22 Mar 2006 Senate Social Security Demagoguery

The Social Security Choice blog has done an end run on the media near-blackout of the U.S. Senate’s vote against the DeMint-Crapo amendment. The amendment called for an end to continuous raids on what millions of Americans mistakenly believe is a thriving Social Security Trust Fund.

As Deroy Murdock explains here, the “trust fund” is empty. The politicians have spent it.

You’d think a $1.7 trillion dollar shortfall would be worth some attention, but the mainstream press apparently does not agree. A March 20 Google News search for the term “DeMint-Crapo amendment” brought in all of four hits. (One a blog, one a conservative group’s press release, and two conservative journals. Changing the search term to just “DeMint amendment” brought in just two hits.)

This is what’s at stake and how a worthy effort was demagogued by opponents:

Senators Jim DeMint (R-SC) and Mike Crapo (R-WY) offered an amendment last week to the FY 2007 budget resolution that called on the Senate to adopt the following guidelines for future Social Security reform:

If the Committee on Finance of the Senate reports a bill or joint resolution, or an amendment is offered thereto, or a conference report is submitted thereon, that provides changes to the Federal Old Age, Survivors, and Disability Insurance Benefits Program established under title II of the Social Security Act (42 U.S.C. 401 et seq.), by–

(1) requiring that the Federal Old Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund are used to finance expenditures to provide retirement and disability income of future beneficiaries of such program;

(2) ensuring that there is no change to current law scheduled benefits for individuals born before January 1, 1950;

(3) providing the option to voluntarily obtain legally binding ownership of at least some portion of each participant’s benefits; and

(4) ensuring that the funds made available to finance such legislation do not exceed the amounts of the Chief Actuary of the Social Security Administration’s intermediate actuarial estimates of the Federal Old Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund, as published in the most recent report of the Board of Trustees of such Trust Funds, the chairman of the Committee on the Budget of the Senate may make the appropriate adjustments in allocations and aggregates to the extent that such legislation would not increase the deficit for fiscal year 2007 and for the period of fiscal years 2007 through 2011.

The DeMint-Crapo amendment was voted down 46-53. According to Andrew Roth, the following eight Republicans joined Senate Democrats in voting “no”:

Conrad Burns (MT)
Richard Lugar (IN)
Lincoln Chafee (RI)
Gordon Smith (OR)
Susan Collins (ME)
Olympia Snowe (ME)
Pete Domenici (NM)
Jim Talent (MO)

The measure did not receive any serious debate in the Senate. Senator DeMint introduced it, saying, in total:

Mr. President, the amendment I have sent to the desk adds a reserve fund to the budget resolution for Social Security that would allow Congress to begin saving Social Security surpluses for future Social Security recipients.

If the Finance Committee does not report back, then nothing happens. The amendment does nothing to change Social Security — no privatization, no stock market investment, and it does not add to the deficit.

The amendment only creates a budget mechanism to allow Congress to consider ways to begin saving the Social Security surplus.

I suspect most Members of this body, Republican and Democrat, are on record on the Senate floor or in a campaign saying that it is wrong to spend the Social Security surplus on other Government programs.

While we don’t yet agree on how to fix Social Security, every Member and I believe every American knows that it is wrong to continue to spend Social Security taxes on other Government programs.

This amendment would open the door to consider ways to stop spending Social Security money.

I ask for the yeas and nays.

Senator Max Baucus (D-MT) then said:

Mr. President my colleagues are not being fooled. This is privatization of Social Security. Turn to page 29, paragraph 3. It so provides.

We have already gone down the road on privatization of Social Security.

The so-called surplus that the Senator referred to is just to privatize Social Security.

The American public said no to privatizing Social Security. The President has realized that it is a bad idea. The Congress should realize it. It is a bad idea. The AARP sure knows it is a bad idea. I have a letter from the AARP. Let me read from it. They say:

AARP strongly opposes this attempt to resurrect a proposal that the American public has soundly rejected.

This is privatization of Social Security, pure and simple. The Senate should reject it as the American people have rejected it.

I ask unanimous consent that the letter be printed in the RECORD.

There being no objection, the material was ordered to be printed in the Record, as follows:

AARP

Washington, DC, March 16, 2006.
Hon. HARRY REID,
Minority Leader, Capitol Office Building,
Washington, DC.

DEAR SENATOR REID: The Senate will vote on an amendment to S. Con. Res. 83 offered by Senator DeMint to use annual Social Security surpluses to create private accounts. AARP strongly opposes this attempt to resurrect a proposal that the American public has soundly rejected.

AARP believes this proposal has serious consequences for our nation’s overall fiscal health and Social Security’s long-term outlook. Ostensibly designed to ‘stop the raid on the surplus”, [sic] the proposal would still result in the Treasury Department receiving the money to spend on its needs, but the federal deficit and debt would increase by over $700 billion over the next ten years. Our nation cannot afford this unnecessary increase in its already large federal debt, and we should not ask future generations to pay for the added cost.

Social Security faces a long-term financial shortfall that we should address in a timely manner, but private accounts do nothing to address long-term solvency. AARP believes it is time to put aside polarizing ideas that do not work and get serious about securing Social Security so future generations can count on these important benefits.

Sincerely,

David P. Sloane,
Senior Managing Director, Government Relations & Advocacy

Senator Baucus and the AARP used a “straw man” argument to attack the amendment. As the wording of the DeMint-Crapo amendment included above clearly indicates, the amendment requires “that the Federal Old Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund are used to finance expenditures to provide retirement and disability income of future beneficiaries of such program.”

In other words, that Social Security surplus dollars (the funds millions of Americans mistaken believe are sent to a thriving trust fund) must be spent to “provide retirement and disability income” under Social Security.

DeMint-Crapo very clearly does not say, as the AARP and Senator Baucus claim, that such funds must be spent to “create private accounts.” In addition to saying Social Security surpluses must be spent on Social Security, it does two more things: state that scheduled benefits for recipients born before 1950 should not change, and create “the option [for each Social Security participant] to voluntarily obtain legally binding ownership of at least some portion” of their benefits.

“Legally-binding ownership” is not synonymous with “privatization.”

As Deroy Murdock explains:

Americans have no legal claim on the money Uncle Sam theoretically salts away for their golden years.

The U.S. Supreme Court decided this in 1960 in the case of Fleming v. Nestor. Bulgarian immigrant Ephram Nestor was deported in 1956 for being a Communist in the 1930s. After Congress prohibited Social Security benefits for deportees in 1954, Nestor sued. He claimed title to his FICA tax payments between 1936 and 1955, the year he retired. The Supreme Court disagreed: “To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands.”

The Court added: “It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.”

This decision reflected the Court’s precedent in Helvering v. Davis. In 1937, it ruled: “The proceeds of both the employee and employer [Social Security] taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.”

Americans have no legal right to their Social Security benefits, and, apparently, the AARP and Senator Max Baucus like this state of affairs just fine.