Some of the problems of the benefit formula will be eased as the years go by, while a few will be accentuated. There are no inequities within the system that seem likely for some time to come to cause serious complaint. Obviously, the amendments of 1954 are no more the last word on the benefit structure than were the amendments of 1939, 1950, or 1952.
Many students believe that a part, perhaps one third, of the cost of old-age insurance ought to be met from general revenues rather than from regressive pay-roll taxes. Particularly, they question the equity of imposing on employers and employees the whole burden of the liberal benefits paid while the system is still young to those workers retiring within a few years after entering it, whose earnings largely antedated the imposition of the taxes. The present condition of the federal budget, on the other hand, argues strongly against any large contribution from general revenue, while the present dominance of progressive taxation has weakened the case for a further shift in that direction. Provision for such a contribution, moreover, especially if the contribution were postponed until it should be needed for the payment of benefits, would inevitably weaken the assurance we now have that the money will be available when that time comes.
At any rate, Congress reverted in 1950, and adhered in 1954, to the position it had taken originally but had seemingly abandoned in the 1940's, that the system ought to be self-supporting on the basis of pay-roll taxes alone. If conditions or opinions change, it will never be too late to scale down the pay-roll taxes and substitute other sources of finance.
Estimates of cost and of the adequacy of financing are necessarily far from precise, for they involve projection not only of demographic factors such as rates of birth, death, and marriage, but also of levels of employment, wage rates, age of retirement, interest rates, and many other factors. In the nature of the case, all that the principle of financial adequacy can mean is that at any given time the probabilities favor there being a sufficiency of funds to pay the benefits. Within the limits imposed by this element of uncertainty, however, resolution to adhere to a fully financed system affords an important safeguard against undue liberality of benefits, for which some political forces will always be at work.
Relatively small increases in benefits may be justified as falling within the range of actuarial uncertainty, but no large increase can be made without raising the taxes or frankly abandoning the principle of financial adequacy. The debate whether benefits for extended total disability should be added to the system, for example, can be kept in balance only if, at the same time it considers such benefits, Congress considers also the added taxes that would be needed to pay for them.
Perhaps the most controversial of all questions about old-age and survivors insurance has to do with the timing of the collection of pay-roll taxes and the accumulation of a reserve for future use. The question has been complicated by the injection of an argument that the reserve is fictitious and does not serve its purpose because the government spends for current expenses the money that is put in the trust fund and gives in exchange only its I.O.U's.
Attacks on the form of the reserve—that it is a "fraud" and a "hoax," that it involves "double taxation," and the like—are demonstrably false and were unanimously rejected by both the distinguished advisory councils that studied the social security system in 1938 and 1948. The currency which constant reiteration gave to these arguments seems to be on the wane.
If old-age and survivors insurance were operated by an entity separate and apart from the government—by a private corporation, for example—probably no one would ever have questioned the propriety of investing in government bonds the funds it did not need for immediate expenditure. The fact that the proceeds of those bonds would be spent for current operations of the government, like the proceeds of bonds sold to insurance companies and others, would be accepted as normal and proper. There would be no question raised about "double taxation": social security contributors would be seen as paying the cost of old-age and survivors insurance and general taxpayers as paying the general cost of government, and the two would not be confused. Like the man who buys a private insurance policy, the social security contributor would have to pay something as taxpayer toward the servicing and redemption of the government bond in which his insurance payment had been invested, but there would be no more double taxation in the one case than in the other.