Hard Working Traditional Values With A Dash of Fun

Hard Working Traditional Values With A Dash of Fun

Thursday, October 2, 2014

FDR Signed The Wrong Social Security Act

Here is another in my series of posts discussing FDR mistakes (See FDR - Flubbed Depression's Recovery and IRA Abuses Began with FDR).

As one would expect Ken Burns and Geoffrey Ward, in their recent PBS documentary, highlight the creation of Social Security, one of the most consequential and far reaching laws created during the Roosevelt presidency. The program pointed out that getting the legislation passed required a lot of compromise, but did not give any of the details.

Here is what happened.  

In 1935 Democrat Missouri Senator Bennett Champ Clark proposed an amendment to the proposed Social Security Act that would allow people to opt out if their employer at least matched the benefits offered by Social Security. The US Senate really liked this change to the proposed Social Security program. It would get retirement savings funded without needing any government interference, something the federal government had never done for all its citizens in the history of the U.S.  The Senate approved it 51-35. Meanwhile, the House passed the government monopoly version.

Roosevelt was upset and made it known that he would veto the Senate version. He did not want private competition to his government program. When the bill went to the House-Senate conference committee to work out a compromise bill, they decided to drop the Clark amendment with the PROMISE to appoint a special joint legislative committee to study the Clark amendment and report back how to add it into the Social Security Act in 1936. The next year, nothing happened; the study was never done.

Who wants to say ARGGHH! at this point?

This one failure doomed Social Security to become the tottering Ponzi scheme that it has become. The program only works because money collected from current workers is immediately paid out to retirees. And with fewer workers per retiree, the program will run out of money before today's young people retire. Considering that mutual funds over the second half of the 20th century averaged 10% return or better vs. 2% for Social Security, most retirees would have voted for a private retirement plan instead of Social Security.  

Those who defend Social Security are either under the misunderstanding that they are only getting back what they put in (when in truth it is money being paid in by current workers) or they approve of spreading the wealth by taking money from those who have it and giving it to those who do not. In the story of the Ant and the Grasshopper, these 'spread the wealth' people think it is okay to take away from the Ant to help the Grasshopper.

People should be in charge of helping themselves and other people without involving the inefficiencies of government. It’s called being responsible and charitable. Society suffers when large segments of the population treat handouts from the government as entitlements.

Too bad the Clark amendment was snuffed out. As you can see (no thanks to the Burns documentary), we ended up with the worst option of the two.

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