Archive for Wednesday, November 3, 1999


November 3, 1999


There is an old con game called "bait and switch." It is simple: the con artist puts a highly desirable item up for sale. A willing buyer appears. As the buyer is distracted, the seller removes the valuable item and substitutes in its place a cheap imitation which he then conceals in a bag or other covering. The buyer leaves thinking that he has purchased the valuable item. When he returns home, he discovers that he has been fooled. The con artist is long gone and untraceable.

Con games such as this will, for the average man or woman, earn a prison sentence. But what do you do when it is the Congress of the United States which is playing bait and switch upon the American people?

For the past year we have heard many in Congress and in the White House speak of the unprecedented budget surplus. Only a few honest and brave souls have made it clear that this surplus is an illusion; it doesn't exist except in the minds of government accountants. There is a surplus only if you ignore the growing deficit in the nation's Social Security reserves. Now the Washington establishment is floating the idea that radical surgery will have to be done to save Social Security. The most frequently proposed notion is that the retirement age under the system will have to be raised to 70 or more.

Social Security is a program with its roots in Franklin Roosevelt's New Deal. The Depression had left millions of Americans out of work, with little prospect for re-employment. Very few businesses provided retirement benefits to their workers. This meant that American workers had to continue working until they died -- if they could keep their jobs, or they would starve.

The Roosevelt administration sponsored legislation to provide a "safety net" for workers and permit them to retire at a reasonable age with the assurance that they would have enough income to survive. But this was not a government hand-out. On the contrary, the system was set up so that every worker would contribute to the Social Security Trust Fund. The underlying assumption was that the Social Security Administration would invest those contributions so as to fund workers' retirement benefits. The retirement age was set at 65.

Unfortunately, the government never took its fiduciary responsibility for Social Security as seriously as necessary. Although funds were not adequately invested and premiums were not raised so as to fully cover pay-outs, benefits continued to be paid as though they had been.

By the 1980s, it was clear that Social Security had failed as an investment scheme, and contributions were considered tax payments, i.e., money paid into the system was immediately paid out as retiree benefits. This was a prescription for system bankruptcy. In 1983, Congress passed legislation gradually raising the retirement age to 67 (in 2027) in order to stave off this disaster. Now Washington wants to raise the retirement age again to 70. Was there ever a clearer case of bait and switch?

Almost all working Americans must pay Social Security. Is it not right, then, that we should expect Washington to handle those funds in a safe, conservative and appropriate manner? Should we not be entitled to expect them to keep the promises they make? If the federal government cannot maintain the system as it was supposed to be maintained, then we need to explore alternatives.

Perhaps Social Security should be voluntary. Perhaps it should be replaced by a different system. But it is time, in my opinion, to have an open and honest national debate. It is time for Congress to stop playing bait and switch with America's retirement funding.

-- Mike Hoeflich is dean of the Kansas University School of Law.

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