Social Security and Me - A Sesquicentennial Odyssey
More than fourscore years ago our fathers brought forth in this nation a pair of institutions, dedicated to the proposition that all men can be made equal. One of those institutions was Social Security, Father FDR, our nation’s leading social insurance program, born on August 14, 1935. The other was me, Father WWK, our nation’s certifiably and completely representative citizen, born on December 29, 1934.
Social Security as originally conceived and implemented didn’t propose to make all men equal, but rather to provide all men (and working women) with subsistence income during retirement. There was considerable initial resistance to the program in this land of fiercely independent people, but this was muted by the sheer number of poverty-stricken old folks during the Great Depression of the 1930s. By the end of the decade, most citizens were supporters of this promise of limited elder relief, which cost employees no more than $30 per year (1% of the first $3,000 of earnings). As for the other institution, my contemporaneous thoughts on the subject were not adequately stored in any medium, and so are lost to this record. It is believed, however, that I was highly dependent at the time.
A sesquidecade later Harry Truman was President and I was a teenager. Social Security had not changed much during the 1940s but was to change considerably during the 1950s. Coverage was extended to farm and domestic workers in 1950, and beyond over the next six years. Maximum monthly benefits rose from $45 in 1950 to $119 in 1960, and disability benefits were added in 1956. The maximum annual tax to employees was still $30 in 1949 but rose to $45 in 1950 and then to $144 in 1960. As for our representative citizen, I got my Social Security card in 1951, and remember it as a pride-worthy event that year second only to earning my driver’s license. I also got my first official job that year, with a paycheck from which were deducted my Social Security “contributions”, which in total for the year were well under the annual maximum of $54.
Lyndon Johnson was President, and I was a fledgling actuary. The big Social Security event of that year was the July 30 birth of Medicare, which probably wouldn’t have happened without the suppression of cost estimates by the President and his allies. For a fascinating 1964 telephone conversation between LBJ and fledgling Senator Ted Kennedy, in which the former protests projections about Medicare costs (saying “the fools had to go projecting it down the road five or six years”), visit Democrats Could Learn From LBJ's Medicare Push.
As for our representative citizen, I paid $175 in Federal Insurance (sic) Contributions (sic) Act taxes in 1964. I also wrote a letter that year to the Los Angeles Times, on October 12 (when I should have been studying for a Fellowship exam), in which I referred to Social Security as a “pyramid club”. I also referred to its proposed expansion, later called “Medicare”, as having the potential to cause a “trillion-dollar deficit” in our social insurance program. The Times’ editors, recognizing “trillion” as a word reserved for astronomers and hyperbolists, changed my reference to “a huge deficit”, but otherwise printed my letter exactly as written, shortly after it was received. My letter gave pause of unrecorded moment within the Beltway, but Social Security was nonetheless expanded as proposed, and a multi-trillion-dollar debt was added to the nation’s balance sheet, if not yet to its political discourse.
Jimmy Carter was President, and during his Administration, I was offered but declined the position of Chief Actuary of Social Security. Perhaps related less to my declination than to the imbalance between benefits and taxes over the years, the Social Security Trust Funds faced depletion in the early 1980s. This potential fiscal disaster led to the formation of the Greenspan Commission, which eventually led to the Social Security Amendments of 1983, which cut benefits somewhat, increased taxes, and took Social Security out of the unified federal budget. The late Bob Myers (see sidebar) was Executive Director of the Greenspan Commission and Bruce Schobel was his assistant; both later were to be Presidents of the Society of Actuaries. Meanwhile, also in 1983, I delivered my Casualty Actuarial Society Presidential Address, entitled Social Insurance and the Casualty Actuary, in which I asked individual actuaries to do their best to promote actuarial soundness in US social insurance programs. I also paid a total of $1,588 that year in FICA taxes.
Bill Clinton was President, and I was in my 32nd year as a consulting actuary and social insurance observer, and commentator. The 1990s saw few significant social insurance changes, but that was not for want of trying by both sides of the emerging political debate. Former Social Security Chief Actuary Haeworth Robertson continued his long campaign to alert the public about multi-trillion-dollar debts by following his 1981 book The Coming Revolution in Social Security with his 1992 book Social Security: What Every Taxpayer Should Know and with his 1997 book The Big Lie: What Every Boomer Should Know About Social Security and Medicare. Not to be outdone, President Clinton in 1993 set up the Task Force on National Health Care Reform, headed by First Lady Hillary Clinton. The Task Force recommendations went well beyond the benefits provided by Medicare and Medicaid (the companion program for the medically indigent) but ultimately were not adopted by Congress (the Constitutional representatives of the public). Social Security was slightly liberalized in the final days of the decade, however, to permit beneficiaries age 65-69 to earn income without a corresponding reduction in their Social Security benefits (this had previously been restricted to beneficiaries age 70 or older).
Your representative citizen was also busy during the 1990s. By 1993, for example, my FICA contributions had risen to slightly over $11,000. That same year I wrote a letter to my grandson, which was published in these pages with the title And Forgive Us Our Debts. In that two-part letter, I asserted that our country was in actuarial ruins, which I described as a home that looks solid from the outside, but that is eaten out by termites from within. I went on to explain that the termites were our politicians, who gained political advantage by promising social insurance and other benefits well in excess of corresponding tax provision, pushing the actuarial deficit off onto future generations. I computed that the Real National Debt at the time, including social insurance and other debt at all levels of government, was about $25 trillion, and that this necessarily implied a declining standard of living in our future. Deciding to try to help do something about this parlous state of affairs, I applied for the job of Chief Actuary of Medicare. I was found by the Clinton Administration to be “highly qualified” for the job but, arguably because I was a victim of height discrimination, I came up short in the final selection process. The decade ended on a high note, however, as I added “beneficiary” to “taxpayer” and “gadfly” on my list of Social Security and Medicare attributes. Recall that I turned age 65 on December 29, 1999, which qualified me for both Medicare and maximum Social Security benefits. My then-eight-year-old daughter also qualified for a monthly income, over the ensuing ten years. Recall further, as noted above, that my benefits were not reduced by my earned income – a liberalization of prior policy that began just three days after my birthday! I had failed in my effort to become part of the solution and was now a major part of the problem.
Barrack Obama is President, while I remain a consulting actuary. Over the first decade of the new millennium, I abandoned my quest to join the federal government, but not my rant against what I perceived to be its excesses. I received the Jarvis Farley Award at the 2007 annual meeting of the American Academy of Actuaries and used the occasion of my acceptance speech to revive my “politicians as termites” analogy, to update my estimate of the Real National Debt to $75 trillion, and to implore actuaries to help stop the fiscal child abuse that is the primary legacy of the governing class. At the beginning of the decade, I wrote an article, published here, in which I traced the cost of government (on a cash basis, but including all levels of government, and as well the costs of compliance with regulations) over the 20th Century. I found that cost to have been about 5% of GDP at the beginning of the century, and about 50% at the end. Ever the actuary, I then applied information about the present to data about the past, yielding a projection for the 21st Century, and an estimate that the cost of government in 2100 would be about 75% of GDP. Eight years later I revisited that article, updated the information and data in its supporting study, and revised upward my projection of the cost of government in 2100 to about 85% of GDP. A year later, last year, I joined with other concerned actuaries to establish the Social Insurance and Public Finance Section within the Society of Actuaries. The Section is open to all concerned citizens, including actuaries who are SOA members as well as those who are not, and including non-actuaries, too. I’m not even sure that you have to be a citizen. Just concerned. Oh, yes – and the Patient Protection and Affordable Care Act became law in March of this year.
Where will we be, Social Security and me, in another 15 years? This is a question made for an actuary, so here goes. Social Insurance and other Publicly Financed federal programs will have managed, through continued fiscal irresponsibility by Congress and the Administration, to bring the federal government to the precipice of insolvency, with all attendant horrors for the public. Your representative citizen will have managed, through late-onset uncontrolled fiscal irresponsibility, to use up every last penny of his money through profligate spending starting at age 75 (and now well underway). The likely public response to both these fiscally irresponsible and hoary institutions is captured well in the cartoon on this page.
Are we doomed?
Probably. But not necessarily. And maybe we actuaries can enlist the public to use their power to stop the fiscal child abuse. We first need to truly understand who put us $100 trillion in debt, and how they did it. We then need to share this understanding with others, and in particular with citizens who aren’t actuaries. In other words, we need to pay heed to the lessons taught us by Bernie and Paul, whose likenesses are shown on this page.