The Hidden History of Social Security

Social Security is in the news. People are finally telling the truth: It’s a government sponsored Ponzi (Pyramid) scheme. In the beginning, the costs of Social Security were not that great and not everybody was in the system. In fact, Congress had exempted itself. Most federal and state workers were not in the system. Public school teachers were exempt. They could opt for a private system. Members of Congress had their own private government (taxpayer)-funded system. This didn’t change until 1984. Compared to today, the costs of Social Security were small. Those in the system paid two percent (employee and employer pay-in combined) on $3000 per year for a total of $60. Now it’s nearly 12.5 percent on more than $106,000 per year.

According to the Social Security board of trustees, there were 42 “covered workers” per Social Security beneficiary in 1945. For every person receiving benefits, 42 people paid for that single recipient. Seemed like magic, except that few people anticipated the “birth dearth,” a decline in family size, legalized abortion, increased SS benefits, a larger recipient pool, and that taking money from people to pay other people is immoral. But we’re talking about “government funding.” Immoral is its middle name.

Since 1945, the number paying into the system has changed dramatically:

There were only 1.75 full-time private-sector workers in the United States last year [2010] for each person receiving benefits from Social Security, according to data from the Bureau of Labor Statistics and the Social Security board of trustees. That means that for each husband and wife who worked full-time in the private sector last year there was a Social Security recipient somewhere in the country taking benefits from the federal government.

Most Americans don’t know much about the financial structure of Social Security, and they also don’t know much about its history. Here’s just a little background. Take it for what it’s worth.

In William L. Shirer’s book The Rise and Fall of the Third Reich we learn the origin of Social Security policies and the effect they had on the German people. Social Security was engineered by German Chancellor Otto Von Bismarck in the 19^th century. His policies gradually made the German people “value security over political freedom and caused them to see in the State, however conservative, a benefactor and a protector.”[1] Between 1883 and 1889 Bismarck put through a program for social security far beyond anything known in other countries at the time. It included compulsory insurance for workers against old age, sickness, accident and incapacity, and though it was organized by the State it was financed by employers and employees. Sound familiar? This is American-style Social Security!

Adolf Hitler took full advantage of the German state of mind and Bismarck’s early progress in turning the nation into a model of socialist reform. Hitler remarks in Mein Kampf, “I studied Bismarck’s socialist legislation in its intention, struggle and success.”[2] It was Hitler’s social security policies and promises that helped get him elected.

Hitler was not alone in his admiration of Bismarck and what he was able to accomplish. FDR borrowed Bismarck’s socialist agenda and created what is now known as the Social Security System. Bismarck said that “the State must take the matter in hand, since the State can most easily supply the requisite funds. It must provide them not as alms but in fulfillment of the workers’ right to look to the State where their own good will can achieve nothing more.”[3] Roosevelt and his admirers agreed. P. J. O’Brien, writing in Forward with Roosevelt, links Bismarck’s social policies with those of Roosevelt: “[The quotation by Bismarck] might have been lifted out of a speech by President Roosevelt in 1936, but the Iron Chancellor uttered it in 1871.”[4]

1. William L. Shirer, The Rise and Fall of the Third Reich (New York: Simon and Schuster, 1960), 96, note. [↩]
2. Shirer, The Rise and Fall of the Third Reich, 96, note. [↩]
3. Quoted in P. J. O’Brien, Forward with Roosevelt (Chicago: John C. Winston Co., 1936), 84. [↩]
4. O’Brien, Forward with Roosevelt, 85. [↩]