What Roosevelt Really Said About Social Security

Lately there has been a lot of talk about the state of Social Security. And naturally Franklin D. Roosevelt, the president who was the "grandfather" of Social Security, has been widely quoted and misquoted about privatization of accounts.

As you listen to analysts, pundits, and even news anchors claim that Roosevelt himself proposed private accounts, it's important to read exactly what he wrote to Congress. The entire letter is titled Message To Congress on Social Security January 17, 1935 and is found at the Social Security Administration's website: http://www.ssa.gov/history/fdrstmts.html#exec

Here is the section that is being widely cited, in complete:

"In the important field of security for our old people, it seems necessary to adopt three principles: First, non-contributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps thirty 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."

Three things about this are critical to the discussions taking place right now.

First, Social Security is an insurance plan. The president proposes in the complete text of the letter that the money put toward the insurance should be a separate tax, to avoid it being at the whim of the tax code, or even at the whim of the market.

Second, Roosevelt thought it was critical that people too old to contribute or contribute sufficiently to the insurance should be provided for by separate annuities. He projected that they would be somewhat temporary, only necessary for about thirty years. By that time, subsequent pensioners would have contributed enough to the fund to receive back a sufficient payment.

Third, he offers the idea that separate annuity accounts, above and beyond what is contributed to Social Security, should be available. He suggests that they should initially be supplemented by the federal government, but as time went on they would become self-supporting. Today we see that kind of additional fund as 401K plans and other tax-deferred plans.

This issue is obviously a bit complicated than this. So as you make your decision whether or not to support privatization, really examine all sides of the issue. Ask the hard questions: Who will manage the money while it is in the market? Why does the president consider Social Security in crisis, when Ronald Reagan worked so hard to provide a good fix to it? What other reforms can be applied to the program? What does the raw data really say?

Every one of us has worked hard, and contributed toward Social Security. We all know people who have benefited -- orphans who were able to afford college because of federal funding and go on to lead productive lives, contributing back into the fund that supported them. Seniors who have a small pension of their own able to pay for life's basics because of the money they faithfully paid being returned to them. Everyone who has contributed to and benefited from an IRA or other tax-deferred plan.

Remember, Social Security is not welfare. It is an old-age insurance policy. There are many ways to fix it. Privatization is not the only way, and the idea should face careful scrutiny.