🚀 go-pugleaf

On Mon, 4 Jul 2005 21:14:47 +0000 (UTC), Merlin Dorfman
<dorfman@green.rahul.net> wrote:

>>>    But that's really beside the point.  The point is that the
>>>purpose of Social Security is to provide a minumum guaranteed
>>>income to everybody, regardless of the state of the economy, or the
>>>state of the stock or bond market, or the quality of investment
>>>choices made by the individual. 
>
>> And again you are wrong.
>
>     Then correct me, O wise one, what is the purpose of Social
>Security?

	
Roosevelt's Social Security Plan
Included Private Accounts
Government/Noel Sheppard
May 13, 2005 - Franklin Delano Roosevelt�s original Social Security
plan included provisions that would have allowed people to make
personal investments not altogether different from the private
accounts that President Bush is currently proposing. In fact, this was
one of three �necessary principles� in FDR�s legislative package
presented to Congress on January 17, 1935:

"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.�

Here�s how it would have worked as outlined by Edwin Witte, Executive
Director of FDR�s Committee on Economic Security:

"The voluntary system of old-age annuities we suggest as a supplement
to the compulsory plan contemplates that the Government shall sell to
individuals, on a cost basis, deferred life annuities similar to those
issued by commercial insurance companies; that is, in consideration of
premiums paid at specified ages, the Government would guarantee the
purchasers a definite amount of income, starting at 65, for example,
and continuing throughout the lifetime of the annuitant.�

For those who are unfamiliar with the term �annuity�, these are
basically certificates of deposit offered by insurance companies
rather than banks. You give your money to an insurance company for a
predetermined period of time in exchange for a minimum guaranteed
interest rate that will be paid back to you -- �the annuitant� -- as
monthly installments in the future.

In this case, what FDR proposed was that along with the funds each
employee was required to contribute from his/her paycheck, workers
could make periodic investments that would give them certificates
redeemable for monthly payments upon their retirement. These
certificates were referred to as �annuity bonds,� and, much like
Bush�s private accounts, could be redeemed by the annuitant�s spouse
or beneficiaries upon his/her demise.

Unfortunately, this provision -- initially referred to as �Title V� --
was deleted from the final bill that came out of Congress due to
pressures exerted by the insurance industry.

For somewhat obvious reasons, insurance lobbyists felt that this plan
might cut into their industry�s ability to sell such policies, as the
government would suddenly become a direct competitor. Given the poor
health of financial companies after The Crash, it is understandable
that Congress didn�t want to add to this sector�s difficulties, and
therefore yielded to such pressures.

That said, the salient point here is that this concept of individuals
being able to invest their own funds exclusively for their benefit (or
for that of their estate) outside of the pay-as-you-go facet of the
program was part of the original Social Security plan.

Furthermore, as the initial monthly cap of the proposed annuity
distribution was fixed at $100, this was intended to represent a very
significant percentage of one�s future benefits. For instance, the
first monthly check distributed by Social Security was $22.54, or less
than a quarter of what one could have received from an annuity bond.

Given this, one has to wonder why the Bush administration has not used
this piece of history to engender support for private accounts. After
all, if the American people were aware that FDR wanted the government
to make such investment alternatives a part of Social Security, maybe
a greater percentage of the nation would favor implementing it now.

Beyond this, wouldn�t such a revelation be extremely embarrassing for
reform opponents? If the most highly regarded Democrat of the 20th
century wanted to offer citizens the option of investing funds for
their own future benefit under the umbrella of Social Security, why is
today�s iteration of this party not only eschewing such a concept, but
spending all of its political capital to defeat it?

Now in fairness, annuity bonds are not completely analogous to some of
the risk-carrying options proposed for private accounts such as
equities. However, what most folks don�t understand in this debate is
that the overwhelming majority of Americans would likely choose the
guaranteed interest option in their private accounts regardless of
what other alternatives were available.

As a result, if private accounts ever became a reality, most people
would, in effect, end up investing in an annuity that is quite similar
to what FDR originally proposed.

With this in mind, the president should consider offering annuity
bonds as a private account option. Then, he could state that he was
just reviving a part of the plan proposed by the Father of Social
Security 70 years ago that had been deleted due to the political and
economic pressures of the day.
"Considering the events of recent years, 
 the world has a long way to go to regain
 its credibility and reputation with the US."
                                 unknown