My, how Social Security has changed and become so costly and unsustainable.

How Social Security has changed from the days of FDR it's creator. That's pointed out in this column by Robert Samuelson.  He thinks FDR wouldn't be supportive of all that Society Security has become today.

Would Franklin Roosevelt approve of Social Security? The question seems absurd. After all, Social Security is considered the New Deal’s signature achievement. It distributes nearly $800 billion a year to 56 million retirees, survivors and disabled beneficiaries. On average, retired workers and spouses receive $1,839 a month — money vital to the well-being of millions. Roosevelt would surely be proud of this, and yet he might also have reservations. Social Security has evolved into something he never intended and actively opposed.

It has become what was then called “the dole” and is now known as “welfare.” This forgotten history clarifies why America’s budget problems are so intractable.

FDR didn't support the "pay as you go" of  today's workers paying for today's retirees.

When Roosevelt proposed Social Security in 1935, he envisioned a contributory pension plan. Workers’ payroll taxes (“contributions”) would be saved and used to pay their retirement benefits. Initially, before workers had time to pay into the system, there would be temporary subsidies. But Roosevelt rejected Social Security as a “pay-as-you-go” system that channeled the taxes of today’s workers to pay today’s retirees. That, he believed, would saddle future generations with huge debts — or higher taxes — as the number of retirees expanded.

Discovering that the original draft wasn’t a contributory pension, Roosevelt ordered it rewritten and complained to Frances Perkins, his labor secretary: “This is the same old dole under another name. It is almost dishonest to build up an accumulated deficit for the Congress . . . to meet.”

That changed however in the 1940s and 50s.  

But Roosevelt’s vision didn’t prevail. In the 1940s and early 1950s, Congress gradually switched Social Security to a pay-as-you-go system. Interestingly, a coalition of liberals and conservatives pushed the change. Liberals wanted higher benefits, which — with few retirees then — existing taxes could support. Conservatives disliked the huge surpluses the government would accumulate under a contributory plan.

All this is well-told in Sylvester Schieber’s “The Predictable Surprise: The Unraveling of the U.S. Retirement System.” Schieber probably knows more about American retirement programs than anyone. He has advised the Social Security system, consulted with private firms and written widely on the subject. His book shows how today’s “entitlement” psychology dates to Social Security’s muddled beginnings.

He notes that Americans falsely think they have a right to social security benefits because they earned it.  It's their money they're getting back.

Millions of Americans believe (falsely) that their payroll taxes have been segregated to pay for their benefits and that, therefore, they “earned” these benefits. To reduce them would be to take something that is rightfully theirs. Indeed, Roosevelt — believing he had created a contributory program — said exactly that:

“We put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions. . . . No damn politician can ever scrap my Social Security program.”

What we have is a vast welfare program grafted onto the rhetoric and psychology of a contributory pension. The result is entitlement. Unsurprisingly, AARP’s advertising slogan is “You’ve earned a say” on Social Security. The trouble is that contributions weren’t saved. They went to past beneficiaries. The $2.6 trillion in the Social Security trust fund at year-end 2010 sounds like a lot but equals slightly more than three years of benefits.

The problem is the current system isn't sustainable.

With favorable demographics, contradictions were bearable. Early Social Security beneficiaries received huge windfalls. A one-earner couple with average wages retiring at 65 in 1960 received lifetime benefits equal to nearly 14 times their payroll taxes, even if those taxes had been saved and invested (which they weren’t), calculate Eugene Steuerle and Stephanie Rennane of the Urban Institute.

But now, demographics are unfriendly. In 1960, there were five workers per recipient; today, there are three, and by 2025 the ratio will approach two. Roosevelt’s fear has materialized. Paying all benefits requires higher taxes, cuts in other programs or large deficits. Indeed, the burden has increased, because it now includes Medicare, which is also viewed as an entitlement.

Although new recipients have paid payroll taxes higher and longer than their predecessors, their benefits still exceed taxes paid even assuming (again, fictitiously) that they had been invested. A two-earner couple with average wages retiring in 2010 would receive lifetime Social Security and Medicare benefits worth $906,000 compared with taxes of $704,000, estimate Steuerle and Rennane.

By all rights, we should ask: Who among the elderly need benefits? How much? At what age? If Social Security and Medicare were considered “welfare” — something the nation does for its collective good — these questions would be easier. We would tailor programs to meet national needs. But entitlements are viewed as a higher-order moral claim, owed individuals based on past performance. So a huge part of government spending moves off-limits to intelligent discussion.

We can only imagine how Roosevelt would view this. He consistently advocated a fully funded Social Security and used his second veto on a 1942 tax bill that delayed higher payroll taxes. But Congress overrode the veto, and Roosevelt was preoccupied by World War II.

Giving health care and retirement decisions back to individuals is both a racial and conservative idea.

The whole debate over health care bills in Congress is really a microcosm of the broader debate over the appropriate role for government in American society. Obama, who certainly has a more collectivist vision for the role of government, has run up against resistance from the American people who are concerned about expanding government control of health care and the cost. And the massively growing government debt and economic problems are also likely to act as a brake on other efforts to expand government control and involvment in other areas as well.

What's the alternative to this collectivist, nanny state vision? It's a return to individual responsibility and a more limited government. One person who's raising the standard for an alternative vision of government is Congressman Paul Ryan.

He wants to return control and responsibility for health care - Medicare and Medicaid - and retirement - Social Security- to individuals rather than letting the government continue to run the costs through the roof and lead these programs to the cliff of bankruptcy.

As Michael Gerson wrote in a column printed in today's Star Tribune:

The new era of Democratic bipartisanship, like cut flowers in a vase, wilted in less than a week. During his question time at the recent House Republican retreat, President Obama elevated Congressman and budget expert Paul Ryan, R-Wis., as a "sincere guy" whose budget blueprint -- which, according to the Congressional Budget Office (CBO), eventually achieves a balanced budget -- has "some ideas in there that I would agree with." Days later, Democratic legislators held a conference call to lambaste Ryan's plan as a vicious, voucherizing, privatizing assault on Social Security, Medicare and every nonmillionaire American. Progressive advocacy groups and liberal bloggers joined the jeering.

From a political perspective, Democratic leaders are right to single out Ryan for unkind attention. He is among their greatest, long-term threats. He possesses the appeal of a young Jack Kemp (for whom both Ryan and I once worked). Like Kemp, Ryan is aggressively likable, crackling with ideas and shockingly sincere.

But unlike Kemp -- who didn't give a rip for deficits, being focused exclusively on economic growth -- Ryan is the cheerful prophet of deficit doom. In a few weeks, he expects the CBO to report that, in the 10th year of Obama's budget, the federal government will "spend nearly a trillion dollars a year, just on interest! This traps us as a country. Inflation will wipe out savings and hurt people on fixed incomes. A plunging dollar will make goods more expensive. High tax rates will undermine economic growth. It is the path of national decline."

But unlike other deficit hawks, Ryan courageously -- some would say foolhardily -- presents his own alternative. His budget road map offers many proposals, but one big vision. Over time, Ryan concentrates government spending on the poor through means-tested programs, patching holes in the safety net while making entitlements more sustainable. He saves money by providing the middle class with defined-contribution benefits -- private retirement accounts and health vouchers -- that are more portable but less generous in the long run. And he expects a growing economy, liberated from debt and inflation, to provide more real gains for middle-class citizens than they lose from lower government benefits.

Ryanism is not only a technical solution to endless deficits; it represents an alternative political philosophy. Democrats have attempted to build a political constituency for the welfare state by expanding its provisions to larger and larger portions of the middle class. Ryan proposes a federal system that focuses on helping the poor, while encouraging the middle class to take more personal responsibility in a dynamic economy. It is the appeal of security vs. the appeal of independence and enterprise.

Both sides of this debate make serious arguments, rooted in differing visions of justice and freedom. But the advocates of security, including Obama, have a serious problem: They are currently on a path to economic ruin.

I think this is ultimately the way to go. Restore responsibility to individuals and view government as the last line of help for those in need rather than the first. For those who say people are unable or unwilling to take responsibility, one has to ask, has the government been successful in addressing these needs? I think not. Health care and retirement programs are seeing rising costs and approaching bankruptcy unless there are major changes.

What's interesting is this conservative plan is really the radical one. As Washington Post blogger Ezra Klein writes:

Paul Ryan's budget is a radical document that rolls a live grenade under current policy. Social Security? Ryan adds private accounts. Medicaid? Ryan privatizes it. Medicare? Same thing. Health care? Ryan repeals the subsidy for employer-provided insurance, replacing it with a tax credit. The boyish Ryan is a conservative darling, but there's nothing conservative about his document. It does not respect, much less preserve, the status quo. But then, that's a point in Ryan's favor. The status quo will bankrupt our country. On that, Ryan's radicalism is welcome, and all too rare.

In this respect, the conservative solution is the radical one while President Obama's approach is simply more of the status quo. Ryan's "roadmap" proposals can be found here.