Introduction

F. D. Roosevelt

In 1935, President Franklin D. Roosevelt promised the American people that the new Social Security Tax would be invested at 3 per cent interest, so that, by 1983, the tax could be ended and returns on the investments would guarantee a retirement income for all Americans. In 1999 that tax, which was initially just 1 percent of the paycheck, has grown to 7.65 per cent of the first $72,600, with a matching contribution from the employer of an additional 7.65 per cent.

Each year, benefits of the Social Security System are paid from current revenues. In every year since the system began, the Social Security System has collected more money than it has paid. The difference between what the Social Security System pays in benefits and what it collects in taxes is surplus revenue. In 1998, the apparent U.S. budget surplus was actually the difference between what the Social Security Administration collected in taxes and what it paid in benefits. President Roosevelt promised that this surplus would be invested to grow into a fund that would assure a retirement income for all Americans.