Announcer:
Good evening and welcome to THE ADVOCATES, the PBS
Fight of the Week coming to you from Boston's historic Farieuil Hall. The
issue of tonight's debate is a concern of every working American, our Social
Security system, and specifically, the question, "Should Social Security
benefits be financed in part from general tax revenues?"
Arguing in support of our proposal is advocate Gus Tyler,
Assistant President of the International Ladies Garment Workers' Union.
Appearing as witnesses for Mr. Tyler will be New Jersey Senator Harrison
Williams and Nelson Cruikshank, President of the National Council of Senior
Citizens. Arguing against the proposal is William Rusher, publisher of the
National Review Magazine. Appearing as witnesses for Mr. Rusher will be
Robert Myers, former Chief Actuary for the Social Security Administration,
and Senator Jack Miller, former member of the Senate Finance
Committee.
Dukakis:
Ladies and gentlemen, may I have your attention,
please.
Announcer:
Moderator Michael Dukakis has just called
tonight's meeting to order.
Dukakis:
Good evening, ladies and gentlemen, and welcome
once again to THE ADVOCATES here in Boston's historic Faneuil Hall. I regret
to report that Senator Edmund Muskie, who was going to be our guest
moderator this evening, is unable to be with us as a result of a conflict in
dates between the taping of this program and the funeral of the late
President Lyndon Johnson. We do look forward, however, to having Senator
Muskie with us on another ADVOCATES broadcast in the not too distant
future.
Few issues directly affect as many Americans as our Social
Security system, whether as Social Security taxpayers during their working
years or as recipients of Social Security benefits after retirement. Our
question tonight concerns the financing of those Social Security benefits.
And specifically we ask, "Should Social Security benefits be financed in
part out of general tax funds?" Advocate Gus Tyler says, "Yes."
Tyler:
The Social Security system should be supported by
general revenues as well as by the present tax on wages and salaries, both
to make the system more adequate in benefits and to make it more equitable
in the financing.
Dukakis:
Advocate William Rusher says, "No."
Rusher:
Tonight's proposal is simply another gigantic raid
by the forces of big labor on the present and future incomes of every
American who works for a living. It won't be called that, of course, but
keep your eye on the ball. The target for tonight is you.
Dukakis:
Thank you, gentlemen. We'll be back to you in a
moment for your cases, but first a word of background,
Announcer:
(on Video) If you are one of the 96 million Americans who
works for a living and have examined your pay checks since the beginning of
the year, you've probably noticed the higher deduction for Social
Security.
Social Security was one of the major achievements of
federal legislation during the 1930's. The system was designed to provide a
guaranteed retirement income to American wage earners when they reached 65.
Today, the Social Security system provides benefits to nearly one in every
seven Americans, retired and disabled, and their survivors. Their benefits
are paid for by the 96 million wage earners in the country, all of whom earn
the right to similar benefits upon their own retirement.
Since the beginning, the program has been self-supporting.
A specific deduction from pay checks, that is, a payroll tax, has paid for
every Social Security benefit. As both the number of people receiving
benefits and the size of those benefits has increased, the payroll taxes to
pay for them have also increased.
Here's how. Beginning in 1950, a maximum of $45 per year
was taken from all workers' wages. In 1960, the maximum went to $144. In
1973, workers will pay a maximum of $632 due to abroad increase in benefits
enacted by the Congress in 1972. And, there are more increases scheduled for
the years ahead. Not everyone pays the maximum. The payroll tax is taken as
a fixed percent of wages up to a wage ceiling. If you make $5400 a year, you
will contribute $315 this year to Social Security. If you make twice that,
$10,800, your contribution will be $632. But that is the maximum. Persons
earning over $10,800 a year pay only the maximum $632 contribution. Whatever
an individual contributes, his employer pays a matching amount into the
Social Security Trust Fund. Thus, these funds are comprised equally of
employee and employer contributions. Out of them, benefits are then paid to
the retired, disabled, or survivors,
Dukakis:
And now to the cases. Mr. Tyler, why should Social
Security benefits be financed in part out of general tax revenues?
Tyler:
We believe that Social Security is a blessing to all
America, Therefore, the whole nation should assume some of the costs.
Without Social Security, millions or retirees, widows, children, and
disabled, would be a public burden.
The billions that flow from the Social Security treasuries
create more jobs and more profits for our total economy. Now where does the
money come from for Social Security at the present time? Almost exclusively,
from the low and middle income worker. Virtually no contribution comes from
those who live on unearned income, such as interest, capital gains, or
inheritance. Now, as the costs as well as the benefits have risen over the
years, the tax burden on the working man has become increasingly
oppressive.
Interestingly enough, the creators of the Social Security
system forecast a time when it would be necessary to use general funds to
supplement the payroll tax. They thought it would be about 1965. That hour
has come. Maybe we're late. We believe that Social Security benefits must be
expanded and that tax relief must be given to low and middle income workers.
And to do this, the system needs and deserves the participation of the
entire society, through general revenues based on ability to pay.
My first witness for this evening is Senator Harrison
Williams.
Dukakis:
Welcome to THE ADVOCATES, Senator Williams. Nice
to have you with us.
Williams:
Honored to be on THE ADVOCATES, and glad to be in
Massachusetts - Democratic Massachusetts.
Tyler:
Senator Williams, you are, I believe, the Chairman
of the Labor and Public Welfare Committee of the Senate, and you serve on
the special Committee on the Aging. Therefore, you have been in an
opportunity to listen to much evidence over the years. Would you say that
the Social Security system, at the present time, good as it is, is
adequate?
Williams:
I say it is not adequate, recognizing, of course,
that it has been greatly improved within the last few years. Coverage for
those who are disabled was a major step forward. The Medicare provisions.
And most recently, an increase of 20 percent. But we still have millions who
are Social Security beneficiaries who are living at incomes below the
poverty level. This should not be. We still see areas that I think should be
covered that are not, particularly in the medical field. There's a
deductible of $72 on every hospital bill for Social Security beneficiaries.
They have to pay that first. Also, I'd like to see doctor-prescribed drugs
covered. And I'd also like to see that special tax, that extra tax, to be
covered for doctors' bills removed too.
Tyler:
In the light of these deficiencies, there are some
who say that the people on Social Security could make up the difference
through private pension plans or through savings or from some other device.
What is the hope?
Williams:
There's little hope at all that there will be a
private pension plan system general enough to make up the difference. First
of all, far more people are not in private pension plans than are in pension
plans. And number two, those who are in plans generally are not going to
receive a meaningful benefit at age 65. This, I say, is a matter of fact,
after two years of study in depth. And that's why we're on the threshold of
doing something about that because right now there is no national law to
bring private pension plans up to the expectations of ...
Tyler:
So we have to count on the Social Security system,
and ...
Williams:
We certainly do.
Tyler:
…you want to have some improvements in that
system.
Tyler:
How would you fund these improvements, because
that's going to cost money?
Williams:
My proposition is, as you've stated it in your
opening, that we should look to a third partner in financing Social
Security. We have the employee, and employer. We should have the people
generally, through general revenues, general revenues that are raised with
the fairest tax that we know of - a progressive income tax where people pay
according to their ability. And not only through general revenues and the
taxes do I look, but I look to the hope and the opportunity of reductions of
certain expenditures we have today. Notwithstanding Mr. Ehrlichman speaking
for the administration, I think there should be a peace dividend as we come
out of this war. And we should see substantial reductions, not only in
cutting out waste but living in peace.
Tyler:
Let me ask you this question. In terms of priorities
- I know that you're not the entire Congress of the United States - but as
you see it, you've been in on this thing, what would your priorities be, as
you got this money, how would you apply It? For tax relief? For expanding …
What kind of an agenda do you have roughly in mind?
Dukakis:
It's going to have to be a brief agenda, Senator.
Briefly, please.
Williams:
Well, first of all, I mentioned that it's an
equal tax. Everybody pays the same rate. I would first bring relief to the
low wage earner who pays a very high proportionate part, number one. And
then move on to the benefits that are paid to the minimum beneficiaries who
are way down at $100 a month. And then go on to supplementing some of the
medical hospital benefits.
Tyler:
Thank you very much,
Dukakis:
All right, Senator, let's turn to Mr. Rusher, who
has some searching questions coming up for you. Mr. Rusher.
Rusher:
Senator, why stop at a third of the costs of Social
Security being paid for through general revenues? Why not a half? Would you
oppose that?
Williams:
Well first of all, all seasoned opinion that's
been working on this great system of Social Security, since its inception in
this country in 1935, have seen in this then new social compact a
partnership of the three elements: the employee to be covered, his employer
whom he is producing for, and because it is a national benefit, it
strengthens the nation, the nation through its federal government should be
the third part of this most noble, enlightened system.
Rusher:
I can see why it might be the third partner, but I
don't see why it should neces… What's the magic of the third part, even with
regard to people who are paying out of their salaries, their wages, now,
withholding. In the case of low income workers, you're already proposing to
reduce the amount that's withheld, so you're not talking about equal parts
in any case. What's the magic of a third?
Williams:
Well, first of all, look at it from the employees
standpoint. Right from the beginning he wanted not to be destitute and
living on welfare. He wanted to be part of a program that he was
contributing to. And workers want to be contributors because they want to
know that they have the benefits provided as a matter of right.
Rusher:
That explains why not 100 percent …
Williams:
They are one part. The employer is in an equal
position to the employee. If we bring in the third necessary part, there are
three, and we make the three-legged stool of the employee, the employer, and
the people through general revenues.
Rusher:
Although in the case of low income employees, their
particular leg of the stool is going to be much shorter, according to Mr.
Tyler, as I understand it. Is that right?
Rusher:
Those earning 5000 or less will be actually paying
less in terms of withholding.
Williams:
Well, as a practical matter, if this should come
about, and general revenues were used, probably It would keep them where
they are, but they would not have any increases as we escalate with the
increase of cost of living …
Rusher:
As I say, the leg would be …
Williams:
… We now have an escalator in the Social Security
program.
Rusher:
If the government wants to make payments to certain
persons based on need, as in the case of the low income worker, why can't
this be done directly out of its general resources under the welfare
program? Why does it have to run through Social Security and transform the
entire philosophy and basis for Social Security?
Williams:
People like to live in dignity.
Williams:
The Social Security program is a program that
recognizes this. These needs that I speak of should be paid under a program
that honors the dignity of an individual and doesn't force him or her to
come in almost begging for their supplementary assistance.
Rusher:
But Senator, the dignity of the Social Security has
been precisely that it has not been based on need but upon a contribution by
the employer and his employee. Now, why should it be suddenly dignified for
them to take welfare merely because you've run it through Social
Security.
Williams:
Where we have supplemented with general revenues,
it hasn't detracted from the dignity of the Social Security program at all.
And there are general revenue contributions to certain aspects of Social
Security today.
Rusher:
I meant to ask you where is the money coming from,
and it will be $30 billion a year, I believe it's been calculated, by the
end of this decade, even on a modest estimate. Where is all this coming
from? That peace dividend you were talking about?
Williams:
Well, I know we're going back to Congress and are
going to be asked to put up a supplemental two billion dollars to pay for
the war. This war has cost over $100 billion. We're out of this war now.
That's one of the places that I look to for some part, and without raising
taxes.
Rusher:
You propose to do this without raising the income
taxes of anybody in the United States?
Williams:
No, I didn't say that.
Rusher:
You are going to raise taxes, yes, for a
part.
Williams:
I said I would look here …
Williams:
… to this dividend that we can get through better
administration and through a peace dividend. And if we go to general
revenues for more money, it will come through the fairest tax and not the
tax that soaks the poorest people as much as it soaks the richest
people.
Dukakis:
Mr. Rusher, you're going to get an opportunity to
get a couple of questions in on Senator Williams, I hope. So, let's go back
to Mr. Tyler for one addition question.
Tyler:
Yes, there was one statement that you made, Senator
Williams, that interested me. You said at the present time, certain aspects
of the Social Security program are paid for out of general revenues.
Williams:
Part of the medical coverage is paid for out of
general revenues. Half of the payments for doctors bills are paid out of
general revenues. And when those doctor bills are paid, people don't have to
beg for a welfare check to pay that part. We've had other parts of the
program for people over 72 that were brought in the program that hadn't
contributed up to an amount that would give them the full benefit, this has
been general revenue. So, the principle does not stand inviolate. Already,
we have established general revenues as one of the partners in the
program.
Tyler:
Thank you, Senator.
Dukakis:
All right, let's go back to Mr. Rusher for another
question or two.
Rusher:
Senator, during the Great Depression, military
pensions and veterans pensions were reduced, but civil service pensions
weren't. Can you guess why?
Williams:
Well, I do know that now I don't believe any
contract that our government has made with the people of this country has
been broken.
Rusher:
That's not my question, Senator. I said that
military pensions and veterans pensions were reduced by the federal
government during the Great Depression, but civil service pensions weren't.
Now, why?
Williams:
It wasn't when I sat. I'll tell you that.
Rusher:
Well, I know you weren't in the Senate during the
Great Depression. Well, you weren't there, I'll tell you why.
Dukakis:
Mr. Rasher, tell us briefly because I have to
dismiss Senator Williams.
Rusher:
It was because the civil service pensions were
funded separately, and the first two were taken out of general revenues
which, naturally, then had to be reduced in time of depression.
Williams:
Well, I like to think that every contract that
our government enters into these days will be honored.
Rusher:
You'd like to think that, but …
Dukakis:
Thank you, Senator. Gentlemen, I'm sorry I have to
interrupt. Senator, it's been a pleasure to have you with us on THE
ADVOCATES.
Tyler:
My second witness is an honest-to-goodness retiree,
Nelson Cruikshank.
Dukakis:
Looks like a pretty lively retiree to me. Welcome
to THE ADVOCATES, Mr. Cruikshank.
Cruikshank:
Thank you. Glad to be here.
Tyler:
Mr. Cruikshank, you are the President of the
National Council of Senior Citizens in the United States. You have some
first-hand contact with them. Let me ask you this question, and I realize
that it's one man's opinion. Would you say that it's their general opinion
that the Social Security system, by and large, is a good thing, bad
thing?
Cruikshank:
I'd say it's the greatest humanitarian system
that exists in any country in the world at any time in the history of
mankind. It's paying $158 million a day, including Saturdays, Sundays, and
holidays, every day in the year, to people who need it. And without this,
there would be millions of people that would be on relief and be on public
welfare and deprived of their sense of independence. It's a great
system.
Tyler:
Does it just cover the aged, or are there others
covered?
Cruikshank:
Oh, no. It protects the younger workers, and
this is one of the most important parts of it. It protects people when
they're in their working years from the possibility of loss of income
because of disability. It gives protection to the widows and orphans where
breadwinners have died. And today, out of the 28 million people that are
covered by the system, that are getting benefits, there are about 22 percent
of them that are people younger than 65 years of age.
Tyler:
You know, we are proposing here tonight that
one-third of the cost ultimately be picked up by general revenue. Is this a
brand new idea?
Cruikshank:
Oh, no. This idea is as old as the system
itself. And it isn't a radical idea proposed by a few labor leaders or
others, as has been suggested. In the first Social Security Advisory
Committee set up under President Roosevelt in 1934, composed of businessmen,
men from the academic world, men from the general public, including such men
as Mr. Folsom, the Treasurer of the Eastman Kodak Company, Gerard Swope of
General Electric, others. And all through the advisory councils, the one in
'47-'48 that I worked on, there were bankers, insurance people, and others;
and they have, through the years, recommended that the Social Security
system be a tripartite, three-way, three-legged stool, in terms of its
financing. This is not new. This is not radical. It's a solid, substantial
proposal coming from the most thoughtful people and the leaders in this
field.
Tyler:
Well, if it was proposed way back then and was
proposed again, apparently, later on, why has Congress kind of ignored the
whole thing?
Cruikshank:
I don't think Congress has ignored it. Congress
has taken it under advisement and has given it study. But these proposals
often come out way ahead of actual performance or adoption by Congress. For
example, the Advisory Council of 1939 proposed that disabled be covered. And
it wasn't until 17 years later that Congress adopted it. We expect the
Congress, representing the broader electorate, to take a little time to
catch up with the people who have specialized and made these
recommendations. Now, as the previous witness indicated, the Congress has
begun to move in this. They do provide general revenues in the Medicare
program. There are today 422,000 people over age 72 getting $24 million a
month in benefits, and they didn't contribute. This all comes out of general
revenues. The people who served in the armed forces got a wage credit. This
is covered under general revenues. So, this is not new. It's partly in
operation. Congress has begun to act.
Dukakis:
All right, Mr. Cruikshank, let's turn to Mr.
Rusher who has some questions for you now. Mr. Rusher.
Rusher:
Mr. Cruikshank, you were formerly Director of the
Department of Social Security of the AFL-CIO, were you not?
Cruikshank:
I was proud to have that privilege of
representing working people, yes, sir.
Rusher:
Right. And your present organization more or less
continues in that spirit by receiving money from the AFL-CIO, doesn't
it?
Cruikshank:
We receive some aid from the AFL-CIO and the
union people because we have a lot of union people retired, yes.
Rusher:
Tell me, you told us that the original planners of
Social Security had intended, really, that sooner or later general revenues
would pick up a part of its cost. There was nothing new about the
idea.
Cruikshank:
That's correct.
Rusher:
You were familiar with their intention at the time?
Did you approve of it?
Cruikshank:
Yes, I wasn't on the first Advisory Council,
but I was there at the time, and I thought that it was a wise provision,
yes.
Rusher:
By 1958, however, you had apparently changed your
mind when you told the House Ways and Means Committee, "We of the AFL-CIO
are not here, gentlemen, asking that additional costly benefits be provided
under this system and paid for out of general revenues of the government. We
have consistently recommended increases in the contribution rate whenever we
have recommended increased benefits that would cost more money." Quite a
change.
Cruikshank:
No, that was no change.
Cruikshank:
I wasn't saying that at any time in the future
days in 1958; I was not saying that there would be no time in future that
the general revenues would not be needed.
Rusher:
And then, what about the very next year, 1959,
when you were a member of the Advisory Council on Social Security Financing,
and the Council unanimously reported, "We believe that the experience of the
last 22 years has shown the advantages of contributory social insurance over
grants from general tax funds."
Cruikshank:
Well, the advantage of a contributory system
is not contradictory. I was also a member of the Advisory Council in 1947
and '48 when, along with businessmen and others, we recommended
contributions out of …
Cruikshank:
The 1959, just a minute, the 1959 Advisory
Council was a very specific one set up to study the solvency of the fund and
the fiscal soundness of the system, so it was a very limited Advisory
Council …
Rusher:
Come on, Mr. Cruikshank, either it is true or not
that the Council said, "We believe the experience of the last 22 years has
shown the advantages of contributory social insurance over grants from
general tax funds."
Cruikshank:
But a contributory social insurance system is
not contradictory. You can still have a contributory social insurance
system, and this was in contrast to a system supported wholly by general
revenues, and this is not what we're pressing tonight. So, that that is
…
Rusher:
You are only pressing for one-third tonight.
Cruikshank:
We're only pressing for one-third, that's
correct.
Rusher:
Of course, you'll never press for more, will
you?
Cruikshank:
I don't know. We might.
Rusher:
You might, indeed, you might. I'd go a little
further and predict you will, Mr. Cruikshank. Tell me, is Social Security
intended to provide, intended to provide, all by itself, adequate income for
retired persons?
Cruikshank:
In the early days of the planning, it was
probably not intended to be a complete underwriting of people's economic
need. But we have found an experience, and we have found the experience of
other means of income maintenance, that we have learned that this is the
main stay of people's income when they are deprived of their earned income,
through disability, through death, or through old age.
Rusher:
And if a person …
Cruikshank:
And so we believe that it has got to become a
much larger part of their income, maintenance, and security, than was
originally intended.
Rusher:
And if a person decides to rely on it altogether,
do you feel that it should be up to the government of the United States to
make sure that that particular Social Security payment is totally
sufficient, all by itself?
Cruikshank:
I believe that the government of the United
States, or the people of the country acting through their government and
using government as an agency, should see that no one is in want in this
great …
Rusher:
Of course, but seven percent of them are on public
assistance right now. Nobody is in want. There is public assistance in this
country…
Cruikshank:
Oh, that doesn't follow. Public assistance
…
Rusher:
Plus Social Security?
Cruikshank:
The seven percent that are on public
assistance doesn't mean there's only seven percent of the people that need
more money and more income security …
Rusher:
Oh, we all need more money.
Cruikshank:
These are the level that is decided by the
states on a purely arbitrary basis.
Dukakis:
Gentlemen, I gather that by public assistance we
mean welfare.
Rusher:
Welfare funds of various types. Here we have
...
Cruikshank:
Welfare. Public health …
Dukakis:
I'm sorry, Mr. Rusher, we have to turn back to
Mr. Tyler. Mr. Tyler, do you have another question for Mr. Cruikshank,
please?
Tyler:
Yes, I do. A number of countries, I understand,
have this tripartite system. How does it work? Successful?
Cruikshank:
Oh, yes, yes. There are a number of countries,
the main industrial countries of the free world, like West Germany and Great
Britain and Japan, have government contributions into their system. It
doesn't destroy the right or the dignity of the individual receiving the
benefits. And it doesn't destroy the contributory principle.
Dukakis:
All right, Mr. Cruikshank, back to Mr. Rusher
now, Mr. Rusher.
Rusher:
Mr. Cruikshank, the AFL-CIO supports national
health insurance, I believe. Does your organization do so, and do you?
Cruikshank:
Yes, but we're not discussing that tonight,
Mr. Rusher.
Rusher:
Oh yes, we are. I'm just about to. Do you,
yourself, support it?
Cruikshank:
Well, I support it, but we're talking about
the Social Security system.
Cruikshank:
… and national health insurance is now, at the
present time …
Dukakis:
Mr. Rusher, you have one more question. Mr.
Cruikshank, let's see if we can answer it, and that will be it.
Rusher:
If the national health insurance is run, as it is
proposed, through Social Security, how much will that add all by itself to
the annual bill of Social Security costs?
Cruikshank:
It would add practically nothing as a net
cost. People today are paying for their health costs. They're not getting
very good health costs, and if they would decide to pay it through another
mechanism, it wouldn't be any more out of their pocket if it was a good
system.
Rusher:
More taxes; that's all.
Cruikshank:
More taxes, but less others.
Dukakis:
Mr. Cruikshank, thanks for being with us on THE
ADVOCATES.
Dukakis:
All right, Mr. Tyler. Mr. Tyler, a closing
word.
Tyler:
Yes, there has been some discussion here about how
much will we spend for what in the future. In the final analysis, the
Congress of the United States will make that decision. We do believe,
however, that the use of general revenue is both necessary and fair, and to
summarize for three reasons: First, it spreads the responsibility to include
the rich who live on unearned income; secondly, it can ease the tax burden
on low and middle income workers; and finally, it provides the means to
expand benefits.
Dukakis:
Thank you, Mr. Tyler. For those of you at home
who may have joined us late, Mr. Tyler and his witnesses have been arguing
for the financing of Social Security benefits, at least in part, out of
general tax revenues. Now, we're going to turn to Mr. Rusher and his
witnesses who oppose that proposal. Mr. Rusher.
Rusher:
As thus far conceived and administered, Social
Security has been a plan whereby a part of every wage earner's pay is
withheld and paid over to the federal government in return for the
government's promise to pay certain benefits to him when he retires. In
combination with ordinary savings and their other property, it has made life
much easier for a great many millions of our older citizens. To their great
credit, only seven percent of those receiving Social Security benefits today
are also on welfare.
But as Congress over the years has added new benefits to
those included under Social Security and as the cost of living has risen,
year by year it has been necessary to keep on increasing the amount of money
withheld from the pay checks of those still earning wages to pay for the
whole system. And recently, the bite has gotten very big indeed. Last
October, just before the election, everybody now receiving Social Security
payments got a health increase. Then in January, just two months after the
election, every American wage earner got socked for a stiff increase in the
amount withheld from his wages.
All right. Now, what? Did you think that the social
planners over at the AFL-CIO like Mr. Tyler, and their professional
lobbyists like Mr. Cruikshank, and their big labor Senators like Mr.
Williams, were going to leave you alone, at last? Oh, no. The expansionists,
as they call themselves, have much bigger plans for you. Now they propose to
put every senior citizen in America permanently on relief by piling another
$30 billion a year onto the present Social Security benefits and paying for
it straight out of the general revenues of the federal government. Do I need
to tell you where those general revenues come from? I don't believe
America's elderly either need or want the tin cup Mr. Tyler is trying to
shove into their hands. To see why, let's here first from Professor Robert
Myers.
Dukakis:
Welcome to THE ADVOCATES, Professor Myers. Nice
to have you with us.
Rusher:
Professor Myers was, for 23 years, the Chief
Actuary or insurance mathematician of the Social Security Administration,
and he is now professor of actuarial science at Temple University in
Philadelphia. Professor Myers, in your opinion, what is the chief merit of
the present system of paying for Social Security by means of a payroll
tax?
Myers:
The chief merit of this, I believe, is that it
makes the cost readily apparent to everybody, to the retired people, to the
active workers who are paying these payroll taxes. And through this obvious
and apparent cost, people generally can democratically decide just how much
of their income they want to put into this one particular program.
Rusher:
And what would be the principal harm, in your
opinion, of tonight's proposal to pay a third of the cost of Social Security
out of general revenues?
Myers:
Well, that's the other side of the coin. The cost
would not be at all apparent. Many people would think that, "Fine, it's
great to increase Social Security benefits. It won't cost me anything. It'll
come out of somebody else's pocket."
Rusher:
The truth is what?
Myers:
The truth is, of course, general revenues come out
of your pocket and my pocket, and the incidence of taxation in general
revenues is really not so greatly different than it is in payroll
taxes.
Rusher:
But how about the argument …
Dukakis:
Excuse me, gentlemen. That's another way of
saying that the same people that pay the payroll taxes generally pay the
general revenues.
Myers:
Yes, that's true. The workers of this country are
primarily the people who pay all taxes.
Rusher:
How about the argument we have heard tonight from
the expansionists to the effect that there should be further increases and
some changes in Social Security benefits that will cost at least $30 billion
more a year before the decade is over?
Myers:
Well, in the first place, I think that $30 billion
is quite an understatement when, as you bring out, their national health
insurance program that they propose would be a very costly thing. And if it
were put into effect, the increase in general revenue taxation would be
anywhere from 50 to probably $75 billion a year. It seems to me that after
the very big increases we've just had that this is the time to think this
matter over more clearly. We had a 20 percent increase in benefits last
October, and this January, workers have had an increase in their taxes
ranging from a minimum of seven and a half percent to a maximum of 35
percent over what they paid in 1972.
Rusher:
And what is the general philosophy of the program,
anyway?
Myers:
Well, the general philosophy of the program, as
it's been from the beginning, and it really hasn't been changed very much,
is that it should be a floor of economic protection on which people can and
do build through home ownerships, savings, pensions, and so forth. And the
proof that it's done an adequate job is the figure you quoted, that only
seven percent of the people have needed to go elsewhere to the government to
get money in order to have a reasonable standard of living.
Rusher:
And what about Mr. Cruikshank's argument that the
people who conceived the Social Security program back in the 1930's always
intended that general revenues would ultimately be needed to support
it?
Myers:
I don't think he's correct about that. The staff
planners did suggest that there should be a one-third government
contribution eventually. But President Franklin D. Roosevelt vetoed that
idea and took it out of the plan when it was submitted to Congress.
Moreover, in the years to come that have come since then, Congress has
repeatedly stated its intention that the program should be completely
self-supporting from the taxes on payrolls for the workers who get the
benefits.
Dukakis:
All right, gentlemen. Mr. Tyler, Mr. Rusher keeps
calling you an expansionist. Do you object to that or are you going to
accept it?
Tyler:
I didn't know it was showing, so I'm just covering it
up.
Tyler:
The first point that you made was that, under the
present system the cost is apparent, and under a changed system, it's not
going to be that visible. Right?
Tyler:
Now, I hate to tangle with you on this because
you're an expert in this, and my addition and subtraction isn't that good.
But a few little questions just so people who are commonsensical about it
can follow our discussion. The present cost is apparent to somebody who has,
let's say, an annual earning of $1000. How much would he pay in?
Myers:
This current year, somebody with an annual earning
of $1000 would pay $58.50.
Tyler:
That's about 5.8 percent.
Myers:
5.85 percent, to be exact.
Tyler:
That's apparent. Now, if I make $10,000, how much
do I pay in?
Myers:
Ten times as much.
Tyler:
Ten times as much, but what percentage?
Tyler:
Exactly the same percentage, so it's not graduated,
right?
Tyler:
All right. Now, if I make $50,000, how much do I
pay in of my total income?
Myers:
You would pay in $632.
Tyler:
What percentage is that of my total income?
Myers:
It's a lower percentage.
Tyler:
All right. So the cost is not that apparent.
Myers:
About 1.2 percent, but …
Tyler:
Yes, and as a matter of fact, if I have $100,000,
I'm paying a still smaller percentage, right?
Myers:
Yes, and this is just as when you go to buy a loaf
of bread, you pay the same price in dollars as everybody else does, but you
pay a much higher percentage of your income for it than does somebody who
has twice your salary. Social insurance is really a form of goods and
services that people are buying.
Tyler:
Is that all it is? There's no problem of social
conscience involved?
Myers:
Well, of course, but that's the service part of
it.
Tyler:
Well, I know it's a service part, but you're
putting Social Security on the same basis as a loaf of bread or a pound of
butter?
Myers:
Yes, it's something …
Tyler:
Is it really that?
Myers:
It's something that people really need.
Tyler:
All right. You have been an actuary with this thing
for many years. Let's talk about bread and butter now. When did the program
start paying out?
Myers:
It first started paying monthly benefits in
1940.
Tyler:
When did it start? When was it initiated?
Tyler:
Were there any people who collected benefits in
1940 and ‘41 and ‘42?
Tyler:
Did they pay in enough to walk out with that pound
of butter or loaf of bread?
Myers:
On a social insurance approach, yes.
Tyler:
On a social insurance approach. In other words,
they didn't pay in enough to cover what they took out of it, right?
Myers:
Just as is done in private pension plans.
Tyler:
Well, now you've made it a loaf of bread. I can't
get a loaf of bread on that basis. I have to pay for it. These people didn't
pay for it, did they?
Tyler:
No, they didn't. They just paid in three years, and
then they collected.
Myers:
The rest was paid for by the employers of the
country on a pooled basis, which is what social insurance is about.
Tyler:
I know they were paid for by employees and
employers; and I thought it was right, and you thought it was right because
that was an act of social conscience. Right?
Tyler:
All right, so, it's somewhat different. Now, if the
costs are so apparent, if I'm lucky and I inherit a million dollars this
year, what is the cost to me - I'm paying a tax on that, I don't have a job
- what is the cost to me of Social Security?
Myers:
The cost is nothing because you get no benefits
from it.
Tyler:
Then you'll only pay when you get benefits?
Myers:
You pay towards your benefits, not on a dollar for
dollar basis, but by your earnings, you are insuring yourself against the
risk of retirement and disability and death.
Tyler:
But we just finished with a case that was a clear
example of people who got benefits and did not pay for it.
Myers:
They and their employers paid for it.
Tyler:
What I'm suggesting is that this is social
insurance, and you've agreed with me. And it's different from buying a loaf
of bread because there's a social conscience that goes with this kind of
insurance, a sense of social responsibility. Isn't that true? That's what
made the difference.
Myers:
No, I think you're buying a service when you're
buying social insurance.
Tyler:
Well, let me give you one other example. The
doctors recently came in. When did they come in?
Myers:
The doctors were covered by the program in
1965.
Tyler:
1965. After the doctors were in it for a year and a
half, could they collect?
Myers:
If they were old enough?
Tyler:
If they were old enough, they could collect.
Myers:
They had to be over age 72.
Tyler:
Well, but you say if they're old enough, they could
collect. Right?
Tyler:
After a year and a half of being in the plan. Could
they put in enough in a year and a half to cover all that they're going to
collect in the coming years?
Myers:
Not that one particular doctor, but the doctors as
a group did. In other words, the younger doctors, in a sense, were putting
in something for the older doctors.
Tyler:
That's exactly correct, and we don't disagree with
the idea of the society as a whole. But why should it always come back to
the young worker paying for the scheme? Why don't we get other people in the
American society who benefit from Social Security in countless ways, why
shouldn't they contribute? Don't they have a sense of social responsibility?
Shouldn't they?
Dukakis:
A brief answer, please.
Myers:
The workers of this country are primarily the only
ones in the country. There are very few people who happen to have just
unearned income.
Dukakis:
All right, gentlemen, let's turn back to Mr.
Rusher for one additional question. Mr. Rusher.
Rusher:
Professor Myers, I must say you don’t look to me
like a person with no social conscience. Is it true that, as a result of the
present system of Social Security, the rich are getting away with paying
less taxes than the poor and that this is, in effect, a regressive
tax?
Myers:
No, indeed. I think it's just the other way around.
This is a very progressive system. The lower paid people get much higher
benefits proportionately than the higher paid do. And if you look at the
system as a whole, it's a progressive system. You shouldn't just look at the
tax and say it's a regressive tax. You look at both ...
Rusher:
In other words, the benefits to the poor are much
larger.
Myers:
Are much higher. They are heavily weighted in favor
of the lower paid.
Dukakis:
All right, back to Mr. Tyler, Professor Myers,
for another question or two.
Tyler:
Yes, you said that the evidence that the present
plan is working is that only seven percent of the retirees turn to public
assistance. But isn't that due, primarily, to the fact that in many states,
no matter how much you want from the state, they just don't put you on
public assistance until you're practically dead?
Myers:
No, I don't think that's so. In some of the
Southern states, the public assistance programs are inadequate. But in a
great Northern state, like Massachusetts, there's a very adequate public
assistance program.
Tyler:
This was a national figure, wasn't it?
Myers:
Yes, and I have computed that if there were
adequate programs in all states, as there really are in New York and
Massachusetts and California, that percentage wouldn't go above 10 percent,
which is still a mighty small figure.
Dukakis:
Professor Myers, thanks for being with us on THE
ADVOCATES.
Dukakis:
All right, Mr. Rusher.
Rusher:
Now, to consider this question from the larger
standpoints of public policy and politics, I call upon former United States
Senator Jack Miller.
Dukakis:
Welcome to THE ADVOCATES, Senator Miller. Nice to
have you with us.
Miller:
Nice to be here with you.
Rusher:
Senator Miller was United States Senator from Iowa
from 1961 until this year. He was a member of the Senate Finance Committee
and of the Special Senate Committee on Aging, and he was the original author
of the automatic cost of living increase in Social Security benefits.
Senator, we've heard tonight that tonight's proposal will help the working
poor by reducing their payroll taxes, among other things. What is your
opinion of this idea?
Miller:
Well, it would help, but if I understood Senator
Williams correctly, he did not necessarily say they were advocating cutting
the Social Security taxes. They just wouldn't increase them. But either way
is only going to temporize with the problem of the so-called working poor.
The problem, essentially, is one of welfare, and of all the welfare
proposals, welfare reform proposals, that were considered last year and the
year before in the Congress, including the one reported out by the Senate
Finance Committee, I don't recall a single one that didn't want to help the
working poor by supplementing their earnings by payments. Out of the general
fund of the treasury is a welfare approach. And I don't recall any of them
trying to link this into Social Security, which, as you know, is essentially
an annuity-type social insurance program.
Rusher:
Suppose we do pass, though, a bill to finance
Social Security to the tune of a third through general revenues. What do you
foresee as the likely political consequences of such a change, sir?
Miller:
Well, first of all, this has already been brought
out, I think, in previous testimony. The restraining impact of the people
paying the bill through their payroll taxes and seeing how much those
payroll taxes are would be detracted from, especially if one-third was used
from general fund. There would be a temptation to go from one-third to a
half to two-thirds. There are members of Congress who have been talking
about putting it all under the general fund of the treasury. Now, either of
two events could happen. This would lead to a lack of restraint, increasing
benefits, and the way the Congress has been operating in recent years, more
deficits and more inflation. And, of course, they'd live up to the contract
by paying off in inflated dollars. That's not a very pretty picture.
Alternatively, it could lead to a demand, public pressure, especially from
the younger members of the work force who are paying so much of this as they
come into their political power, to cut down on benefits or, perhaps, to go
to a need factor in determining benefits.
Miller:
A need factor, so that those who don't need them
wouldn't get them and those who need them might get more, which is something
that has been pretty well out of the social insurance concept from the
beginning. And then, finally, this one-third or one-half, whatever it
amounts to out of the general fund of the treasury, would be bidding for
general fund dollars against other essential programs, such as air and water
pollution control, mass transit programs, health and education
programs.
Rusher:
Senator, what is the real problem here, and what
is the solution to it?
Miller:
Well, the real problem, I think, is that a
majority of the members of Congress have been looking too much towards the
objects or the beneficiaries of increases in Social Security benefits and
not enough to those are paying the bill. And now, especially after what
happened last year, the day of reckoning is here, and the bite is really
tight this year. And so, there's pressure being built up to try to do
something about it. That is where the problem really originates.
Rusher:
And the solution?
Dukakis:
All right, Senator, let's turn to Mr. Tyler. Mr.
Tyler, some questions for Senator Miller, please.
Tyler:
Senator Miller, if I understand correctly, you are
suggesting that the people under Social Security who, at the present time,
are having considerable hardship, that sector of it should not be protected
by an expanded Social Security program. You're suggesting that they go on
welfare.
Miller:
I'm not suggesting that they receive additional
Social Security benefits which they're not paying for. I'm suggesting that
the working poor, supplementing their payments, their work payments, is an
essential feature of any welfare reform program that's worthy of the name
because if you don't do it then you discourage them from working and
encourage them to revert to a welfare statue.
Tyler:
I'm not sure I understand it, so let me be
specific. At the present time, there are about five million people who are
getting Social Security who, in effect, are living below the poverty level
in the United States. That's about one out of every four of the elderly
citizens under Social Security. What do you propose we do with them?
Miller:
Well now, that's another aspect of welfare reform.
In response to the original question, we were talking about those who are
paying Social Security taxes. You're talking about ...
Tyler:
They're paying Social Security taxes.
Miller:
You're talking about the working poor when you do
that. But you're now talking about those who are drawing Social Security,
which means they're no longer working. They're retired, such people as the
aged ...
Dukakis:
Senator, let's clarify it because I'm not sure I
understand it, Mr. Tyler. Are you saying that one out of every four elderly
persons …
Tyler:
About one out of four.
Dukakis:
… on Social Security are below the poverty
line?
Dukakis:
It’s that group, I gather, Senator, that Mr.
Tyler is talking about.
Miller:
Well, I don't know, but …
Dukakis:
Not the working poor.
Miller:
…we'll take that ... No, because the working poor
are not retired.
Miller:
He's talking about the retired people, such as the
aged, the blind, the disabled, people of that kind, and many of whom are
drawing Social Security benefits which are inadequate.
Miller:
And here again, welfare reform demands that they
receive supplemental benefits and out of the general fund of the treasury in
order for them to maintain a decent standard of living. But I don't recall,
in the various welfare reform proposals that we considered in the Finance
Committee, including the one reported over by the House, of any serious
proposal to tie this into Social Security,
Tyler:
Well, we have several proposals. One would be,
actually, to remove some of the burdens that they bear at the present time
to operate within the Social Security system, and Senator Williams did
present them here this evening.
Tyler:
And we would up the benefits in general.
Miller:
I think, Mr. Tyler, that what you're talking about
here is you're talking about Social Security supplements as against welfare
reform. And welfare reform has had a tremendous amount of attention in this
country, and I dare say that it will be a very big order of business in the
current session of Congress. If you had welfare reform such as was passed by
the House of Representatives, as modified by the Senate Finance Committee,
last year, I don't think we'd have this, program tonight because your
working poor would be brought up to a decent standard of living.
Tyler:
Where would the money come from …
Miller:
Out of the general fund of the treasury.
Tyler:
In welfare reform, where would the money come
from?
Miller:
Out of the general fund of the treasury.
Tyler:
Out of the general treasury. You did hear Mr.
Rusher say earlier that he did not want us having these senior citizens
running around with a tin cup, didn't you?
Miller:
Well, I don't know what that means, for example,
but let me say this …
Tyler:
What it means is they don't want them getting money
out through welfare.
Miller:
Well now, let's make this clear. If you don't do
it this way, if you don't do it out of the general fund of the treasury,
you're not going to have to worry about a need factor. But if you do it out
of the general fund of the treasury, you’re going to get into a need factor,
and I don't need to tell you, Mr. Tyler, that a need factor in Social
Security has been abhorrent to your people, very abhorrent.
Miller:
But the best guarantee of getting the need factor
cranked into this, to depart from the concept of the annuity social
insurance approach, is to start paying these out of the general fund of the
treasury. A welfare concept, and there's where your need factor comes in
because you cannot justify payments under that concept unless it is on a
need basis …
Tyler:
Well, wouldn't you agree …
Dukakis:
Gentlemen, we can't hear you. Let's let Senator
Miller finish. Did you finish your ...
Miller:
Yes. Let me repeat. You cannot justify those
payments out of the general fund of the treasury if there is no need.
Tyler:
Yeah, but wouldn't you agree with me, Senator
Miller, that the best way to deal with the need factor for the elderly
citizen is to pay him adequate Social Security so that he is not in
need?
Dukakis:
A brief answer, please, Senator.
Miller:
That depends upon the income status of the
recipient. You certainly could not justify that to a high income individual,
so there again, you're on a need basis in determining who's going to get
those increased benefits.
Dukakis:
Senator, let's go back to Mr. Rusher for one
additional question.
Rusher:
Senator, in your opinion, do the recipients of
Social Security in this country, in general, want to be treated as an aspect
of the welfare problem by having their payments made out of the general
revenue?
Miller:
I don't believe that most of them do, Mr. Rusher.
After all, they have been used to the concept of social insurance on an
annuity basis. The very concept of Social Security, payments coming out of a
separate identifiable trust fund, gives them the feeling of social security.
Do away with that, put them at the whims of the annual appropriations of
Congress, I don't think they want.
Dukakis:
All right, back to Mr. Tyler. Mr. Tyler.
Tyler:
Just one question. You suggest that if there are
funds out of general revenues, there would be no restraint. Since we are
continuing with the contributory feature to provide two-thirds of the funds,
is that not a built-in restraint?
Miller:
I think that's a fair point, Mr. Tyler, but not as
much. And I was attempting to get across the point that there would not be
as much restraint, not the fact that there would be none. But we need plenty
of restraint. That's part of the trouble that we're in today. There hasn't
been enough restraint. And as I pointed out, you've had a majority of the
Congress focusing attention on the beneficiaries and overlooking those who
are paying the bill, and that's what led to the problem which, I suppose,
had a lot to do with the program we're on this evening.
Dukakis:
Senator, thanks very much for being with us on
THE ADVOCATES. Mr. Rusher.
Rusher:
It is an interesting philosophical point that the
other side makes. Senator Williams made it most clearly. To accept welfare
payments out the general revenues when you really need them is undignified.
The way to solve the problem is to run the whole business through Social
Security, and thereby, it becomes dignified because if Social Security is
paid out of the general welfare, everybody still thinks of it as basically
Social Security and not welfare. This is simply a semantic trick. In order
to make people who need help feel dignified, we are making the entire
recipients of Social Security in America part of the welfare system.
Dukakis:
Thank you, Mr. Rusher. That completes our cases,
and now it's time for your summary.
Rusher:
Tonight's proposal calls for a fundamental change
in the whole philosophy of our Social Security system. No longer will it be
a plan to help America's senior citizens to plan for and pay for a dignified
retirement. Instead, everybody who has retired from the work force is to be
treated as a chronic welfare case, pensioned out of the ever growing taxes
of those who still are working for their living.
I don't think it's fair, and I most certainly don't think
it's necessary. Just permit people to save some of their money while they'll
earning it instead of taxing every nickel of it out of their hides; and then
on top of that be sure that they receive the fair value of what the
government withheld and promised to pay, and they will not need or want Mr.
Tyler's sweet charity. Like every magician, he calls your attention to what
is going on up here. But the trick is really being played down here. Don't
be fooled. Vote, "No."
Dukakis:
All right, Mr. Tyler, your summary, please.
Tyler:
In many ways, this has been a complex discussion,
yet, as in many complex matters, behind the confusion there very often is a
very simple question. Shall the costs of Social Security fall on the
shoulders of the working stiff, or should we reach into general funds,
mainly financed by graduated income tax, so that the well-to-do who live off
unearned income also contribute to a system that is one of the great
strengths of America.
We think that the man who works should pay his share so he
knows that the benefits are a matter of right. We also believe that those
who live on unearned income, like inheritance and dividends, should pick up
a piece of the cost because it is their social responsibility. Vote,
"Yes,"
Dukakis:
Thank you, gentlemen. We've now reached that
point in the program where we ask you, our audience, to participate, and
it's a very important form of participation. What do you think about
tonight's question? Should Social Security benefits be financed in part from
general tax revenues? Send us your vote on a letter or post card, and mail
it to THE ADVOCATES, Box 1973, Boston 02134. The question is an important
one. The Senate Special Committee on Aging is in the process of conducting
hearings on this and related Social Security questions. So make your views
known, and write THE ADVOCATES. We will tabulate them and send them to all
of the members of Congress and to others in the government concerned with
this issue. Remember that address: THE ADVOCATES, Box 1973, Boston
02134.
At the end of December, THE ADVOCATES journeyed to
Yosemite National Park to debate an important question on future policy for
our national park system. And the question was, "Should your use of our
national parks be drastically restricted?" Of the almost 5000 letters we
received on that question, 75 percent said, "Yes, use should be restricted,"
and 25 percent said, "No, our use of our national parks should not be
drastically restricted."
And now, let's take a look at next week's program.
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