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Friday, Aug. 29, 2014

The reality of Social Security system

Wednesday, April 25, 2012

To the Editor:

Bill Field in a recent letter to the editor declares that FDR's "... disastrous, ill-conceived economic policies made the Great Depression drag on for years ..."

This statement is followed with no supporting evidence whatsoever. It is a throwaway line. That's what conservatives like to do -- throw out emotionally charged statements without actually backing them up.

He continues his misguided attack on FDR by declaring without evidence that Social Security (SS) undermines the incentive to work and save.

The evidence indicates otherwise. With regard to saving, virtually

every European "socialist" country has higher contribution rates to their SS systems than the US does to its system, but with a few exceptions individual savings rates in those countries are far higher than in the U.S.

Savings rates and Social Security contributions aren't correlated at all. All it takes is a couple of quick Google searches to access the relevant statistics that prove the writer's statements are false. So too, more than 90 percent of the working age population in this country is actually working or looking for work.

If SS is a disincentive to work, it's a pretty weak disincentive.

At this point the writer becomes confused when he states that every dollar paid into SS has been spent by our politicians. No, most of the money paid into SS has funded peoples' retirements. What he presumably is referring to is the SS surplus, which has built up over time but is only a fraction of all SS revenue.

In the 1980s it was realized that the Baby Boomer generation was too large for subsequent working generations to fully fund their retirements. To solve this problem the payroll tax was raised so that SS would run a surplus.

The idea was that this surplus would build up until the Baby Boomers began retiring and would then be drawn down during the Baby Boomers' retirements. Unlike for every other generation, the idea was that the Baby Boomers would partly fund their own retirements.

The surplus has been spent by politicians. It was used to buy Treasury securities and that money was then applied to the federal operating budget. But that fact is irrelevant and has nothing to do with FDR. The relevant question is will the money owed the Social Security Trust Fund be repaid? Many politicians don't want to honor that debt so they try to convince everyone that it can't be honored.

However, honoring that debt is an exercise in triviality. Cutting defense spending or raising the maximum income subject to the payroll tax are two simple ways to honor the debt owed to Social Security.

Social Security has been a godsend to millions of retirees. For many it has been the difference between an old age of modest means versus one of poverty. It was a great achievement. To suggest that it has been a disaster is surreal. But then being in touch with reality has never been a conservative strong point.

Bruce Sanders