WASHINGTON, Oct. 24 (UPI) -- The problem with America's Social Security system isn't inevitable bankruptcy: it's that Social Security was never a legal insurance contract or a separate fund in the first place, said the author of a new book at a recent think tank forum in Washington.
The commonly held belief -- that Social Security is an earned right, a contract between workers and the government in which the government holds employees contributions in a trust fund from which it pays guaranteed benefits -- is false, says economist John Attarian in his new book, "Social Security: False Consciousness and Crisis," discussed Tuesday in a symposium held by the libertarian Cato Institute.
The book's topic is a timely one. In the midst of the ongoing debate about Social Security reform, analysts predict that without reform, by 2017 the system will be five to six trillion dollars in debt, and will have to be repaid by borrowing money, raising taxes, cutting Social Security benefits, or cutting other spending. Reforms being discussed include privatization -- allowing workers to invest part or all of their Social Security funds in personal retirement accounts.
Attarian instead proposes radically restructuring the Social Security program and changing it from a universal entitlement to a floor of protection. This would transform it into a means-tested welfare system that would eliminate Social Security taxes altogether and distribute benefits only if someone is destitute.
"Without a clearer idea of what Social Security is and how it works, change will be impossible," Attarian said. "We'd be better off if we faced reality. Politicians are saying people are robbing the SS trust fund; that they will put the money in a 'lock box.' Constitutionally, this isn't the way the system is set up.
"The government has been presenting this misleading definition of Social Security to the public since its inception in the 1935," he said. "The image of Social Security as a contractual annuity to pay benefits is false; there is no contract language in the law. The myth that Social Security is an earned right with no strings attached is not true.
Attarian writes that this false picture of the Social Security system was deliberately fostered to ensure the program's constitutionality while downplaying Congress's power to eliminate, cut, delay, or tax benefits, or deny them to certain classes of people. In his book he says that this was done to make Social Security popular and politically invulnerable, and this has) prevented any corrective action to the system over the years.
"Fixes to the Social Security problem -- a reduction in benefits or tax increases -- are never politically palatable," he writes "Most of the proposed reforms refuse to cut current benefits and are thereby saddled with the huge costs of transition to a new system."
Attarian pointed out that Social Security taxes are commingled with other government revenues, and not reserved solely for Social Security benefits. They are used, he said, for things like buying aircraft carriers, paying government workers' salaries, and for anything else the federal government wants.
"The original SS Act said the funds could be used for general use. Employees have no contractual right to sue the government if they don't get their benefits. In 1953 congressional hearings revealed that SS benefits, according to SSA Section 1104, were subject to Congress' whims," he said. "Congress can get rid of it, or change it, which impacted policy making. Congress raised SS taxes in the 1970s and Reagan cut benefits in 1980. Two years later, Congress raised taxes again.
"In fact, in 1960 the Amish were told they had to pay Social Security taxes, even though the Amish take care of their retired population and don't need SS monies," he said. "They were told to pay because it was not real insurance."
Social Security is not insurance, since your tax is not a premium, said Attarian: It is a redistributed welfare program.
"Social Security is a welfare and taxation scheme," agreed Charles Rounds, Professor of Law at Suffolk University, who favors privatization.
"Social Security payments are commingled with the federal government's general assets. There is no SS account, no guarantee," Rounds said at the forum. "It would be constitutional if Congress eliminated the welfare component of Social Security and kept the tax component. Social Security is a relic of the depression era. Privatizing would have a risk too, but large, varied portfolios are less risky. I'm for privatization or throwing out Social Security completely."
But getting rid of Social Security and not trusting the government to pay benefits would not be the Democratic way, argued Dr. Amitai Etzioni, professor of sociology at George Washington University.
"I respect the Democratic process," he said. "I agree that Social Security is not a legal contract and not insurance. But it is a moral contract between the government and individuals that people who built their lives through employment will be taken care of in their old age. I wouldn't want to live in a society where people fended completely on their own."
Etzioni noted that privatization would also have its limitations. It would be well regulated, the analysts and politicians say. Well, that would take government from one place and put it in another," he said. "Why would we trust a government under new conditions that had misled us before? Also, if the government can mislead you, so can companies and individuals who are telling you where to privately invest Social Security funds."
He pointed out that people would be able to opt out of private investments that made them uneasy, where they can't opt out of the government Social Security system.
"I think the Social Security program is solid; minor changes would extend the program past 3066, and after that, who cares?" Etzioni said.
"Moving the retirement age up one year every year (the equivalent to 65 years old in 1935 is now 85 years old) would take care of 90 percent of problem. We also need to adjust the tax for inflation, which would reduce the costs. Congress needs to stop expanding benefits. And I would make all of SS taxable income."
