LBJ and Social Security—Another Hotbed of Misunderstanding - AMAC Foundation
Lyndon B. Johnson, our 36th president, is remembered for many things, from his traumatic ascension to the presidency in the aftermath of President John Kennedy’s assassination to his pushing the Civil Rights Act of 1964 to the finish line and his historic signing of Medicare and Medicaid into law in mid-1965.
In short, while LBJ is remembered for many actions, one of them unfortunately stands out incorrectly in the minds of many Social Security critics and specifically those seeking to cast blame for the program’s solvency problems. It goes like this: “There wouldn’t be a Social Security solvency problem if Congress would replace the money that President Johnson stole to finance the Vietnam War.”
What did LBJ Really Do Regarding Social Security Funding?
Historically, President Johnson inherited the Vietnam War, along with considerable pushback from a disapproving public distressed at the mounting loss of life, an unclear political climate, and an enormous drain on the U.S. Treasury. Social Security trust fund reserves at that time were considered “off-budget,” which meant they were accounted for separately from other areas of the federal budget and therefore could not be considered in any attempts to balance the overall federal budget picture. Social Security, in effect, stood apart from all other areas of government spending.
This detached accounting caused confusion in measuring the country’s fiscal position, a problem that the 1967 President’s Commission on Budget Concepts sought to correct through establishment of a “unified budget” wherein all functions of government were added together to produce a single measure of governmental 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. And public cynicism regarding governmental handling of finances—especially Social Security money—led to LBJ unfairly tagged as having “stolen” the funds.
The important point to note here is that moving Social Security’s trust fund balances from “off-budget” to the unified budget (making them “on-budget”) was simply a change in accounting practice. As the Social Security Administration (SSA) notes in their archives, the move to “on-budget” status had no effect on the actual operation of the programs 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 a recommendation from the Greenspan Commission, enacted the Social Security Amendments of 1983 restoring the trust funds to their original “off-budget” status.