To understand the context for the debate on Social Security taxes, let us examine a brief history of ‘social security’ in the USA.
In comparison to the other industrialized nations, the United States lagged behind in terms of providing social insurance for their citizens. While the rich industrialists, the robber barons, were certainly part of the blame, the other side had to do with American Protestant work ethic. For the first century of America’s existence land was plentiful; growth and expansion was continual. The consequence was plenty of jobs. Anyone who wanted to work could find a job. Those who couldn’t find work were ‘simply lazy’. The obvious conclusion of these farmers was straightforward: ‘God rewards hard work with prosperity and punishes those who were morally lacking with poverty and indigence.’
Further with 90% of Americans living on single-family farms at the turn into the 20th century - the agricultural economy dominated. This included a self-sufficiency that is lacking in the growing industrial world. The American farmer was reliant only on himself and family for all his needs, while the industrial worker needed an entire society to provide for his needs.
The agricultural attitude was that initiative and industry were all that was needed for material success. Poverty and incompetence were linked. Compassion for misfortune was not part of the mind set of the time. Work hard and you will thrive. God rewards those who work hard and punishes those who are incompetent. American Protestantism, which evolved to nourish this pioneer spirit, came to carry with it this strong element of self-reliance.
This value system was highly applicable to the American pioneer farmer. Those who worked hard -- diligently tending their farm and livestock -- were able to do quite well by themselves -- perhaps clearing more of the surrounding virgin forests for increased productivity. It was easy to see in this society of independent farmers that those who were not as industrious didn’t do as well. Their crops were not as lush; their livestock was not as healthy -- herds smaller -- the amount of acreage in production limited. An ambitious farmer was rewarded materially for his hard work. The lazy farmer might not survive.
Further, the Pioneer farmers living in the wilderness did not need or want government assistance - except to defend them from the indigenous Indian tribes - whose land they were appropriating. The government represented taxes and controls, which we can imagine was resented by the independent-minded pioneer farmers. For the self-reliant American farmers Government assistance for the poor meant rewarding laziness. They worked hard and were rewarded with prosperity. Why should the government help out the poor, who just didn’t work as hard, but could have if they had only wanted to? In many ways this seems to be a reasonable way of thinking for these self-reliant independent pioneer farmers. As mentioned American Protestantism evolved to support these ideals.
While applicable to the pioneer farmer, this ethic is not at all applicable to the industrial worker. No matter how hard the factory worker labors - no matter how many hours he puts in - he can remain in poverty his whole life - and then when he gets old, he can’t work anymore and dies on the street or in a poor house. His poverty has nothing to do with his lack of industry and has everything to do with his station in society. In some ways Marx’s Communist philosophy was an attempt to address this problem by placing the workers at the head of the factory just like the farmer was in charge of his land. Unfortunately running and working a small farm with a few employees is much different than running a huge agri-business or factory.
The early settlers brought English common law with them when they migrated and then conquered America from the indigenous tribes -- just as their ancestors had conquered or been conquered in England many centuries before. As one might suspect these laws tended to favor the employer rights over the employee. This is to be expected. Because landowners and employers tend to be wealthier and hence more powerful than the landless workers, it is they who tend to make the rules and laws of a society even though they are in the minority. Indeed in certain countries the ruler decrees. Laws don’t even exist. As to expected the wealthy and powerful also wrote the early labor rules.
Among the issues dealt with by these laws was the relation between employer and employee. The employer provides jobs, which are voluntarily accepted or rejected by the worker. No slavery or conscription allowed - unless it was for the Royal Navy -- with which the English dominated the world. (Ironically England ruled the world by enslaving the lower classes in their warships. These British sailors were called free men --although they were not free to quit and they weren’t free to refuse service when it was offered them.)
While the worker was free to reject the job if he didn’t want it, he became the slave of the employer if he accepted it. With the job came the hours, the pay, and the risks. In an expanding economy and an endless frontier, this worked pretty well, because the worker simply moved to where the job conditions were best. Also with a growing community there was plenty of competition for labor with healthy competition for pay and benefits.
However with immigrant labor concentrating in big cities, the capitalist/industrialist, as always, focused on profit at the expense of labor. This was natural. With a shortage of labor, benefits and pay naturally rise. Conversely, with an abundance of labor, the job conditions fell - abysmally. It is at this point that government intervention is necessary to protect the worker from the predatory habits of the wealthy.
While the cities and their suburbs were going through industrialization with all the dependency and need for labor rights, most of America in the early 1900s was still living on small farms in small communities - which tended to take care of its own. A place was found for everyone on the farm to do something. The extended family took care of the old and sick. These small communities tended to take care of its own. Thus the predominance of Americans who were living in small agricultural communities within extended families had no need of government assistance. Old age, sickness and disability were taken care of internally. There was no need for government ‘hand outs’ or protection.
The small agricultural communities that dominated that dominated the American landscape took care of the social welfare of their members. The industrialists, who controlled Congress and the Press as always, forever and ever Amen, certainly were not going to extend any benefits to their workers unless it would make them a profit.
Further American Protestantism, dominated by the successful, evolved to support these cultural mind-sets in church. They turned a social phenomenon into a religious philosophy, as tends to always be the case.
The complex of ideas associated with work, wealth, and God resonated with Calvin’s Protestantism, which was a good match for the agricultural communities that early America was based upon. God rewards the industrious with materialism, which shows that they are one of the Elect that he has chosen for Heaven. This is also linked with the Gospel of Wealth, which states that those who are wealthy are God’s Chosen because they are wealthy. Here the linkage is reversed. The first says that God rewards the virtuous with wealth. The second says that God loves and favors those with wealth. This attitude is still prevalent in the USA.
There was another factor in the American psyche that also blocked (and blocks) social protection for the society as a whole. This also harks back to the English Common law, but fits in well with American Protestantism and the agricultural society. This was the notion of pauperism.
A pauper was someone who had to receive government assistance because they were so poor. The receipt of government funds put one in the pauper class. It was a common practice to publicly post the names of paupers. As a pauper one lost certain civil rights, including the right to vote and sometimes even the right to marry. Obviously it was a huge social stigma to become a pauper. In the Protestant frontier farmer mentality of the time, God did not bless a pauper. Hence, the pauper was not one of the Elect who were going to Heaven. Besides the financial stigma there was also the social/political and the religious stigmas with being a pauper.
Wandering beggars were bums, thieves and alcoholics, not religious hermits or monks to be supported by the generosity of the culture. Instead they were pariahs to be shunned and excluded from the most important gatherings. Things have not really changed that much. The beggar is a bum, who ‘should get a job like the rest of us’ -- Not a spiritual seeker who is revered and honored. Tripitaka was a Chinese Buddhist monk who begged on his quest from China to India and back - returning with some important Buddhist scripture for the enlightenment of the Chinese. He might have been beaten up, spit upon, jailed and starved if he had tried that from the East to West Coast of the United States.
“We don’t look to kindly upon bums in these parts. So you might just move on, if you know what’s good for you.”
Therefore when the idea of government assistance for the needy was first suggested it was rejected. Social assistance implied that one was a pauper and therefore not deserving of all the civil rights. According to tradition going back to Anglo Saxon England of King Arthur each person had a designated place in society according to his social position. A pauper was one of the lowest - with a reduced social status. He was less than a full citizen.
This attitude of partial citizenship was nothing new. It hadn’t been that long since only white male landowners could vote - and that was revolutionary - In most of the rest of the world there was no voting at all. Political decisions tended to be made by the consensus of the powerful - depending on army size and alliances. It was only in the early 1800s that non land owners were allowed full citizenship with the right to vote, and only a little later that blacks were granted any citizenship and the right to vote - and only a little later - in the early 20th century - that women were granted full citizenship when they were finally given the right to vote. Many are still fighting presently for full equality for women in our modern culture. The idea of limited citizenship had been an integral part of the Anglo Saxon way of thinking for thousands of years. Indeed the idea of full citizenship for all adults is a very modern or very ancient concept. And many of the powerful still think it is not a good idea.
The poor or working class have never had full citizenship in the sense of having a significant influence on political decisions for the good of the community since the Angles and Saxons invaded England. During the prior Celtic rule the swineherd had full status. Further wandering Druid priests were supported by the generosity of the local citizenry. (At least this is the illusion that has been created.) This changed when the hierarchical society of the Anglo Saxons replaced the egalitarian society of the Celts. In the hierarchical society, most of the times associated with a patriarchy, only the top class has full citizenship. The innate feeling of these Anglo Saxon conquerors of first Great Britain and then Middle North America was that paupers, those receiving government assistance, were only barely citizens, if that. Instead they were thought of as leeches of the state - parasites.
Nobody wanted the social stigma of being a pauper. Therefore any legislation to help the plight of the poor was continually voted down. The agricultural communities felt that the poor would and should be taken care of locally, while the rich industrialist, addicted to materialism - callused to life - emotionally challenged - always afraid of retaliation - living in the constant fear that they had taken more than their fair share and so were at risk from those around them - never able to taste of the clear bliss of Reality because their mirror was so clouded over by Greed - they just didn’t care. Thus the industrialist profit motive combined with the independent pioneer farmer mentality, linked with the fear and social stigma of pauperism, blocked any form of social insurance for decades.
The idea of pauperism was eventually linked with the welfare state. The idea of welfare in the USA is associated with receiving government assistance without working. However globally the idea of a welfare state means a country that tends to the social welfare of all their citizens.
Here in America, the land of the free and home of the brave, we resent paupers, the poor, for receiving assistance from the government. The reason is straightforward. We are addicted to materialism and embrace the materialist mindset. We believe that if we have less money that we will be a little less happy. Government assistance to the poor is linked to rising taxes, which reduces our income and hence our 'happiness'. The underlying belief is that the rich are happiest because they have the most money. Conversely, the poor and indigent are least happy because they have the least money.
“If my rising taxes provide assistance to the poor, I will be a little less happy and they will be a little happier. My happiness and God’s favor is based upon materialism. If I have less, I am not quite as favored and hence not as happy. This is not fair. I worked for my happiness. Why shouldn’t he work for his?”
The Mirror of the Mind is clouded by Person-hood as a Veil of misunderstanding. Materialism doesn’t buy happiness, but helping another human being out of his suffering does. If one is not callused to Life, then helping others brings the greatest joy - because we are really helping our greater Self. However those addicted to self think that the pleasures of money are greater because they are numb to life and need a materialist rush to get a small rise.
One implicit belief that blocks social welfare is that more money brings more happiness. Another implicit belief, which contributes to this prejudice towards those receiving government assistance, is based around the idea that work is bad.
“I have to work and he gets paid for doing nothing. He’s lucky because he doesn’t have to work.”
The internal reality is actually quite different. Most people derive much of their internal satisfaction from working. We might prefer to work less, but our jobs provide the funds for the materialism that most of us participate in. Working also provides a sense of self-esteem. We regularly set achievable goals and fulfill them. Psychologists have found that humans derive their greatest emotional highs from overcoming challenges, not from 'hanging out'. While there are some who can just ‘hang out’, most of us enjoy the challenges associated with contributing to human culture.
Another aspect of work is the social side. We are forced into confrontation and cooperation with others. These interactions, whether pleasant or uncomfortable, provide us an opportunity for personal transformation and growth. The tension propels us forward. There is really no reason for most of us to envy those on welfare who are just hanging out. Those of us who have jobs are the lucky ones.
Americans resisted voting themselves any form of social welfare for a multitude of reasons: the mindset of self-sufficient small farmers, the residuals of English Common Law where the employer reigns supreme, the Gospel of Wealth, Pauperism and the materialist mindset. Despite the massive exploitation going on in the factories of the cities, the bulk of Americans preferred to be independent of government influence. However, the shift from small farms to industrialization was changing the cultural reality.
With the economic turbulence of the Depression -- beginning with the stock market crash of 1929 -- enough Americans began to suffer materially to finally elect a presidential administration committed to worker rights. Franklin Roosevelt in 1935 finally passed his New Deal programs. The working class was given a ‘new deal’. These programs created jobs to stimulate the economy and raise morale of the working class, through the self-esteem of labor, mentioned above,
Further Roosevelt’s New Deal, finally forced the employers to change their ‘accept job with risks’ attitude and provide a safe work place with reasonable hours and a minimum wage for their workers. Employers rarely provide worker’s rights voluntarily. However because workers are the vast majority of the populace everywhere, democratic governments tend to intervene to provide protection for the employee.
In addition to jobs and worker safety, this New Deal legislation also created the Social Security Program. The idea behind the program was to provide ‘social security’ for illness, survivors, and old age. In effect the government was attempting to provide for the social welfare of the citizens. However because of resistance to government assistance, Roosevelt’s Congress voted for a payroll withholding tax to fund these programs rather than taking money from the general fund generated through income taxes. This tax was a way for each worker to be forced into saving for his old age, his survivors, and times of ill health. The initial idea was that each worker contributed to his own ‘social security account’ through contributions from himself and his employer. This is the idea of equity. Contributions are equal to the amount withdrawn for social emergencies and inevitabilities.
However with the concept of social welfare came the idea of adequacy. This was the concept that everyone in the whole United States should be provided with an adequate standard of living. Adequate in this case meant that no one in the United States should die of starvation or lack of health care. It meant that the survivors of a primary breadwinner should be provided for in some way.
Initially the general feeling was that the general population could provide for their own social security, therefore these withholding taxes were set at a rate of 1% and was only applied to the first $3000 of income. The poor would be taken care of from their own contributions. The government was not really providing them any assistance. It was just helping them to save money for themselves and their dependents in case of a premature death or disability. Remember at this time the man was still the primary breadwinner, so his wife also had to be taken care of after he died, whenever that was. Thus the Social Security legislation from the beginning was supposed to be an enforced savings account for the poor.
The Bill passed in 1935; the first taxes were collected beginning in 1937; the first Social Security payments were to begin in 1940. As soon as the withholding began, two phenomena were perceived. First the holding account, the Social Security ‘trust fund’, for these payroll taxes was growing far more quickly than the anticipated outlays, based upon equity. Further it was seen that these equity based outlays for survivors and retirement were inadequate to provide any real social security. On the most obvious level, three years of retirement contributions doesn’t provide much of a pension. Thus before the first payment was made, Congress passed an amendment in 1939, which increased the amount the retiring worker would receive from his Social Security pensions. It also increased the number of people eligible for the funds. Thus while the 1935 act was based upon an equity between contributions and reimbursements, the 1939 act changed the intent to provide a more adequate retirement account for widows and workers. Although these new outlays were greater for the retirees and widows than the breadwinner had contributed, there were so many more workers contributing their payroll taxes to social security that there was more than enough money to go around. Adequacy replaced equity immediately.
Thus from the very beginning the program was plagued with controversy over the issue of equity vs. adequacy. The American public was sold on the idea of equity, while the program immediately shifted to the philosophy of adequacy. This initial confusion betweeen 'equity and adequacy' is but one feature of the Social System that the Media employs to manipulate the sentiments of the public. Whether the resulting propaganda occurred inadvertently or intentionally, doesn’t really matter.
Because of the lack of equity between personal contributions and outlay from the beginning and because of the need for adequate social coverage for retirees, their wives and the disabled, the Social Security system was never quite sound. For instance the average single male retiring in 1975 only paid one third of the money that he received from the Social Security fund. This was possible initially because there were more workers than retirees. For instance in 1950, there were 16 workers supporting one retiree. As late as 1965 there were four workers supporting one retiree. However, because of the lack of equity between contributions and dispersal of funds, in the 1970s the Social Security revenue began to fall behind the outlays for the first time.
Despite the fact that most retirees, since the beginning received far more money than they had paid into the system, the mind set of the American Government was that the ‘Social Security System should pay for itself’. What started as a mandatory retirement program for the working class, shifted immediately to workers supporting their fellow workers in their old age with their taxes.
Many still have the notion that the Social Security is a collective savings account for workers. The reality is that most people receiving Social Security are receiving a form of government assistance, just like people who receive money because they are so poor. However, most people who receive Social Security feel that they have earned their monthly checks because of their tax contributions when they were working. In actuality only a third of the money they receive is from funds that they have donated. The rest is coming from taxes collected from their fellow workers.
Many Americans have a need to feel self-sufficient – perhaps because of our pioneer farmer heritage. We like to feel that we have paid our own way. However, it takes the retirement taxes of three workers to support our Social Security check. There are multiple reasons behind this imbalance. We are living longer; inflation erodes contributions, and Social Security benefits are determined by one’s best years of earning rather than upon one’s total contributions or upon one’s lifetime earnings.
The feel good lie that we want to believe: “My Social Security benefits are generated by my tax contributions that I paid in while I was working. I’ve worked hard and paid my taxes to receive my pension from the government.”
The reality is that we work hard, contributing what is expected of us. And when we retire we expect to receive an amount of money that allows us to live adequately, at least. If we were paid a monthly pension based on our real savings we would starve unless we had another source of income.
From the beginning the Social Security tax rate, the upward limit, and the workers that were covered grew steadily. The growth was very slow at first. It started in 1937 at 1% with a salary cap of $3000 and only covered a limited amount of workers. By 1950 the rate grew to 1.5% with a salary cap of $3,600. By 1975 the rate had risen to 4.25%. Now in 2002 the rate is 7.65% with a cap of some $60K.
Initially these rises were to allow Social Security trust fund to accumulate enough money that it would be able to pay retirement benefits to the retirees and their survivors. The system was supposedly on a pay-as-you go plan. This meant that the working poor, i.e. those making less than the salary cap, paid enough Social Security taxes as they worked to fulfill the payments for the retirees and their survivors that were drawing on the fund. It did not mean that those contributing were expecting to get what they had contributed. They were expecting to get much, much more, especially if they lived a long time.
However in the 1980s even this workers pay-as-they-work for the retirees and survivors had to be abandoned. Basically as long as the population bubble called the Baby Boomers were working there were plenty of workers providing taxes for the retirees, but as soon as the Baby Boomers began to retire there was to be a huge strain on the system with many drawing on it and fewer contributing.
To prepare for this eventuality, in 1983 Congress legislated a gradual but steady doubling in the Social Security tax rate so that savings would be accumulated for the population bubble that was soon to be retiring. After this legislation the Worker’s weren’t just being taxed to pay for the retirees and their dependents. They were now being taxed heavily enough to pay for their own retirement as well. This meant the SS system had to begin saving money for the future. The workers-pay-for retirees as they work was changed to save for the future as well as pay for the past. This meant a huge fund began to accumulate.
On the surface this saving account was a good one but unfortunately the Politicians began drooling over the growing size of this retirement ‘trust fund’. Republican Reagan asked for and was given by the Democratic Congress a huge amounts of money for the Domination Department, er I guess they call it the Department of Defense, - this in a time of peace. Anyway because so much money was allocated for War, there was not enough money for Peace. Not only that there was not even enough money from income tax revenues to balance the budget. Indeed the government was running a huge deficit - which is not a good fiscal policy for long periods of time. To balance their budget the Politicians counted the retirement Savings for the Workers of our fair country as Income.
This is and has been the state of affairs for over a decade now. This pretty much brings us up to the present in terms of Social Security.
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