Mr. Williamson is a former Actuarial Consultant to the Social Security Board. This article is reprinted with permission from Christian Economics,
The recent average increase of about 7 per cent in monthly benefit payments to more than 12 million persons under the federal program officially designated as Old Age and Survivors Insurance is another step taken by the camel into the "social security" tent. Over the years the camel has been deliberate in following his head into the tent, but he is relentlessly moving in. The tax burden has increased and the program broadened and liberalized tremendously.
In 1937, the first year of operation of the system now known as OASI, the income from the tax was $500 million, and the outgo only $1 million.
In 1958, the Social Security tax and interest payments amounted to $8.1 billion, and the outgo $8.6 billion.
The first year’s income was 1/16th of the 22nd year’s income, and the first year’s outgo was 1/8600th of the 22nd year’s outgo. By 1950, the outgo had reached 1,000 times the outgo of 1937, while 60 per cent of tax collected was added to the Trust Fund.
In 1958, the Social Security tax receipts were six times those of 1950, but 1958 was the second year in succession when the Social Security taxes plus the interest on the reserve together were less than the outgo for benefits and administrative costs.
In the early years of the program the Social Security tax collections above the outgo requirements were mighty reassuring and averaged a billion dollars a year for the first 22 years. This Trust Fund of $22 billion at the end of 1958 included cash of $1 billion and funded interest-bearing federal debt of $21 billion, or approximately 7 per cent of the total federal debt.
The 12 million beneficiaries of the 1958 year end were receiving $700 million a month, and they could anticipate aggregate future receipts of $70 billion, all accrued by completed service. Comparing the Trust Fund of $22 billion with the potential aggregate payments to existing claimants, the Trust Fund is less than one-third of such payments.
Furthermore, there are 100 million nonretired covered individuals who look forward to later benefit status for themselves, dependents, and survivors. It is a calculated guess-estimate that their past service accrual could be over $600 billion. So, against this total past service accrual of $670 billion, the Trust Fund bulks some 3 per cent. Big as $22 billion is, against demands of this magnitude it is just peanuts.
We cannot know to what gigantic sum these payments will hereafter expand. But we do know that in 1955 the outgo was some 6times the 1935 prospectus for 1955; we do know that Congress has expanded the system 5 times in the 9 year period of 1950-1958; we do know that the 86th Congress gives advance evidence of even less financial prudence than recent former Congresses; we do know that the already determined up-trend in benefits is so high as to call for an advance in tax rates from 41/2 per cent in 1958 to 81/2 per cent in 1969; and we do know that the taxable wage base has advanced 60 per cent from 1937 to 1959.
It will become steadily clearer that OASI taxpayers contribute the funds for the current beneficiary classes rather than for themselves and their dependents, and thus the benefits become more doles to the recipients than anything else.
Paul L. Poirot, Social Security
Unlike private insurance, the protection afforded by the social security program rests upon the willingness and ability of government officials to authorize future appropriations from future tax revenue. The so-called social security fund has not been invested in productive property. In place of the money which was collected to go into the fund, there are receipts saying in effect that the government used that money to meet current operating expenses of one kind or another. The government bonds which are said to constitute a social security fund can only be redeemed in valuable goods or services as any other government bonds are redeemed—by future levies against the private property and productive efforts of individuals. Who can say now what the real value of a government bond will be to the next generation of taxpayers who may be asked to redeem it in goods and services?