From: Brian Holtz [brian@holtz.org]
Sent: Wednesday, June 08, 2005 8:34 PM
Subject: RE: Candidates - RE: Best LP issue: fascism or entitlements?
Don't we all agree on these following points?

One generation may benefit more than another from SS.
One group of may pay more than another for the same benefits.  Some individuals have received huge windfalls.  Social Security taxes do not always cover the current cost.
 
From the above, I would conclude that  the program was never "pre-funded in the cohort sense" as Brian defines it.
Your conclusion does not follow from the points listed, because you omitted the crucial point: it is not in evidence that a cohort's Social Security benefits have ever been [or would ever have been] financed solely from that cohort's Social Security contributions.
However, the law, as written, should not have resulted in a huge, unfunded, liability 70 years later either.  The law clearly states that Congress will pay the "annual premium" necessary for the program.
There are also laws clearly stating that Congress shall pass a budget before the start of each fiscal year. Just because a law proclaims some alleged hope of its authors does not excuse its authors from responsibility when the straightforward consequences of the law are contrary to that hope.
They will calculate that premium using mortality tables and interest rates.  This funding obligation has nothing to do with tax rates.
It has a lot to do with tax rates, since it was clear from the first year that the enacted tax rates were taken to be the premium schedule. And as I said, this premium schedule had a ramp-up throughout the effective political time horizon. If you know of an actuarially sound pension program with a flat benefit schedule but such an increasing contribution schedule, I'd like to hear about it.
The premium was clearly intended to cover all costs on an accrual basis.
It was clearly intended that Congress should be able to point to the unimplemented and unenforceable language you're pointing to and make the claim that you're making.  If Congress did this in 2005, you'd call it a cynical diversion. Why do you think the Congress of 1935 had more scruples?
The SS law was  passed as a "pre-funded" program in the sense that we should not be owing trillions of dollars now.
To make that statement you must believe one of the following:
 
1) Congresses are in the habit of keeping vague promises to tax current voters so that future voters need not be taxed more, even when the very same Congress in the very same law enacts a tax schedule that does the opposite i.e. tax future voters in order to finance payments to current voters.
 
2) The benefit and contribution schedule that was enacted in 1935 and in effect for only three years would have been actuarially sound over the subsequent hundred years, even in the face of all the unanticipated changes in life expectancy, birth rates, labor force participation, immigration, etc.
 
None of us have the data to justify believing (2). I'm just plain dumbfounded that you could believe (1).  You call it cynical "looting" when subsequent Congresses invest SS's excess receipts in the safest of all possible investment vehicles (T bills), but you take at face value the empty promise of the 1935 Congress to create an actuarially-sound multi-generation government-funded entitlement program.
 
I fear you've been successfully propagandized by the New Dealers who created Social Security. Even if Social Security had by some miracle of politics been successfully scheduled to be pre-funded for a century in the cohort sense, it would still be a socialization of pension savings that we libertarians should vehemently oppose.  I fear you've been misled by your understandable eagerness to find a new crime by current politicians behind the perennial accusations that they are "looting" the SS "trust fund".  The real crime here is just that they are continuing a scheme that from its inception was intra-generationally socialistic and inter-generationally unfair and unsound.  To idolize the "original" Social Security law is to undermine the libertarian case against a program that is vile socialism no matter what form it takes.