retirees and medicare patients.

Unfortunately, the following "generation X" workers are fewer in number and therefore must work harder and longer to support their fathers, mothers, poor, sick and disabled.

The original Social Security tax began at 1 percent -- split evenly between employee and employer. This was raised to 3-percent in 1938.

Today, the combined tax is 15.3-percent -- 12.4 percent capped each year for general welfare benefits, and 2.9 percent set aside for Medicare. However, Medicare is not capped, so its 2.9 percent tax on wages is continuous.

The first Social Security payoffs -- averaging $22.50 per month -- were funded by taxes of 55 employed workers. Today's huge payoffs are funded by just five contributing workers. The prospects are that the cost of future payoffs will be borne by two or three workers.

Social Security taxes are deposited in the general operating budget -- to be replaced immediately with Treasury notes, that is, I.O.U.S. The system will be kaput about 2018 -- Medicare by 2001 -- without additional tax hikes and/or reductions in benefits.

It is certain that the retirement age will be boosted to at least age 67 -- perhaps 70. As with all welfare plans, benefits will exclude most middle and upper income workers.

These stiff measures will not be enough, so new sources of revenue will be created. Hello national sales tax. Welcome 300-percent gasoline tax. Move over Russia and make room for us.

The first approach to fiscal sanity requires that Social Security be taken from the general budget and put back into its own insurance account. In this way, taxpayers and prospective beneficiaries can keep an eye on it.

Which ever man proposes this tonight deserves our votes.

If neither takes it to his bosom, God help our children when they retire or get sick in their old age.

PARTING SHOTS

The Department of Health and Human Services reports that 80,000 drug addicts and alcoholics collect monthly Social Security checks of $446 for their "disability." That's a lot of taxpayers' green flowing in abusers' veins.

F.D.R. taught us that all we have to fear is fear itself. And then there are liberal Congresses.

* * *

Sometimes you have to kiss a lot of frogs to find a prince.

By Lindsey Williams, columnist for Sun Coast Media Group newspapers