I managed to catch some of Brit Hume’s Special Report tonight. I happen to think he’s far and away the best anchor on TV and a top notch analyst, so I usually try to see his show. But tonight when introducing a story on the end of fox hunting in England, he ascribed the line “green and pleasant land” in reference to England to Shakespeare. Now I can’t definitively say that the bard never wrote, let alone uttered those words, but I know William Blake used them in his poem Jerusalem that has gone on to be the favorite hymn of England. Not because I’m an expert on romantic poets (or poets of any persuasion), but because I like the Emerson Lake and Palmer version and Monty Python used the hymn in the dog kennels skit.

I’ve been following the links over at Instapundit in regards to accusations that Hume made another, more serious mistake in reference to FDR’s plans for social security.  Media Matters, Al Franken and now Kevin Drum accuse Hume of selective quoting, the worst Dowdification to change a meaning since Maureen perfected its use by routinely changing people’s meanings to the exact opposite from what they really said.

Well, Cassandra at Villainous Company actually bothered to check the transcript and discovered that it wasn’t Hume doing the selective quoting, it was the usual suspects: Media Matters, Al Franken, Kevin Drum, Daily Kos et al. Cassandra really hammers Franken but good and is well worth the read.

From Media Matters:

Earlier that evening, on FOX News’ Special Report with Brit Hume, Hume provided the alleged historical basis for Bennett’s claim:

HUME: In a written statement to Congress in 1935, Roosevelt said that any Social Security plans should include, quote, “Voluntary contributory annuities, by which individual initiative can increase the annual amounts received in old age,” adding that government funding, quote, “ought to ultimately be supplanted by self-supporting annuity plans.”

But Roosevelt was not advocating that the present system of guaranteed Social Security benefits “ought to ultimately be supplanted by self-supporting annuity plans.” Rather, he was proposing that both mandatory contributions and voluntary annuities would eventually eliminate the need for a different fund which was established to provide pension benefits to Americans who were already too old in 1935 to contribute payroll taxes to the Social Security system.

Roosevelt outlined the three major tenets he envisioned for Social Security in the January 17, 1935, speech that Hume quoted. As the Social Security Administration (SSA) has noted, these tenets are: 1) “non-contributory old-age pensions for those who are now too old to build up their own insurance”; 2) “compulsory contributory annuities which in time will establish a self-supporting system for those now young and for future generations”; and 3) “voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age.”

It seems to me that their real beef is with Bill Bennet (and that is where the outrage started with Media Matters) taking Hume’s abbreviated quote and running with it, rather than Hume, because as Cassandra noted, what Hume said was (in full):

Senate Democrats gathered at the Franklin Roosevelt Memorial today to invoke the image of FDR in calling on President Bush to remove private accounts from his Social Security proposal. But it turns out that FDR himself planned to include private investment accounts in the Social Security program when he proposed it.

In a written statement to Congress in 1935, Roosevelt said that any Social Security plans should include, “Voluntary contributory annuities, by which individual initiative can increase the annual amounts received in old age,” adding that government funding, “ought to ultimately be supplanted by self-supporting annuity plans.”

Last night, Senate minority leader Harry Reid likened the president’s proposal to allow Americans to divert a portion of payroll taxes into personal security investment accounts to “gambling.” But in 1999, the Nevada Democrat proposed something very similar on our own “FOX News Sunday” saying, “Most of us have no problem with taking a small amount of the Social Security proceeds and putting it into the private sector.”

Now did Hume not provide the whole quote? No, he didn’t. But then he didn’t pretend to, did he. He provided the part that bore directly on the claim that FDR wanted a voluntary contributory part. And if you’ve ever paid much attention to the news, you know that such shortening of quotes is pretty standard. The trick is to shorten the quote without changing the meaning. And Hume didn’t change the meaning.

What struck me though was the actual language FDR used (let’s roll the tape):

At this time, I recommend the following types of legislation looking to economic security:

1. Unemployment compensation.

2. Old-age benefits, including compulsory and voluntary annuities.

3. Federal aid to dependent children through grants to States for the support of existing mothers’ pension systems and for services for the protection and care of homeless, neglected, dependent, and crippled children.

…

In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities which in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.

My ellipses note where I removed a portion of the speech referring to health insurance and unemployment compensation (news flash: FDR against government health insurance! Just kidding, but he didn’t advocate it).

In light of FDR’s clear call not just once, but twice for voluntary and compulsory annuities for old age benefits, it’s clear that Hume was accurate in his assessment of FDR’s desire for a voluntary part to old age benefits. 

But what’s amazing is the call for a self supporting system of annuities that would be started by 30 years of government (state and federal) funding. That isn’t how Social Security is run – it’s run as a pay as you go system and always has been. And if you honestly think that a pay as you go system is self supporting (especially with demographics rapidly becoming 2 workers for every 1 retiree), you really have no business opining on economics. I mean, if you think it is, then there wouldn’t be a need for 30 year period of money coming from the government to fund them initially — it would just be a compulsory government funded part and a voluntary annuity part for ever and ever.

Now contra Bill Bennet, that doesn’t necessarily mean privatization, but it sure isn’t the system we do have.

Now this is just one speech and FDR was a politician and thus accustomed to compromise and the art of speaking so the audience hears what it wants to hear, but based on this not only did FDR want a voluntary component to Social Security, he wanted pay as you go only for the first 30 years or so until the money that people had paid in could come back to them in benefits. Wow. I bet that’s someting you won’t hear Media Matters, Al Franken, Kevin Drum or Kos.

Tags: social security

The Social Security Trust Fund is going south because it is neither secure, a trust, or a fund. It is an accounting device, deliberately chosen to allow politicians to say one thing but do another.

Social security has always been funded on a pay as you go basis. The government levies an income tax on most people (there are those who are exempt because they are covered by other plans) and hides half of it by having the employer pay it. This money goes into the general fund with all the other tax dollars, and social security is paid to its recipients just like all the other stuff government spends money on.

There is no investment. There is no trust fund. All the money from the social security payroll tax is spent, and then the government writes an IOU to itself in the form of a bond.

The beauty of the system is that the same entity that agrees to pay the bond in order to meet its social security obligation is also the entity that determines its social security obligation. If the government decides it would rather cut benefits than default on the bonds, raise taxes, or borrow, then benefits are cut. Social security recipients have no legal claim on the money. It isn’t theirs, and it isn’t owed to them in any legally binding sense. 

Contrast that with a pension fund. As the obligation is incurred by the company while the worker is employed, the company (legally) must set aside money to cover the payment in the future based on expected returns. The company holds the money in trust for its retirees, and the retirees do have a legal claim to the money and are legally owed the money. The trust money is invested so that it grows while the worker is employed and even after she starts drawing a pension.

The two systems are nothing alike. And no company can legally run a pension fund like the government runs social security.

The problem with any pay as you go system, like social security, is that you have to have enough people paying in so that they can support those who are receiving the money. And in a few short years, namely 2016, there won’t be enough people paying in due to demographics. So at that point, we will turn to the Social Security Trust Fund, and instead of cold hard cash, we will find promises. And then our elected representatives will be forced to decide what mix of borrowing, tax increases, benefit reductions and other budget item reductions we will adopt to allow us to continue to pay Social Security. 

And we will confront the exact same choice to the penny with our vaunted Social Security Trust Fund or without it. Having this fund does absolutely nothing for us but lull us into a false sense of security. You can’t rob Peter to pay Paul if you’re Peter.

If we took the excess social security taxes (to current social security obligations) and instead of the government spending it and giving itself an IOU, we legally transferred it to future recipients, to be actually invested, when 2016 rolls around and we open the lock box and find IOU’s, we could reduce the money the government would have to scrounge (again by raising taxes, borrowing, or reducing benefits and other government services) by the amount of money that was transferred to the then future, now current, recipients, thus achieving what the Social Security Trust Fund and all that Lock Boxes in the world are designed to do but cannot do.

Tags: social security