RAIDING THE TRUST FUND

Allen W. Smith, Ph.D.

RAIDING THE TRUST FUND
Read Chapter One Free RAIDING THE TRUST FUND
The Long Struggle
The Big Lie
Allen W. Smith, Ph.D.
The Looting of Social Security
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CONTEMPLATIONS

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"A Voice Crying in the Wilderness"

When Allen W. Smith appeared on CNN to discuss his newly published book, The Alleged Budget Surplus, Social Security and Voodoo Economics, on September 27, 2000, he thought that what he was about to say would soon become breaking news that would spread throughout the nation like wildfire.  Smith was so outraged by what he had discovered a few months earlier that he thought it would shock the public and generate a national scandal that would make Watergate pale by comparison.    Smith thought that, when the public found out that their Social Security contributions were being embezzled, and used to help finance Reagan's large tax cuts for the rich, they would share his outrage and demand action.  Smith thought that taking money from the payroll tax contributions of working Americans and transferring it to America's richest citizens was more than wrong.  It was immoral.  

Dr. Smith, a strong supporter of Social Security as we now know it, saw the raiding of the Social Security fund as a first step toward destroying the current Social Security system and replacing it with a privatized system.  The payroll tax hike of 1983 was designed to generate Social Security surpluses for 30 years prior to the retirement of the oldest baby boomers in about 2010.  These surpluses were to be saved and invested in marketable U.S. Treasury bonds, which could later be resold in the open market to raise cash with which to pay benefits to the boomers.  If the $2.7 trillion in Social Security surplus revenue, which the tax hike was designed to accumulate by 2010, were to be taken by someone like Bernie Madoff, the baby boomers would be  out of luck. The enemies of Social Security would then point to the dire financial condition of Social Security as proof that Social Security benefits had to be cut, and the system should be scrapped and replaced with a privatized system.  Most readers can readily see that if the $2.7 trillion in surplus Social Security revenue had been taken by Madoff, who is now serving a 150-year prison sentence, Social Security would now be in deep trouble.  Bernie Madoff did not steal the Social Security money. but the United States government did.  The money is gone and the only way to get it back is by raising taxes, which appears to be politically impossible in the near future.   

If the CNN interview, thirteen years ago, had gone differently, Smith thinks the public outrage would have been so strong that Congress and the president would have been forced to bring the raiding of Social Security to an abrupt end.  If that had happened, all the surplus revenue that came in after 2000 would today be safely held by the trust fund in the form of "good-as-gold" marketable U.S.Treasury Bonds, which could be sold in the open market as needed to pay benefits to the boomers. 

Smith was really excited as he entered that CNN studio.  He would soon be able to tell millions of viewers about the Social Security theft.  But the interview didn't go the way he had hoped.  Instead of showing interest in what Dr. Smith had to say, the CNN Anchor, Lou Waters from Atlanta, was amused, and he treated the interview as a big joke.  He ended the interview with these words:

"We're not hearing any of this in the news.  I'm involved in the news.  Are you a voice crying in the wilderness?" 

As thing turned out, Smith was a voice crying in the wilderness in September 2000,  and he has continued to be such a voice to this day.  In addition to Reagan, Presidents George H.W. Bush, Bill Clinton, and George W. Bush all looted and spent every dollar of the surplus that came in during ther presidencies. Obama might have done the same, but we can't know for sure because the surpluses were over and Social Security was running permanet annual deficits by the second year of Obama's presidency.

Dr. Smith is the author of nine books, and he has appeared on CNN, CNBC, and more than 200 radio talk shows.  He has a B.S. in Education degree from Ball State University and a Ph.D. degree in Economics from Indiana University.

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Links to articles: 

 

 

 

 Interview with investigative reporter, Mike Deeson, WTSP--CBS local affiliate in Tampa: http://www.wtsp.com/news/local/article/195201/8/Social-Security-Trust-Fund-stolen-by-the-Government

 

Archive of Allen's articles published by Dissident Voice.org: http://dissidentvoice.org/2013/05/government-owes-2-7-trillion-to-social-security/ 

Archive of Allen's articles published by FedSmith.com: http://www.fedsmith.com/author/allen-smith/

Allen's articles published in the Orlando Sentinel:   http://articles.orlandosentinel.com/2012-08-07/opinion/os-ed-social-security-con-080712-20120806_1_social-security-trust-fund-ious; http://articles.orlandosentinel.com/2013-06-10/news/os-ed-social-security-061013-20130609_1_social-security-income-subject-payroll-tax  

 

 

 

 

 

 


CONTACT ALLEN:  Phone: 1-863-875-2735     Email: ironwoodas@aol.com

Allen W. Smith is available for media interviews and speaking engagements.  Call 1-800-840-6812.

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Allen converted his Honda Odyssey into the "Social Security Info-van" several years ago with the hope that  it might be another tool with which to deliver his message directly to the public. 
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Allen's Blog 

"THE LOOTING OF SOCIAL SECURITY"

Email Address: ironwoodas@aol.com

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August 25, 2009

The Empty Social Security Trust Fund


The 1983 payroll tax hike was designed to generate annual surpluses in the Social Security budget every year until about 2016.  So far, approximately $2.5 trillion in surplus revenue has been generated, and all of that money is supposed to be in the trust fund.  Beginning about 2017, the Social Security budget will begin running annual deficits that will become progressively larger each and every year.  The plan was to use the accumulated surpluses, as a supplement to the inadequate payroll tax revenue, in order to continue to pay full Social Security benefits until 2037.  

It was a good plan, and it would have worked
IF government officials had been honest.  Unfortunately, they were not.  For the past 24 years, under four presidents, every dollar of the Social Security surplus has been used like a giant slush fund to finance tax cuts, wars, and other government programs.  Some people say that the government just borrowed the money. But the word, “borrowed,” implies repayment, and no provisions, whatsoever, have been made for repaying the $2.5 trillion.  That being the case, I think it is more accurate to say that the money has been “embezzled” or “stolen.”  Senator Harry Reid used the word, “embezzlement,” to refer to the practice in a speech on the Senate floor on October 9, 1990.  In that same speech, Senator Reid also said, ”We have been stealing money from the Social Security recipients of this country.” 
 

How was the government able to hoodwink the public to such a degree?  It did so by using a gimmick to make people believe the trust fund holds real bonds even though it does not.   What the government should have done with the surplus Social Security money was to invest it in regular public-issue marketable Treasury bonds, purchased in the open market.  These “good-as-gold” Treasury bonds could have been resold in the open market at any time in order to raise funds for paying Social Security benefits.   But, if the government had done that, the surplus money would have had to be paid to the sellers of the bonds, and there would have been no surplus money for the government to spend.  
 

So the government created a special kind of certificate and gave it the name “special issues of the Treasury,” which many people believe are real government bonds with value.  However, these IOUs are nothing more than an accounting record of how much Social Security money the government has spent.  They can be held only by the trust funds, and they are not marketable.  Therefore, these IOUs are not real assets and could not be sold to anyone, even for a penny on the dollar.  
 

The net effect of the government’s looting of the Social Security trust fund for the past quarter century is that when Social Security begins to experience annual deficits, in about seven years, full benefits can no longer be paid without a tax increase.  There are no real assets in the trust fund, so the government must rely solely on the inadequate payroll tax revenue, unless it finds some way to repay its debt to the Social Security trust fund. 


1:20 pm edt 

August 15, 2009

The 1983 Social Security Fix

The 1982 National Commission on Social Security, headed by Alan Greenspan, found that Social Security would have a solvency problem when the baby boomers began retiring, about 2010, unless long-term measures were taken to keep Social Security solvent.  The commission report recommended a substantial hike in the payroll tax, in order to build up a large reserve in the trust fund that could be used to help fund the benefits of the baby boomers. 
 

The Social Security Amendments of 1983 did just what the Greenspan Commission recommended.  A hefty increase in payroll taxes was designed to require the baby boomers to pay more Social Security taxes than any previous generation.  The boomers were required to pay for the cost of benefits for the generation that preceded them, which was customary.  In addition, the baby boomers were required to prepay most of the cost of their own retirement benefits, which was not customary.   With enactment of the 1983 legislation, Social Security was no longer a strictly “pay-as-you-go” system.  For the baby boomers, it became as combination, “pay-as-you-go” and “prepay-your-own-benefits” system.  

 

The baby boomers have held up their end of the deal.  The payroll tax began generating more revenue than was required to pay for current benefits in 1985, and it has continued to do so every year since.  Today, the Social Security trust fund is supposed to hold approximately $2.5 trillion in assets, and the annual surpluses are projected to continue until at least 2016.  However, beginning in 2017, Social Security will begin running annual deficits that will get larger and larger as the years pass.  As a result, beginning in 2017, the payroll tax will not generate enough revenue to pay full benefits.  Therefore, either benefits will have to be cut, or taxes will have to be raised. 

The intent of the 1983 legislation was that all surplus revenue generated by the payroll tax hike would be saved and invested to build up the large planned reserve in the trust fund that would be used to supplement the inadequate payroll tax revenue so that full benefits could be paid until 2037.  If the surplus Social Security revenue had been saved and invested as intended, Social Security would have no short-term problem today. However, instead of saving and investing the surplus revenue, it has been used for the past 25 years as a giant slush fund for financing tax cuts, wars, and other government programs. As a result, THE SOCIAL SECURITY TRUST FUND IS EMPTY!   


Most people believe that the trust fund “is full of U.S. Treasury bonds.”  That is not true.   In the words of David Walker, Comptroller General of the Government Accountability Office  (GAO), “There are no stocks or bonds or real estate in the trust fund.  It has nothing of real value to draw down.”

1:52 pm edt 

August 14, 2009

10:54 pm edt 


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