Social Security: A Debt-Threatened Dream

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Security. The system had to be funded entirely by a payroll tax levied half on employers and half on workers, so that it could be presented to the nation as a sort of contributory insurance plan. To this day, paycheck stubs identify Social Security taxes withheld from a worker's wages as FICA—for Federal Insurance Contributions Act—deductions.

The retirement program set up by the Social Security Act of 1935 was modest. It covered workers in commerce and industry only (leaving out the self-employed, farmers, service workers and government employees), plus their spouses and dependents. Taxes, collected beginning in 1937, were set at 1 % of the first $3,000 of a worker's pay, a maximum of $30 a year, with a matching levy on the employer. Benefits initially averaged $22.60 a month. Those were moderate sums even then, and designedly so. Social Security, as Roosevelt made quite clear, was not intended to guarantee a comfortable retirement; it was meant to ward off destitution. Said F.D.R. while signing the law: "We can never insure 100% of the population against 100% of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family . . . against poverty-ridden old age." It was a point that his political successors would have done well to remember, and most certainly did not.

Congress began trying to provide old-age insurance for something close to 100% of the population as early as 1939, before the first Social Security benefits were paid. It decreed that if a pensioner died, benefits would continue to be paid to the widow and dependents. Since then, coverage has been steadily expanded to include farm and domestic workers; employees of state and local governments and nonprofit organizations like hospitals; self-employed people, including doctors and lawyers; members of the armed forces; even ministers and members of religious orders, so long as they do not take vows of poverty. Retired millionaires collect, as well as laborers; benefits go to almost anyone who has ever paid Social Security taxes and to some people who never have. In recognition of their important role in society, housewives who have not worked outside the home and thus never paid into the system collect benefits equal to 50% of those earned by their husbands.

In time, whole new programs were added. In 1956 Congress started payments, financed by Social Security taxes, to disabled workers, and in later years it greatly liberalized the definitions of who could qualify. Though the eligibility rules were tightened last year at Reagan's request, the program costs $17.7 billion a year. In 1965 the Medicare program was enacted to help cover the hospital and medical bills of people 65 or older. Hospital bills are paid out of a portion of Social Security taxes assigned to a separate trust fund; insurance to pay doctors' bills is financed by voluntary contributions from the elderly who elect to sign up. Current cost of the compulsory Medicare program to Social Security: $34 billion annually.

An especially important expansion began in 1956, when Congress permitted women to retire at 62 rather than 65, on 80% of the standard pension; men were allowed to do the same in 1961. Today two-thirds of all Social Security pensioners retire before the "normal" age of 65. Although