LBJ ȷȤȲ SȨșȄȷȜ SȇșȎȀȄȋȚƴAȤȨȋȺȇȀ HȨȋȐȇȲ Ȩȧ MȄȃȎȤȲȇȀȃȋȷȤȲȄȤȬ lG Y *G¦ |& *
L yndon B. Johnson, our 36 th president, is remembered for many things, including his traumatic ascension to the presidency in the aftermath of President John Kennedy’s assassination, his pushing the Civil Rights Act of 1964 to the finish line, and his historic sign- ing of Medicare and Medicaid into law in mid-1965. In short, while LBJ is remembered for many actions, one of them, unfortu- nately, stands out incorrectly in the minds of many Social Security critics, specifi- cally those seeking to cast blame for the program’s solvency problems. It goes like this: “There wouldn’t be a Social Secu- rity solvency problem if Congress would replace the money that President John- son stole to finance the Vietnam War.” What Did LBJ Really Do Regarding Social Security Funding? Historically, President Johnson inherited the Vietnam War along with consider- able pushback from a disapproving public concerned about the mounting
loss of life, an unclear political climate, and an enormous drain on the US Trea- sury. Social Security trust fund reserves at that time were considered “off-bud- get,” which meant they were accounted for separately from other areas of the federal budget and, therefore, could not be considered in any attempt to balance the overall federal budget picture. Social Security, in effect, stood apart from all other areas of government spending. This detached accounting caused confu- sion in measuring the country’s fiscal position, a problem that the 1967 Presi- dent’s Commission on Budget Concepts sought to correct by establishing a “unified budget” in which all govern- ment functions were added together to produce a single measure of govern- mental finances. Under this approach, Social Security’s trust fund balances were reflected, but simply from a reporting standpoint. From LBJ’s perspective, this change was a way to ease the pressure. Public cynicism regarding the govern- ment’s handling of finances, especially Social Security money, led to LBJ being unfairly accused of “stealing” the funds.
The important point to note here is that the transfer of Social Security’s trust fund balances from “off-budget” to the unified budget (making them “on-bud- get”) was simply a change in account- ing practice. According to the archives of the Social Security Administration (SSA), the change to “on-budget” status had no effect on the actual operation of the program’s trust funds. In fact, in their archives on myths and misinformation, SSA documents that “there has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government.” As a historical note, President Ronald Reagan, in response to the Greenspan Commission’s recommendation, enacted the Social Security Amendments of 1983, restoring the trust funds to their original “off-budget” status.
Gerry Hafer Social Security Advisor
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