The first thing that Congress should do is pass a “Truth in Social Security Act,” which would tell the story of the payoffs over the years. This should be easy to tell. Every year, the Social Security Administration sends me a statement detailing how much I have paid into the system, and projecting how much I (or my wife and dependents) will collect if I continue to contribute at the current rate. But the Administration does not include such details as the fact that there will be no funds left for anyone by 2037.
Over the last year, the “payroll tax holiday” reduced employee taxes from 6% to 4%. (Notably, the act did not reduce employer “contributions,” and thus could only stimulate consumer spending, rather than payrolls.) Nobody in the administration explained why this would not also reduce the ultimate Social Security benefits of payroll tax vacationers.
Some critics have called Social Security a Ponzi scheme. That’s not fair—not fair to Charles Ponzi, that is. He could only keep his scheme going as long as he could gull new participants into the scheme. We have no choice. Social Security is better called “a Ponzi scheme with a gun.”
The guys with the guns ought to tell the truth. But Social Security was conceived in dishonesty. F.D.R. understood that the payroll-tax system of funding Social Security was untenable. “I suppose you’re right on the economics,” he told Luther Gulick. But the payroll taxes “are politics all the way through. We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scarp by social security program.”
True, no damn politician ever would grasp the “third rail of American politics.” But a real statesman would at least tell the truth that can be the first step toward reform.