Social Security

Social Security is a New Deal program created in 1935. Its viability, success and need-to-exist is entirely up for debate.

Speech Relevance

It would be difficult to list every quote from the speeches regarding Social Security, as Reagan talks about it often. It may be easiest to offer a few generalized statements of Reagan's feelings and work from those.

From 'A Time For Choosing'

Quote 1:

We are for a provision that destitution should not follow unemployment by reason of old age, and to that end we have accepted Social Security as a step toward meeting the problem. But we are against those entrusted with this program when they practice deception regarding its fiscal shortcomings, when they charge that any criticism of the program means that we want to end payments to those who depend on them for livelihood. They have called it insurance to us in a hundred million pieces of literature. But then they appeared before the Supreme Court and they testified that it was a welfare program. They only use the term "insurance" to sell it to the people. And they said Social Security dues are a tax for the general use of the government, and the government has used that tax.

The court case Reagan refers to is Helvering V. Davis. It was held that Social Security is NOT a contributory insurance program and are not protected by the Fifth Amendment (Takings Clause).

Quote 2:

There is no fund, because Robert Myers, the actuarial head, appeared before a congressional committee and admitted that Social Security as of this moment is $298 billion in the hole. But he said there should be no cause for worry because as long as they have the power to tax, they could always take away from the people whatever they needed to bail them out of trouble! And they are doing just that.

From 'Encroaching Control'

Quote 1:

But this isn't the tone of the testimony uttered by the experts of Social Security recently in a lawsuit before the United States Supreme Court. In that lawsuit, the experts of Social Security said it is not an insurance program. It does not have to be based on actuarial principles because it has at its beck and call the tax mechanism of the country.

Quote 2:

It then went on to say that Social Security dues are a tax for the general use of the government and the payment of this tax does not automatically entitle any citizen to the payment of Social Security benefits. It then goes on to say that these benefits are a welfare program at the behest of Congress and that Congress can curtail or cancel these benefit payments any time it sees fit.

The court case Reagan refers to is Flemming V. Nestor. Ephram Nestor became eligible for Social Security in 1955, but was deported in 1956 after it was learned he had been a communist for 6 years during the 1930s. His Social Security payments were suspended and he argued it was illegal. The money was his, simply being held by the government. The Supreme Court found against him.

Quote 3:

Well, he has mentioned the tax mechanism of Social Security. In 1935, Social Security called for a three percent contribution of $3000 of annual income. Today it calls for six percent of $4800 of annual income. And if the expansions now proposed are voted, including this medical program, by 1969 it will call for eleven percent of $5000 of income and again it is no secret that the proponents of this measure are openly advocating that there should be no limit that Social Security taxes and dues should be based on gross income with no ceiling.

Reagan is completely correct with his past information. It was 3% of $3000 in 1935 and 6% of $4800 in 1961. His estimates of the tax and the income for 1969 are both incorrect, but in checking what is now historical data, we find that Reagan's numbers, outrageous at the time, are actually better than reality turned out. Reagan said it would be 11% of $5000 by 1969, which comes to $550.

The actual numbers for 1969 was 9.6% (8.4% for OASDI tax and 1.2% for Medicare) of $7800, which results in $748.80 of taxes.

From Both speeches

A man just entering the workforce could buy an insurance plan on the open market that would be worth almost double that of a Social Security for the same price.

Source Links

Helvering V. Davis (Wikipedia)

Is Social Security Constitutional? (More on Helvering)

Flemming V. Nestor (Wikipedia)

What Property Right to Benefits? (More on Flemming)

The Tax Policy Center's Historical Payroll Tax Rates