Did Lyndon Johnson Steal Social Security Trust Fund?

The debate over social security reform contains a number of myths that have been accepted primarily by volume rather than fact. One of the most common legends in the social security debate suggests that President Lyndon Johnson (LBJ) stole the trust fund in order to pay for Vietnam.

The Social Security Administration responds directly to this request. The Social Security Trust Fund has never been “put into the general government fund”. For this myth to be a fact, it would take a 50-year conspiracy that crosses administrations, political parties and ideologies. The only word in English to describe this suspicion is crazy.

Yet this belief about LBJ is so widespread that the Social Security Administration included it in its internet myths page. And the public is not an isolated conspiracy cult. For example, former Senator Jim DeMint wrote in one of his books Now or never, “The raid on the Social Security Trust Fund was a precedent set in 1968 by another progressive president, Lyndon B. Johnson, to help pay for the Vietnam War. “

The myth seems to be linked to LBJ’s proposal to move Social Security into the federal budget. In short, yes LBJ recommended that the budget process include social security income and expenditure. No, his recommendation did not actually transfer money from Social Security. You might think of this distinction as filing a 1040 jointly with a spouse. While Form 1040 reports the income and expenses of both spouses, it does not move money between accounts.

“A presidential commission made up of prominent congressional tax leaders and other prominent Americans has recommended this year that we take a new approach to the budget. I am implementing their recommendations in this year’s budget. This budget therefore covers for the first time precisely all federal spending and all federal revenues, including for the first time in a single budget $ 47 billion from social security, medicare, highways and other trust funds.

~ State of the Union 1968

This myth unfolds over several layers. LBJ’s term as president expired before Social Security was incorporated into the unified budget process. There is no historical record of money improperly flowing out of the Social Security Trust Fund. And even though there was a paper trail of the money moving, the amounts in the trust fund during LBJ’s day were relatively very small.

Back then, Social Security was a pay-as-you-go system, leaving LBJ with almost nothing to steal. Prior to 1983, the excess cash collected by the system in one year peaked at $ 5.5 billion in 1969, which is roughly $ 37.5 billion in today’s currency. At the time, the whole Trust Fund balance was less than $ 29 billion, about $ 190 billion in 2014 dollars. In contrast, the Trust Fund is now worth about $ 2.8 trillion and generates over $ 100 billion in interest each year.

Beyond denial by the Social Security Administration, Snopes rules out this possibility. FactCheck rejects this possibility. All of these sources basically come to the same conclusion: the process that governs the movement of money has not changed since 1939. When payroll taxes exceed the cost of benefits, excess cash is invested in government securities. It is no different from a private pension which buys government securities, only the government gives social security slightly better conditions.

Millions of people depend on social security. The system has massive financial imbalances. Yet the nation is leading the debate in clichés and hyperbole such as the more you type, the fairer you are.

© 2021 Brenton Smith. All rights reserved. This article may not be reproduced without the express written consent of Brenton Smith.

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