Though the payroll tax is regressive -- it hits lower- income Americans harder -- Roosevelt believed the levy would make the program politically impregnable. That's because Americans would feel their benefits had been "bought and paid for" by their payroll taxes by the time they reached retirement, said tax historian Joseph Thorndike.
"We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions," Roosevelt said, according to a 1941 memorandum written by Luther Gulick, an adviser. "With those taxes in there, no damn politician can ever scrap my Social Security program. Those taxes aren't a matter of economics, they're straight politics."
Until recently, the program's special status was underscored by statements the government mailed to more than 150 million workers tallying how much they've paid in Social Security taxes and how much they can expect to receive in retirement. The government said it is suspending those mailings to save money and plans to make them available online.
Critics say the administration's tax-cut plan threatens that legacy because it would replace with other revenue the $265 billion the congressional Joint Committee on Taxation estimated would be foregone by Social Security next year.
While transferring other revenue into the program would ensure benefits aren't cut because of the tax reduction, Social Security advocates may have a harder time arguing that seniors' benefits were bought and paid for by their payroll taxes.
Chuck Blahous, a former Bush administration economic adviser who now sits on Social Security's Board of Trustees, called the Obama plan a "very fundamental transformation" in how the program operates.
"When you start funding Social Security that way, you basically destroy any notion that people really paid for their Social Security benefits," he said. "We've got this political dynamic that says, 'Well, if you don't extend this, then you're in favor of raising taxes on poor working people. If that's the dynamic, then Social Security is in really severe trouble."
The ambivalence over tapping into the funding for the popular retirement program is underscored by a split among advocacy organizations for the elderly: AARP, the largest group, supports the payroll tax cuts -- as long as they are temporary - - while the National Commission to Preserve Social Security & Medicare has criticized the administration's plan.
Alan Krueger, the chairman of the White House Council of Economic Advisers, denies there's any danger to the system. He told reporters in a Nov. 29 briefing, "I don't think this jeopardizes the Social Security trust fund or the solvency of Social Security -- the trust fund is made whole by general revenues." And he said Obama has proposed a way to fully pay for his tax-cut plan.
Senator Dick Durbin, the chamber's second-ranking Democrat, also rejected the complaints. He said the government has been borrowing surplus Social Security revenue to pay for other programs, and promising to repay it later with other tax revenue, so the money has already been mixed.