The Washington times., 1937-03-18
VANDENBERG
LAUDS HEARST
SOCIAL STUDY

The Social Security act must be
amended to put the old-age pen
sion program on a "pay-aS-you-go"
basis, Senator Vandenberg (R0 OF
Michigan told the Senate yester-
day.
In spirited attack on the re-
serve fund provision of the act,
the Senator predicted this reserve
will reach $4,000 million dollars
in 1880, "the most fantastic and
indefensible objective imaginable"
Fights Reserve Fund
The attack preceded Senate
passage of the Treasury-Post Of
flee bill, passed earlier by the
House. involving expenditures of
$1,505, ,138,287. The measure now
goes to conference.
Singing out provision of the
bill setting aside $500,O00,00O as
a reserve fund for the Social Sc
curity program, Vandenberg as
serted he will seek later to have
it stricken from the Social Sc
curity act.
Vandenberg paid high tribute to
the Hearst newspapers for their
leadership in forming a Non
Partisan Social Security Commits
sion to study all aspects of the
program.
Praises Report
He added:
II have here a copy of the
first report of that nOnpartiSan
commission on their study of the
Social Security Act. 1 am happy
to observe it completely coin
cides with the conclusion which
have reached and which / am
placing before the Senate"
Declaring the reserve fund is un-
necessary. Vandenberg declared
the certain prospect of a reserve
eventually of At billion dollars is
lone of the most fundamental fis-
cal challenges confronting the Gov.
ernment."
Reserve Needless
He continued:
This reserve is needless. In
deed, it actually penalties and
hampers the Objectives of the
pension system by diverting
payroll tax revenues which
otherwise could be used to has
ten and expand the benefit
payments, and to avoid for some
time to come the contemplated
Set-up in the percentage of pay
roll taxes.
"ThiS alternative to the full
reserve Is a candid pay-asyOu-
go system, with only a cOntin.
gent reserve for emergency pur-
poses.
600 MILLION
"MOre than rs million wage
earnerS are registered under
this act. They are paying l per
cent of their annual earnings
and their employers are paying
an equal amount. They are pay
ing more than 600 million dol
lars this year.
"The payroll tax goes up to
3 per cent in 1910, 4 per cent
in 1943, per cent in 1916, to
per cent in 1949, and there
after stays at 6. Benefit pay
ments do not generally start
until January, 1912, and then
on a slim basis.
GREEDY RESERVE
"It is the greedy appetite of
the reserve which eats up a
large portion of these payroll
tax revenues and needleSSly
divertS it from the Social Secu-
rity Act ObjectiveS which it is
presumed to promote.
What happens in 1880? The
OId.age pension fund, with a
reserve of nearly so billion dol
lars in Government securities,
caShes its per cent coupon
and gets S1,5OO, 100000. Con-
greSs in turn raises that 81, 1,5OO,-
OOO,O in taxes. In others words
Gnc ScAAcA dA UdAPoJCA pays SAAAo
interest.
PERMANENT lou.
"The principal of the bonds
Is rarely ever caShed or touched.
Social Security gets a perma-
nent 1. o. u. for 500 million dol
lars. The Secretary of the Treas
ury gets this 500 million dollars
in cash to apply on the general
debt and deficits. In other
words, we use the proceeds of a
gross income tax on labor raised
in the piOus name of Social Sc
curity in order to cushion the
general treasury.
"There are no Government
bonds at the present time sell
ing on the basis of a yield of 3
per cent. MOrgenthau will be
obliged to issue a special 3 per
cent bond tomorrow, at a time
when money in the open market
can be procured on the basis of
IL and 13s per cent"
Vandenberg suggested if the
reserve fund were eliminated, the
2 per cent payroll tax could be
cut to / per cent or the benefit