Dumas:Republicans opposed Social Security in 1936 through courts(Social Security Series Part 1)

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Social Security Series Part 1

Michael Tanner, a senior fellow at the CATO institute, explains that the rate of return on social security will be much lower for todays youth.

Ernest Dumas in his article “Back to 1936,” (Ark Times, Dec 23, 2010), notes, “Now the Republican Party has retreated to 1936, when it fought the Social Security law, which required people to buy old-age and survivors insurance and pay for it with a payroll tax and taxed employers to pay for unemployment insurance.”

Ernest Dumas tries to compare the Republicans of 1936 who fought Social Security through the courts to the Republicans of 2010 who are trying to fight Obamacare through the courts. Over and over again Dumas has repeated in the last few years what a great program Social Security has been. I want to start a series today that looks at the history of Social Security and what the future holds for this program.

Michael Tanner of the Cato Institute shed some light on where we are now 75 years later with this great program that Dumas praises (“Social Security Deficits will soon be Permanent,” Aug 16, 2010):

When last we heard from Senate Majority Leader Harry Reid, he was proclaiming that there was no need to reform Social Security because the program “is on solid ground for decades to come.”

Well, apparently that’s true — if by “decades” Reid, D-Nev., meant “five years.”

Social Security’s trustees this month finally released their long-delayed report on the system’s finances. According to the trustees, who include President Barack Obama’s secretaries of Labor and Treasury, Social Security is actually running a cash-flow deficit today, spending more money on benefits than it takes in through taxes. Most of that deficit has been caused by the recent economic downturn and, hopefully, will be only temporary.

But regardless of how the economy performs in the next few years, the trustees warn that by 2015, just five years from now, Social Security will again start to run deficits — and this time they will be permanent. That’s a year sooner than predicted in last year’s report.

While, in theory, the Social Security Trust Fund will be able to pay benefits until 2037, the same as in last year’s report, that figure is misleading because the trust fund contains no actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system, $2.6 trillion, according to the report.

Of course, no one is saying that the government will default on its obligations, but one might ask where the government will get the money to pay back that $2.6 trillion. It’s not as though the government has it laying around. To say that Social Security is fine because the Treasury will find a way to pay its debts is like saying you have plenty of money for your mortgage — as long as you don’t eat.

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