Friday, February 18, 2005

What was FDR Really About? 

Bush's Social Security reform initiative is being brandished as either an anathema to the social promise of the New Deal or a return to FDR's true intentions, depending upon who is being cited. I haven't paid much attention to the "he’s misquoting FDR," "no, he’s misquoting" bickering, but Deinonychus antirrhopus provides the contested FDR quote in the clearest manner I've seen, and while my take is that both sides are not quite on target the Democrats are not even on the firing range.

The quote in question is:
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.
This specifically outlines a three-part program, which I summarize as follows:

If I were to equate these three to today's situation, it is clear the first equates to the current model of Social Security and I see the third provided by government sponsorship and creation of IRA, 401(k) and other retirement specific accounts. What is clearly missing from the picture is the second category, the government mandated annuity "for those now young and for future generations." That is, unless one stretches the use of "annuity" to mean a big, huge honkin' bundle of money and IOUs that makes payments to millions of beneficiaries for various reasons and has funds coming in and out on a daily basis. Considering that this definition has never traditionally been applied to the word "annuity" and that FDR most certainly would not have recognized it as such, one is left with the only logical conclusion that the specific use of "annuity" means an individual's account into which funds are placed providing a guaranteed return at some future point in time. Gee, sure sounds like the Bush plan to me.

The other intellectually troubling part most Democrats pass by like a Brahmin ignoring an untouchable is that Social Security as we "know and love it" represents the only leg of the triad for which FDR envisioned a twilight. The idea of paying for today's retirees by today's workers is explicitly expressed as a necessary evil for "perhaps thirty years" until annuities of the then current workers had built up to a self-sustaining level. Of course, when Congress failed to institute and protect individual annuities they, of course, never built up to a self-sustaining level. Besides, once Congress got their hands on the Social Security teat did anyone seriously believe they would on their own retire the tax? Additional Social Security entitlements enacted in LBJ's "Great Society" further damned ever pushing this slobbering baboon off the taxpayers' collective backs.

Maybe I'm slow on the take, but perhaps the real danger some traditional Social Security advocates see is that once individual annuities are part of the system and workers can see the real return for their own money in their own account they may start questioning why they're still paying the rest instead of investing it as well.

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