Evening star., 1937-10-24
Social Security Savings
Used as. General Funds
BY OVEN L. SCOTT.

they are saving against OLD age ana un-
employment really are being used to
finance a big Government spending
spree.
President Roosevelt rightly concluded
that the most salable political commod-
ity is promise to voters of security
against old age and unemployment. To
fulfill this promise, the Government set
up systems of old age and unemploy-
ment insurance, with those systems sup
ported by taxes levied on pay rolls.
On each pay day, more than 25,0O0,-
600 workers are sacrificing some of their
income so that the money can be sent
to Washington to build up what they
have been told are individual savings ac-
counts Employers, likewise, are send
ing along a portion of their total pay
rolls to augment these employe accounts
and are contributing further to build
unemployment reserves. During the
present fiscal year. the Government is
going to get 81, ,263 900 600 from these
sources.
That money is flowing into the Treas
ury, supposedly for safekeeping. Actu-
ally, the cash dollars are merely flowing
into the Treasury and then are Just as
quickly flowing out again to buy battle
ships, to pay w. p. A. workers, to pro-
vide bounties for farmers, to pay Gov
ernment clerks and to take care of the
myriad cash demands on the Treasury.
To represent this cash contributed by
millions of workers, there are some nice
new paper Il. o. US" properly recorded
on the books.
All of this comes in very handy for
President Roosevelt and for Henry Nor
genthau, jr., who handles the Govern
ments accounts. The reason is that
they constantly need more and more
cash and now have a big new supply
readily at hand from the pay checks of
the country's workers. The millions of
contributors-who are not supposed to
get their money back anyway for many
yearS-think that the Government is 60
ing to protect their dollars and so they
look at the I. o. Us and take them at
their face value.
The rude awakening is to come at this
point unless the millions of affected in
dividuals begin to take an interest in
Government finances.
AS it is, Mr. Morgenthau is rapidly
using the pay roll tax dollars and sign
ing II. o. Us" to take their place. This
is something akin to the practice Of
some heads of families who dip into the
baby's savings bank to get spending
money But within the next year many
State unemployment insurance systems
are going to be IN operation and drawing
on the reserves that supposedly are being
accumulated in the Treasury And, in
the years farther ahead, millions Of
workers are going to expect to get back
in the form of old-age annuities the cash
dollars they now are contributing.
When that time comes, unless the
Government has it's financial affairs in
order. with its books balanced, there can
be trouble.
Once the cash is spent, 1t cannot be
spent again and cannot be replaced by
new cash unless the Government bor-
rows the money. or levies new taxes to
get it, or decides to run the printing
presses. Within the next IL years, pay
roll tax money will be flowing into the
Treasury at the rate of three billions a
year, if present plans are followed. The
accumulations are scheduled to run up
very rapidly to huge figures.
The idea underlying the social security
system has been that these contributions
would go into Government securities,
bearing per cent annual interest. AS
the money flowed in, the Government
would buy up outstanding bonds, there
by shifting ownership of the national
debt from the banks and insurance COM
panies into the hands of the millions of
workers and employers.
But, in practice. the cash that has
been flowing into the Treasury has been
spent to do the things that the President
wanted to do and wholly new securities
have been created to represent the debt
owed to the workers and employers. In
other words, instead of transferring
ownership of the debt to pay roll tax
payers-as Congress intended-new debt
has been created.
This is due to the fact that Mr.. Roose-
velt keeps finding, year after year. that
he is unable to get the regular Federal
income UP to a point where it will cover
the ordinary Federal Government outgo.
Last January he told the people that he
thought he could turn the trick before
next July l. But, last Tuesday, he ad-
mitted a mistake in calculations, owing
to acts of Congress, and estimated that
the Treasury would be short at least
S7OO, 100000 With Congress returning,
even that figure may be a bad under
estimate.
So the savings of the workers and en-
ployers are being used to finance this
deficit and will continue to be used to
finance any future deficit.
The meaning of all of this is that-in
the absence of an early budget balance
the millions of workers saving against
old age and unemployment are going to
find themselves out in the cold. They,
as much as bankers and other investors,
now have a direct dollars-and-cents
stake in sound Government finance.
That fact is beginning to make an i'm
preston on high Government officials
The reason is that, if these workers sud-
| denly wake up to the fact that their
savings are being dissipated, after they
have been forced by the Government to
do the saving on the promise of oldage
and unemployment protection, the polit-
| ical kickback can be tremendous.
| In other words, powerful new lobby
| may be in the making in Washington
| based upon the direct interest that the
| a balanced Federal Government budget
X \ \
But isn't there chance for an actual
| early balance in the Governments
| budget?
One important official, who is in close
| touch with the Governments financial
| problems, said privately this past week
l %I.1@ In rrroc hiatt inc