On this date in 1940, the first Social Security check was issued to Ida Mae Fuller, check #00-000-001 in the amount of $22.54. Ida was a retired legal secretary and had paid a total of $24.75 into the program over a three-year period before she retired. Dear Ida lived to be a 100 and ended up collecting $22,888.92 in Social Security benefits. That’s not right, you say, she didn’t contribute to the program enough to get all that money in benefits. Well yes she did, and no she didn’t.
Social Security as proposed and operated for the last 70 years is social insurance. We all know how insurance works right? Many pay premiums to cover the costs of few claims. The insurance company makes a tidy profit because more people pay than claim, and if you get a payout, you’re usually cancelled anyway so you don’t benefit anymore from all those premiums you’ve paid. Don’t get me started on insurance companies.
So back when the whole deal started, about 36 people were paying in to cover benefits for one, benefits which amounted to about a $1 a day. A nice surplus was developing to maintain the program into the future. Then, of course, politicians got involved, and, starting in 1950, turned it into a Ponzi scheme. We all know how that works right? A bunch of people invest being promised huge returns on their investment. They get paid huge returns by using funds from each new investor, so they keep their money in the fund because they’re earning such huge returns. However, there is never really any money left in the fund from their original investment.
Just like auto insurance. I paid over $1,440 last year in auto insurance premiums. I haven’t filed a claim…ever. I always keep my deductibles high so I keep the cost of the insurance down. Multiply that by 42 driving years and the insurance company has made over $60,000 by taking the risk to insure me, and collect funds to pay out the claims of other drivers. Let’s not forget, not everyone that pays into Social Security ends up drawing benefits.
The Social Security system is a pay-as-you-go system, meaning that current payroll taxes are used to pay benefits to current retirees. Sound like a Ponzi scheme yet? In 1983, President Ronald Reagan signed into law a tax increase in Social Security. This again resulted in more tax revenue being taken in than was being paid out. And the surplus in the Social Security account was always loaned to the government (to fund budget deficits). The total accumulated so far is $2.5 trillion!! Sound familiar? WTF.
Can Social Security be rescued? This is so simple we should pose the question to a 5th grade math class. Even with one in seven Americans receiving a Social Security benefit, we are still on the side of excess contributions into the program, if we quit loaning it out to the federal government to meet budget deficits! And how about we take away that income limitation? People only pay FICA (That stands for Federal Insurance Contributions Act.) tax on wages up to $106,000. Why? Remove that limit and you’ll “fix” Social Security for years to come.
And, please, please make it illegal for the government to borrow the excess funds. The excess funds should be invested. We get no return and no payback to the fund from these “loans” to the federal government which is effectively borrowing from itself. There are no real bonds or real assets of any kind in the trust fund. Can you say Bernie Madoff?