Evening star., 1936-09-28

0per0tt0n OF tnS SyStem ~ SeUefot
States, a. DeH Gs OF the central
administration In Warrington.
BY BLAIR MOODY.
BY far the most hotly controverted
point Of the social security act b the
huge old-age benefits reserve fund"
And with good reason. for the pay
roll taxes that will total 81, ,000, ,000,.
900 in the next six years start ut
rate double what would be necessary
if the highly questionable reserve
policy were abandoned or modified.
The initial levy Of per cent. spread
equally on employers and employees,
which takes effect January /, would
be / per cent II the Government had
taken the advice given by nearly every
competent authority who had any
thing to do with the program.
This double rate" runs for three
years and then becomes triple the
necessary level and remains "too
high" for more than Q decade, ex-
tracing needlessly from the peoples
pockets hundreds Of millions Of dol
lars which they could be using to
purchase goods, stimulate employ
ment and enjoy life.
Congress took this amazing and
capricious action specifically to pile
up . huge bookkeeping trust fund"
which, in the next 81 years, will reach
the staggering total Of $47 ,000. .000. 600,
nA f,h ~ Anufhin0
more than . ledger-sheet myth. Its
theoretical purpose is to make the
vast system of annuities self sup
porting" but, when you boil it down
to essentials. it becomes nothing more
than an Alice in wonderland device
to enable Uncle Sam to shift his
own I. o. US from one pocket to the
other and imagine himself rich.
Political Grab Bag.
It is, of course, highly desirable,
If it will work, to enable wage earners
and their employers to finance their
own old age and save the general
taxpayer" Pay-as-you-go financing
of q program that costs little now and
staggering sums later reeks with
danger. II . great collective security
scheme such as this cannot pay for
itself within its own tax structure
II the amount of each years tax is
to be juggled around and the size
of the benefits lobbied back and
forth-the conception of . great
insurance company" publicly oper-
sted for the public good, breaks
down, and the whole thing becomes
political grab bag.
But it Is sensible, too, to determine
whether the reserve" plan Of financ-
ing. which involves laying aside large
sums in the early years Of the pro-
gram (only 1927, ,000,00 will be paid
out of the $4,000, ,000, 900 collected in
the first six years., will work out in
practice as 1t does on paper.
The basis Of this scheme Is that,
when the reserve has been built up, it
will remain permanently on the books
Of the Treasury As an asset and will
earn" interest. As benefit payments
jump sharply, this interest would
augment the revenues from the pay
4Ol4 WA oAo PkONC 0u4C1Sut 70 kCCp
the system afloat without calling for
q separate subsidy from general taxa
ton.
Thus, when the program Is in full
swing, only so per cent of the money
disbursed would come from the pay
roll taxes, which would then be run
ming at s per cent. The other 40
per cent, amounting to about 81, 400
100000 year. would be earned" by
the trust fund
But-earned where
TAXPAYER Pays Interest.
The law says the trust fund must
be invested in Government bonds.
And who pays the interest on the
Governments bonds?
That's right, boys and girls, the
taxpayersl
In other words, the wage Garner
would be saved" from paying taxes
to support the program from one
pocket, by being forced to contribute
from the other pocket.
But this system involves not only
absorbing the entire national debt in
the reserve fund, but buying more
Government bonds-by over $I2,-
000, ,000, ,000-than now exist.
In other words, the scheme would
certainly precipitate . brand-new gov
ernmental spending spree, because 1t
would virtually force the borrowing
and spending Of money to jack up
the national debt, so that the Gov
ernment would owe itself enough to
collect enough interest from the tax
payers to make its annuity program
"self-supporting."
Now, when the worker and his boss
dig into their jeans for the pay roll
taxes, they will cough up good, hard
money that they could spend for q
new radio or q pair of shoes. They
will think they are doing 1t 20 the
money can be laid aside for their fu-
ture. But when it gets to Washington,
all that will be laid aside for the
future will be an entry on . ledger
sheet.
The actual money will 60 to swell
the Treasurys current bank balance
and cut down the amount 1t must
borrow, because it would be silly to
pay interest to outsiders when it can
get all it needs from the reserve in
its other pocket.
There are several things we could
do with the reserve" says Arthur j.
Altmeyer, Security Board member.
I'VE could buy in the Government
debt. use the money for general ex-
penses and cut other taxes, or embark
on big public works program and
put the money into permanent i'm
provements."
Time Of Accounting.
But what will happen, then. when
the money has been spent and the
Government is holding . stack Of
its own I. o. us in the reserve fund,
and Joe Spivis, who has been paying
weekly contributions for all these
years, comes around to collect his
annuity? viii he be informed:
Sorry. but we used your money 10
years ago to reduce taxes?
nI.ah -