FDR vetos Social Security Legislation - 1943

[FreakinDJ]

That headline contradicts most people's view of the history of Social Security, the most visible, surviving legacy of the New Deal. But it's true.

Roosevelt, of course, promoted and signed into law the original Social Security Act of 1935. But that law set up a forced savings/redistribution program for limited portion of the population (* details below the fold). It used the contributions from the participants to set up reserves, and it paid beneficiaries from those reserves. The plan was more or less self-contained. In 1943, President Roosevelt vetoed legislation that would turn Social Security from the forced savings/redistribution program it was set up to be into the pay-as-you-go program that, once his veto was overriden, we know today.

The 1943 debate on this law centered on governance. For Roosevelt, good governance meant continuing the Social Security program as it was originally envisioned--actuarially self-financing. To Arthur Vandenberg and other Republicans, it was clear that Congress was simply using the "reserve fund" as a cover to squander money on pet projects. In their minds, shutting down the "reserve" was just a way of restoring fiscal discipline.

So, in 1939 Vandenberg got Congress to begin payouts in 1940 instead of 1942, and to delay scheduled tax increases until 1942 instead of 1940. The net effect of these changes was to wipe out the notional reserves that had been building up since 1937. (Accelerating benefits and delaying a tax increase was also a pretty good way to get votes.) In 1943, Vandenberg pushed a law that indefinitely canceled further tax increases. Even without any increases, the war had already pushed up Social Security reserves.

http://www.hodakvalue.com/blog/2008/06/fdr_vetos_social_security_legi.html

Thought it was interesting since the Ratpublicans are circulating emails blaming Congressional Democrats for all of Social Security's problems

Nice link to pass along

[rpannier]

1. Thanks for sharing

Hope more people here pay attention to it

[pampango]

2. That is really interesting. I hadn't known that repubs were behind changing

Social Security to a "pay-as-you-go" program from a self-contained "forced savings/redistribution" program that FDR envisioned.

[trotsky]

3. Maybe, but Democrats controlled both houses in 1943, didn't they?

If an FDR veto was overridden, it was done with the help of a lot of Democrats unfortunately.

[pampango]

4. Right. I guess they can share the blame/credit for the shift to

the current form of system. I hadn't known the FDR really envisioned a Social Security trust fund that actually had "forced savings" from each worker in it. I thought he saw it as a "pay-as-you-go" system right from the start.