The Big Brother State

May 23, 1960

More and more cynically, as the years go on, the social-security program is used as a political football. It is assumed that the votes of our older citizens are for sale to the highest bidder. Democrats suddenly push the Forand bill, openly for votes. The Administration, in panic, hastily slaps together a “substitute.”

I discussed the Forand bill in this place in Newsweek of April 25. In the same issue there was a special report of three pages on the measure. The report showed that a husband who began paying at the start of collections in 1937, when he was 42, and who retires this year at 65, has paid $1,100 in “premiums” but stands to get back an average of $30,000. Actuaries have figured that a maximum payment from 1937 to the end of 1959—$l,146—would actually finance a pension for a male at age 65 of about $7 a month.

Yet the 10 million people who are getting present windfall payments are treated as if they had somehow been victimized. Though a token increase in taxes would be placed by the Forand bill on people still working, those already receiving old-age pensions, who have not made even nominal contributions for medical care, would be entitled to receive medical benefits immediately.

DISGUISED RELIEF

The Administration bill was thrown together in haste. It is called “insurance,” but it is mere additional relief. Its benefits would be available free to elderly persons already on relief. Other elderly persons could get them, on payment of an annual fee of $24 each, provided their income did not exceed $2,500 a year for a single person or $3,800 for a married couple. The limitation imposed on the income of persons eligible shows that the Federal government has not the slightest belief that $24 would pay for earned insurance. That sum merely entitles the holder (because of his low income) to medical relief. The scheme would probably cost far more than the estimated $1.3 billion a year.

The best thing that could happen in this session of Congress would be for the various Democratic and Republican bills to kill each other off.

Then there would at least be opportunity for some new Advisory Council on Social Security (like that of 1937) to study the issue of medical care for the aged and to re-examine the whole social-security program.

The original social-security legislation was economically unsound. In spite of this, it has been “liberalized” substantially, apart from earlier expansions, in every election year—1950, 1952, 1954, 1956, and 1958. Not only are the benefit payments constantly raised, but new “needs” are constantly being discovered and provided for—first benefits for old age then for dependents, then for survivors, then for disablement, and now for medical care.

PSEUDO ‘INSURANCE’

Old-age “insurance” was originally enacted on the argument that it would do away with old-age relief. Yet Federal grants for old-age relief alone have grown from $247 million in 1939 to $1,880,000,000 in 1959. W. Rulon Williamson, the first actuary of social security, has pointed out that the benefits paid out under OASI in 1959 were ten times the benefits of 1950 and 10,000 times the benefits of 1937, the first year. Yet the total tax income has only reached seventeen times that of the first year.

That tax income is still inadequate. Williamson estimates that the unfunded accrued liability of the system may exceed $650 billion. It is neither on a sound actuarial basis nor on a sound basis in relation to need. The benefits to the most affluent are three times as great as those to the minimum qualifier.

Instead of recklessly piling on new benefits, it is time to stop, look, and listen. The social-security system cries out for reexamination. It does not add to the supply of goods and services; it merely operates to redistribute income. In fact it lowers national output by encouraging premature retirement and limiting allowable earnings. It cheats its supposed beneficiaries by forcing inflation and reducing the purchasing power of their pensions.

A leap into “medicare” may be a leap into socialized medicine; and a leap into socialized medicine may be a leap into the Big Brother State.