March 14, 1936 - Article - Social Security, Or De Levee Done Bust (part 2), by Frank Parker Stockbridge
On the face of it, the old-age benefit project is an insurance system, designed to provide retirement annuities for all workers when they reached the age of 65 years. If carried out on the lines laid down in the Social Security Act, it will, in time, accomplish that end.
"The only certain thing about it," said Professor Witte, when I asked him what had been in the mind of the President's Committee on this point, "is that, once established, nothing is harder to kill than a Government-administered old-age retirement system. The oldest of them all, in Germany, was established by Bismark in 1889. It survived through the Great War, it was maintained by the republic that succeeded the Kaiser's regime, its beneficiaries suffered, like all others, in the great inflation of 1920-21, but the system was maintained, and under the Nazi regime it is almost the only established institution in Germany surviving from the old days which has not been seriously interfered with or altered. The rates of premium payments have changed, the value of the retirement annuities has varied, but the principle is imbedded so deeply in the popular mores' that even a dictator would not dare to abolish it."
The present fact is the old-age benefit tax. Anyone's guess is about as valid as another's as to what this will come to a generation hence, but beginning January 1, 1937, we've all got to pay it, employer and employee alike. From each will be taken 1% of pay rolls in each of the years 1937, 38, and 39; 1½% in 1940, 41 and 42; 2% in 1943, 44 and 45; 2½% in 1946, 47 and 48; and 3% in 1949 and every year thereafter, making the total draw-down from wages and salaries 6%.
Like the milk that the grocer's boy spilled on the cash register, that is going to run into money fast.
Take the employer's excise tax on pay rolls as a starting point. How many employers there are, and what their pay rolls come to, are questions which lie, so far, in the misty mid-region between statistics and guesswork. The latest available statistics are those of the U.S. Department of Commerce, which computes at $29,300,000,000 the total of wages and salaries paid out and received by everybody in 1933. Right here, however, the guesswork begins, for the old-age benefit tax does not apply to the wages of farm workers - some 2,000,000 of them - nor to the salaries of the 2,000,000 employees of Federal, state and local governmental units. Nor does it apply to wages paid to sailors, domestic servants and person employed by charitable or other nonprofit institutions, nor to salaries above $3,000 a year. But pay rolls are higher now that in 1933. The estimate of the President's Committee is $37,165,000,000 pay rolls for 1937. On that the initial old-age-benefit tax will run up to above $2,000,000,000 a year, and continue to yield that much or more from then on. Or so the President's Committee calculates.
What happens then? What becomes of the huge fund created by these new taxes? Only a small fraction of it is to be disbursed for old-age benefits before 1942. For five years the proceeds of these taxes are to lie in the Treasury, earning interest at a rate, specified in the Act, of not less than 3%. By the end of 1940, the President's committee estimates, this reserve will have reached, with accrued interest, a total of $2,960,200,000.; five years later, it is predicted, it will be $9,338,800,000. By 1960 it will come to $36,381,700,000, or more than the total of the present national debt.
All the life-insurance companies in America combined have not taken in as much as $60,000,000,000 in premiums since the first of them started business, a century ago. Uncle Sam, starting from scratch, expects to take in more insurance cash in 35 years what the insurance companies did in a hundred. And by 1980, the President's Committee estimates, the reserve, after the payment of more than $4,000,000,000 in benefits in that one year alone, will amount to $50,000,000,000. (pp. 27, 37)
The size of that estimated reserve has worried many students of the Social Security Act. They shudder when they contemplate the temptation to extravagance held forth to politicians in high office by a lump sum of $50,000,000,000, or half of it. But there isn't going to be any such amount of loose change lying around in the old-age-benefit reserve fund. The Federal Government is going to use every dollar of it to pay its other debts with.
The largest retirement pension, however, that anyone can collect under the Act is $85 a month. (pg. 40)
The unemployment tax on the wages of a $20 a week worker will come to $31.50 a year by 1938. That is about the average wage of today, taking all business and industry, by and large. When the old-age tax is in full effect, the tax paid by the employer on the wages of the average employee will be above $62 a year.
Certainly, the whole Social Security Act introduces a new note in American life, a foreign note in every sense of the word. We are an adaptable people; moreover, we have a way of disregarding or changing laws that don't work. But the first effect of reading the Act upon an average American, rooted in the American tradition of individual responsibility and unschooled in the social-service mysticism which sees dreams as realities and creates Utopia by waving a magic wand, has been well expressed by one of the members of the Social Security Board, Judge Miles, of Arkansas.
An Arkansas Delta Negro, Judge Miles reported, was drafted in the World War. He was placed in a labor battalion, trained for a short period, loaded on the train, and shipped to the coast for transportation overseas. He was kept back from the ocean until time to load the boat; he was marched down to the sea at night and placed in the hold. About ten o'clock the next morning, when the boat was well out on the ocean, he was permitted to come up on deck, and he stuck his head over the rail. He threw up his hands and yelled, "Good Lawd! De levee done bust!" (pg. 48)
Comments: In took only until 1939 for the Federal Government to begin spending the money brought in from social security taxes. The social security system has been and always will be a system that enslaves class A for the benefit of class B. A represents the working class and B the recipients of the labor taken from the working class. In 1980, when the old-age pension fun was supposed to have a $50,000,000,000 reserve, it took one of the biggest tax increases in history to bail the system out. The old-age pension fund was only supposed to be used to pay out old-age benefits, and the original social security card said on them that they were not for identification purposes. Things sure have changed, haven't they? This shouldn't surprise anyone, since the system was started and then administered by people who used lies and deceit to establish their power. The enormous sums of money gathered in from taxing labor is important. Abraham Lincoln, in a speech he gave at New Haven on March 6, 1860, stated:
Look at the magnitude of this subject. One sixth of our population, in round numbers - not quite one sixth, and yet more than a seventh - about one sixth of the population of these United States, are slaves. The owner of these slaves consider them property. The effect upon the minds of the owners is that of property, and nothing else; it induces them to insist upon all that will favorably affect its value as property, to demand laws and institutions and a public policy that shall increase and secure its value, and make it durable, lasting, and universal. The effect on the minds of the owners is to persuade them that there is no wrong in it. The slaveholder does not like to be considered a mean fellow for holding that species of property, and hence has to struggle within himself, and sets about arguing himself into the belief that slavery is right. The property influences his mind. The dissenting minister who argued some theological point with one of the established church was always met by the reply, "I can't see it so." He opened his Bible and pointed him to a passage, but the orthodox minister replied, "I can't see it so." He showed him a single word - "Can you see that?" "Yes, I see it," was the reply. The dissenter laid a guinea [gold coin] over the word, and asked, "Do you see it now?" So here. Whether the owners of this species of property do really see it as it is, it is not for me to say; but if they do, they see it through two billions of dollars, and that is a pretty thick coating. Certain it is that they do not see it as we see it. Certain it is that this two thousand million of dollars invested in this species of property is all so concentrated that the mind can grasp it at once. This immense pecuniary interest has its influence upon their minds.
The power to tax the labor of every worker in a vast country such as the United States, is a taxing power that has no limitations, since labor is the foundation of all other property. For example, let's say you have 100,000,000 workers who average $30,000 a year in wages, to make things simple. If the government can tax that labor at the rate of 1/3 of your wages, then that means that each worker would pay an average tax of $10,000 a year. So, let's do the math. 100,000,000 workers multiplied by $10,000 would equal $1,000,000,000,000 [$1 trillion] a year. Do you think that political parties that have this much money coming in every year are going to want to give it up? Do you not think that these political parties will naturally enact laws that will secure their rights to the labor of the multitudes of working people? Does not this enormous pecuniary interest in the labor of the people have an influence on the minds of those in power? Lincoln, back in his day, referred to the approximate sale price if the rights to the labor of all the slaves of the South were sold. In other words, if one buyer back then had $2,000,000,000, then they could have bought all the slaves and this would have given the new master the command of the labor of one sixth of the population at that time. Frederick Douglass, while still a slave in 1838 under the ownership of Master Hugh, was able to get his master to agree to let him go out and live on his own as long as Douglass paid him $3 per week for the privilege. Douglass said on page 215 of his book The Life And Times of Frederick Douglass (1882) that: "This was a hard bargain. The wear and tear of clothing, the losing and breaking of tools, and the expense of board made it necessary for me to earn $6 per week to keep even with the world." The important thing to remember is that whether Douglass lived directly under his master's care or was given the privilege to live apart from his master, his labor was not his own property - Douglass' labor belonged to his Master Hugh. His allowance from labor was always at the command of his master.