Bait and Switch

Media Matters has attacked Brit Hume for citing a statement of FDR that indicates he would support Bush's plan to save Social Security. Here's what FDR said:

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. [Italics added]

It seems to me that the question is what he meant by "self-supporting annuity plans." The non-contributory old-age pension system was supposed to be eliminated in 30 years. I suppose that means that the elderly alive in 1935 would receive a pension out of funds raised from the payroll tax and when these people were all gone, the payments to future retirees would come from the "self-supporting plans." But he mentions two such plans, the "compulsory contributory annuities" and the "voluntary contributory annuities." The latter sound to me like Bush's private accounts, which is what Brit Hume stated.

The former is the system we have and it is not guaranteed to be self-supporting, as Roosevelt said it would because (1) the ratio of workers to retirees has increased, (2) longer life expectencies mean that retirees may collect benefits far in excess of what they paid into the system, and (3) there is and will continue to be resistance to raising payroll taxes on workers to meet the increasing needs of the system. By "self-supporting" I mean that the system should never need a bailout to meet its commitments. What Bush is proposing is to try to wean us off depending on the "compulsory contributory annuities" which promise defined benefits which must be paid, no matter how much the payroll tax brings in, and to move to private investment accounts which will be paid out according to the amount of capital gains they have accrued when the owners retire. The latter is a sustainable system, the former isn't.

Nobody can really say what FDR really meant, but it sure sounds like he anticipated private investment accounts to me. Bush is hoping that the greater growth rate of funds invested other than in federal bonds will help meet the shortfall of the system for future generations. I'm not sure it will, but it makes more sense than sitting here like deer in the headlights as the inevitable bears down on us.