The Truth About Social Security

There are many misconceptions about Social Security.  One columnist for the Atlanta Journal/Constitution stated that Social Security is just another tax, and she didn’t want to hear about people paying into it.  It is sad to have such a closed mind.

The Social Security Act was passed by President Roosevelt in 1935, and it was to be an old-age insurance program.  Most workers and employers had to participate.  There was no choice. All wages and all payrolls were taxed, and that money went into a trust fund maintained by the United States Treasury. After 1937, all employees had to pay 1.5% of their wages into Social Security, and the employers had to pay 1.5%.

This fund was to provide monthly pensions for those workers over the age of 65. If you did not pay into the system, you didn’t get the pension.

In 1956, the rate changed to 4% (2% for employees and 2% for the employers).  In 1961, the rate changed again to a total of 6%.

In 1965, Congress noticed that the Social Security Trust Fund was making money.  We were paying more into it than we were taking out.  Congress, in their greed, saw a new source of funds for some of their pet projects. So, they withdrew the funds from the independent Social Security Trust Fund and added it to the General Fund.  The surplus was then used to offset the national debt, and there is where Social Security began to have problems.

In July 1965, President Johnson passed the Medicare program through Social Security.  It provided medical aid for persons over 65. A separate payroll tax of 1.45% from employees and 1.45% from employers was levied to cover these health services. Social Security was also expanded and given to states for the care of dependent children and the handicapped.

In the 1970’s, President Carter made the Supplemental Security Income (SSI) available to immigrants who had never paid into the system.  At this point, it became a welfare program.  In 1977, the rate was raised to 6.15% to fund SSI.

Payroll taxes are collected by the Federal Insurance Contributions Act (FICA) equal to 6.2% of gross wages up to but not exceeding $106,800 for 2009. Employers are also taxed at 6.2%.  Self-employed persons have to pay the entire amount, even though they are allowed a deduction on their tax return for half.

In 2007, the cumulative excess of Social Security taxes and interest received over the benefits paid out stood at $2.2 trillion.  Yet, in 2008, the Chief Actuary of the Social Security Administration calculated an unfunded obligation of $13.6 trillion.

Securities in the Social Security Fund are backed by the “full faith and credit” of the United States Government which has an obligation to repay its debt.  While the Treasury guarantees the payments it makes to Social Security, it does not guarantee the funds to the retirees. It doesn’t matter if you have paid part of your salary to Social Security your whole working life; the government can deny your benefits any time it wants to for no reason.  Also, if you draw a pay check after you begin receiving Social Security, you will be taxed on that money up to 85%. That is a tax on a tax.

The Liberals cry that Social Security is corrupted.  Who corrupted it? If the Social Security Trust Fund had been left alone, there would be plenty of funds to cover those retirees who have worked so hard their entire lives and deserve the money. A greedy Congress, however, was just too tempted and weak to keep their hands of the money that morally they had no right to touch. Now all of us are suffering the consequences.

Yes, Ms AJC columnist, we paid into Social Security and Medicare because we had to. Yes, it is a government-run program. We should be entitled to this money when we retire. I know that you and your progressive friends can’t understand that. What was taken from us by law is now being doled out to everyone else. It is just another way to redistribute the wealth.

Ann Smelser

Owner, TAS Publications