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The site that is dedicated
the truth about Social Security's financial status.
have been visiting this site for more than a decade, to gather information about the true financial
status of Social Security, but so many more could benefit. I want to increase the traffic so this site
can play a bigger role in educating the public about how the government has secretly spent $2.7 trillion
of Social Security money for such things as wars, funding tax cuts for the rich, and
other government programs. Social Security would be in good financial condition
today if the $2.7 trillion in embezzled funds were in the trust fund in the form of marketable
U.S. Treasury bonds as was the intent of of the Social Security Amendments of 1983. Social Security's
primary problem today is the missing $2.7 trillion that the governnent embezzled and spent for non-Social Security purposes.
The solution to that problem is for the government to repay the $2.7 trillion with interest.
I will be posting new articles, periodcally, designed to help readers understand what
is wrong with Social Secuuty, and what needs to be done to fix the program. Please
tell others about the site and encourage them to visit. We must demand that the Social Security
money be paid back. The future of Social Security is in the hands of the American people.
There is nothing broken about the program, and it does not need reform. If the government would repay the $2.7 trillion
and remove the cap on earnings subject to the payroll tax, the program would be in good shape.
Allen W. Smith, Ph.D.
The Legacy of
the 1983 “Social Security Fix”
Allen W. Smith, Ph.D.
The 1983 Social Security agreement between President Reagan and Speaker Tip O’Neill
is touted as one of the best examples of bipartisan compromise for the public good. It is often cited as
the kind of political cooperation we need today. But, the ultimate outcome of the 1983 legislation is so tragic that our
nation must never again travel that road.
The legislation, creating
the Social Security Amendments of 1983, was signed into law on April 20, 1983 with much fanfare.
President Reagan gave a glowing assessment of the legislation, giving
the impression that he believed the problems of Social Security had been solved. Parts of
Reagan’s speech are reproduced below:
This bill demonstrates for all time our nation's ironclad commitment to social security. It assures
the elderly that America will always keep the promises made in troubled times a half century ago…
elderly need no longer fear that the checks they depend on will be stopped
or reduced. These amendments protect them. Americans of middle age need no
longer worry whether their career-long investment will pay off. These amendments guarantee it.
How do we reconcile the contrast between these powerful words of assurance
by President Reagan, less than 30 years ago, and the gloom and doom pronouncements
that are so common today? The explanation is that a funny thing happened to that surplus Social
Security money on its way from the pockets of working Americans to the Social Security trust fund.
It got hijacked.
dollar of that $2.7 trillion in surplus revenue was diverted to the general fund where it was
used to pay for wars and other government programs. The only thing
that went to the trust fund was government IOUs, called “special issues of the Treasury.”
These IOUs are nothing more than an accounting record of how much Social Security money was used for non-Social Security
purposes. The non-marketable IOUs cannot be converted into cash, and they cannot be used to pay
benefits. They are only IOUs which represent government debt to Social Security. The government
has a moral obligation to repay the money, but it does not have a legal obligation to do so.
Section 1104 of the 1935 Social Security Act specifically
states, “The right to alter, amend, or repeal any provision of this Act is hereby
reserved to the Congress.”This tough language was backed up by a United States Supreme
Court ruling (Fleming v. Nestor) in 1960. In this ruling, the Supreme Court established
the principle that entitlement to Social Security benefits “is not a contractual right.”
The Court’s position was that the payroll tax revenue belonged to the government, and that
the government could do whatever it wanted to do with the money. Therefore, the future of the Social Security program
is totally in the hands of the Congress and the President. As David Walker, Comptroller General of the General Accountabilty
Office (GAO), said in a Washington speech on January 21, 2005, “There are no stocks or bonds or real estate in the
trust fund. It has nothing of real value to draw down.”
The only real money that Social Security has today is its annual tax revenue.
After running annual surpluses for nearly 30 years, the program ran its first deficit in 2010, and it is expected to run
annual deficits from now on. If the surplus money had been saved and invested, the government
could simply sell enough marketable Treasury bonds each year to make up the difference between
the Social Security revenue and the cost of paying full benefits. That was the whole point of
the 1983 legislation. But, having raided the trust fund, and spent the money on other things,
the government has no marketable bonds to sell.
The only way that Social
Security can pay full benefits from now on, is for the government to repay enough of the raided
money each year to cover the shortfall in the Social Security budget.
That is why so many members of Congress are calling for benefit cuts. They do not want to repay
the money that was raided from the trust fund.
In order to do so, taxes would have to be raised,
or other programs would have to be cut, but neither of these options is politically
feasible at this time. And Congress would have to repeatedly raise the debt ceiling
in order for the government to borrow the money with which to repay its debt to Social Security.
Given the fact that Congress almost drove the economy over a cliff
the last time the debt ceiling was raised, it is not likely that the debt ceiling could be
raised every year in order to repay the government’s debt to Social Security.
Copyright 2016 Allen W. Smith
Government Must Repay the Stolen Social
We must be truthful
about what is wrong with Social Security. Some people are hesitant to use strong enough words to truly describe
just how bad the Social Security situation is. We can't say the government just borrowed the surplus Social Security
money and be accurate. What the government did was to steal $2.7 trillion of Social Security money over a 30-year period.
The government simply took the money from the trust fund and replaced the money with non-marketable government IOUs,
which could not be sold or, in any other way, converted to cash. The government has not made any provisions for repaying
the money, and the government doesn't pay any real, cash interest on the money. The government "pays
interest" by issuing still more of the same worthless government IOUs which the trust fund already already has so many
The surplus Social Security revenue, generated
by the 1983 payroll tax increase, was supposed to be saved and invested in "good-as-gold" marketable U.S. Treasury
bonds. These real bonds were to be held by the trust fund until they were needed to pay increased
benefits to the bay boomers beginning about 2010. But none of the Social Security surplus was saved or invested in
anything. Every dollar of the $2.7 trillion in surplus revenue was stolen by the government, and the government does
not have the means or the inclination to repay the money.
The Raiding of the Social Security Trust Fund
Social Security doesn’t have $2.7 trillion stashed away for
paying benefits, as so many people believe. It cannot pay benefits for another 20 years,
as is often claimed. In fact, Social Security does not have enough money to pay full benefits, even for 2015, without borrowing
money from China or another of our creditors. How can this be? Wasn’t Social Security fixed by the Social Security Amendments
of 1983, which included a large increase in payroll taxes? That’s what we were told at the time, but that’s not
what happened. The Social Security Amendments of 1983 laid the foundation for 30 years of government
embezzlement of Social Security funds. The money was used to pay for wars, tax cuts for the rich, and other government programs.
payroll tax hike generated a total of $2.7 trillion in surplus Social Security revenue. This surplus revenue was supposed
to be saved and invested in marketable U.S. Treasury bonds, which would be held in the trust fund until the baby boomers began
to retire in about 2010. But not one dime of that money ever made its way to the Social Security trust
fund. The 1983 legislation was sold to the public, and to Congress, as a long-term fix for Social Security. Reagan
intended to use the surplus Social Security revenue to replace revenue lost because of his unaffordable income tax cuts. Instead
of being set aside for the retirement of the baby boomers, as was the intent of the legislation, the extra Social Security
revenue was deposited directly into the general fund just like income tax revenue.
From the very beginning,
Reagan and his advisors had no intention of saving and investing the new revenue for the retirement of the baby boomers. They
needed additional general tax revenue, and an increase in the payroll tax would be much easier to enact than higher income
taxes. Also, the potential to get vast sums of revenue was much greater with a payroll tax increase than from an income tax
The actual surplus money was replaced with nonmarketable government IOUs, which cannot be converted into cash or
used to pay Social Security benefits. It would have been bad enough if only Reagan had looted Social Security money. But George
H.W. Bush, Bill Clinton, and George W. Bush all followed in Reagan’s footsteps and spent all of the Social Security
surplus revenue for non-Social Security purposes, just like Reagan.
THE LONG STRUGGLE TO EXPOSE THE GREAT SOCIAL
27, 2000, Dr. Allen W. Smith appeared on the CNN afternoon news to discuss his newly published book, The Alleged Budget
Surplus, Social Security and Voodoo Economics. This marked the beginning of of Smith's fifteen-year-long campaign
to alert the public to the fact that the government was taking money from Social Security, depositing it into the general
fund, and then using the revenue for other purposes, as if it were general revenue from the income tax. The money
taken from Social Security was replaced with non-marketable government IOUs, that could not be used to pay benefits, and could
not be sold,or in any other way, converted to cash. Smith thought that once he reported that the government
was embezzling Social Security money and spending it for other things, there would be a public outcry, and the looting
would come to an end. But that did not happen. The government continued to keep the big dirty secret from the public.
On February 25, 2004, Alan Greenspan launched a verbal bombshell
which set off anger, and some degree of panic, throughout the nation. He called for cutting Social Security benefits
for future retirees because, in his words, "We are over committed at this stage. It is important that
we tell the people who are about to retire what it is they will have." Dr. Smith was furious over Greenspan's double-crossing
of the baby boomers. Greenspan had helped President Reagan push the payroll tax hike of 1983 through Congress,
which was supposed to provide enough surplus revenue to fully fund the retirement of the baby boomers. Twenty-one
years later, after two decades of government embezzlement of Social Security funds, Greenspan was pretending that
the surplus revenue had never existed and advocating cutting Social Security benefits to future retirees who had already prepaid
the cost of their own benefits. The following day, Dr. Smith was one of two invited guests to respond to Greenspan on the
CNBC morning news. That interview was recorded and is the second video below.
A month later, on March 22, 2004, Smith was interviewed by "The Dollans" on
CNNfn. This interview makes up the third video in the series below. By viewing the videos, you will see that Allen
W. Smith was making the same arguments in 2004 as he made in his 2000 interview on CNN. Ten years later, as we enter
2014, Dr. Smith continues his effort to expose the great Social Security theft. But the Social Security program
is in much deeper trouble today than ever before. The last surplus year was 2009. In 2010, Social Security transitioned
from 30 years of annual surpluses to permanent deficits. The cost of paying full benefits in 2010 exceeded Social
Security revenue by $49 billion. The government had to borrow $49 billion from China, or one of our other creditors,
in order to pay full benefits in 2010. The deficits will become larger and larger in the years ahead, meaning that unless
their are benefit cuts or tax increases, the government will have to borrow more and more for Social Security. This
is not possible without large increases in the debt ceiling, which seems unlikely in the current political climate. The
only thing Social Security has is its annual tax revenue. It does not have a bunch of money stashed away that it
can draw down. All of the $2.7 trillion that is alleged to be in the trust fund is gone. It has been spent for
other purposes. Yet. government officials and the AARP continue to tell the public that Social Security has enough money
to pay benefits for 20 more years. These statements are deliberate lies to try to keep the big dirty secret from
becoming public knowledge. The government does not even have enough money to pay full benefits in 2014, without borrowing
View video of three Social Security interviews with Dr. Allen W. Smith on national TV
Mainstream Media Outlets Have Been Reluctant to Report a Story
Which the Government has Kept Secret from the Public for 30 Years
have continued my relentless campaign to expose the Social Security theft to this day, using any media outlets that
were available. The looting of the Social Security surplus is sometimes reported on editorial pages, but it never makes
it into the mainstream news. For that to happen, the President of the United States, or perhaps the Secretary of the
Treasury, would have to hold a press conference, or issue a press release, stating specifically that all the Social Security
surplus had been spent for other purposes, leaving the trust fund without any current liquid assets.
specific members of Congress have stated publicly that Social Security has no reserve money, these statements are never widely
reported by the mainstream media. On March 16, 2011, Senator Tom Coburn (R-OK) made the following statement during a
Senate speech: "Congresses under both Republican and Democratic control have stolen money from Social Security
and spent it. The money's gone. It's been used for another purpose." On October 6, 2013, House speaker John
Boehner said on ABC television, "It's not like there is money in Social Security...The government, over the last 30 years
has spent it all." Such statements would have been headline news during the Watergate era, when reporters engaged
in active investigative reporting. But there is little investigative reporting today. When Dan Rather, a highly
respected Journalist, was fired because he reported a story that the White House did not want reported, a powerful message
was sent to every journalist in America. If they valued job security, they had better be careful not to report anything
the government did not want reported. Talk radio is still an area where almost
anything can be discussed, and I have done more than 200 radio interviews. I have also appeared on a few local TV stations
where daring investigative reporters try to cover the news not being covered by the mainstream media.