Social Security’s illusion of insurance papered over what, for progressives, was the inconvenient fact that worker “contributions” were actually a regressive tax that charged the same fixed amount to the lowest-wage worker and the millionaire. As Mark Levin notes, Roosevelt was emphatic that these taxes had nothing to do with the program’s economic viability or lack thereof. They were, FDR said, “politics all the way through,” enacted “to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits.” Even if the numbers did not add up, the universal sense of entitlement fostered by framing assessments as contributions rather than taxes assured that “no damn politician can ever scrap my Social Security program,” as FDR presciently put it. Mark adds Milton Friedman’s explanation that presenting Social Security as insurance was a “fiction” preserved by the “accounting sleight-of-hand of a bogus trust fund.”
Though Radosh is still peddling the “insurance” Kool-Aid, the Roosevelt Justice Department was forced to abandon it 76 years ago, when the constitutionality of this government-mandated “insurance” program was challenged. Social Security did not really involve insurance contributions, FDR’s lawyers told the Supreme Court; they were just taxes like any other paid into the treasury generally — “The tax moneys are not earmarked, and . . . Congress is at liberty to spend them as it will.” It was on that representation — not on the Radosh portrayal of “funds taken from [workers’] own paychecks” earmarked for their retirement — that the justices upheld the program in Helvering v. Davis.
You’ll notice the eerie similarity to Obamacare: the nation gulled into believing an ambitious welfare program was constitutionally suspect insurance regulation, only to have the Supreme Court sustain it as taxation — despite the president’s contrary insistence.