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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October 23, 2009

Will the Government Repay its Debt to Social Security?
 

Once people accept the fact that there are no real assets in the trust fund with which to pay future benefits, they must ask the question, “Does the government have the financial resources and the political will to raise enough money to repay the $2.5 trillion that it owes to Social Security?”  The problem is that, as the years go by, the amount of money that would be required, each year, to repay Social Security just enough to enable it to continue paying full benefits becomes larger and larger.

 

According to the 2008 Social Security Trustees Report (Table VI.F9), in order to pay full benefits in 2020, the government would have to come up with $107 billion to add to the inadequate payroll tax revenue.  In 2025, paying full benefits would require the government to come up with $275 billion, and for 2030, there would be a need for $471 billion.  In 2035, the shortfall is $656 billion, and in 2040 the government would have to add $808 billion to the payroll tax revenue in order to pay full Social Security benefits.

 

It will not be easy for the government to repay the “borrowed” Social Security money, either through higher taxes or with borrowed funds, given all the other financial demands resulting from the financial crisis.  If the government is unable to repay the borrowed money, the only other option is for the government to default on its debt to Social Security and cut benefits. 

 

Although I strongly oppose any effort by the government to default on its debt to Social Security, as an economist who has followed federal finance for the past 30 years, I think the likelihood of that happening is higher today than ever before.  I know that most economists and other financial experts have long argued that the federal government could never default on any of its debt because of the catastrophic effect that such action would have on world financial markets.  I agree that the government cannot, and will not, ever default on any of its public issue Treasury bills, notes, and bonds.  These instruments are as good as gold, and they are default proof.

 

Unfortunately, however, none of the Social security surplus funds were invested in such instruments.  Actually, none of the surplus Social Security funds were invested in anything.  The money was all spent pure and simple just as if it were general fund revenue.  The trust fund holds no real bonds—only non-marketable IOUs.  The United States government could default on these special Social Security IOUs without defaulting on any of its other debt.  Some nations might frown on such action by our government, but, since they would not be directly affected by such a default, I think most countries would view such action as an internal matter between the United States Government and its citizens.  As long as the United States government continues to honor all public-issue Treasuries , I don’t think failure to repay its debt to Social Security would have any significant international ramifications.

 

The sad part of all this is that, in the past, some Social Security funds were invested in these “good-as-gold” Treasury bonds and every penny of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax increase, could have, and SHOULD HAVE, been invested in such bonds.  If that had happened, Social Security would be in great shape today.  The only reason the money was not invested in public-issue Treasuries, is that, if real bonds had been purchased in the open market, they would have had to be paid for.  Thus, there would have been no money left over for the slush fund. 

 

I discovered what was happening to the surplus Social Security money ten years ago while doing research for my book, “The Alleged Budget Surplus, Social Security, and Voodoo Economics.”  I was outraged and wanted to tell the whole world about it, but nobody wanted to listen.  I appeared on CNN on September 27, 2000,  and I did everything within my power to alert the public to the fact that the government was mishandling their Social Security contributions.  During the past ten years I have been obsessed with trying to alert the public that they are being ripped of by their government.  I have published four books on the subject, done 170 talk radio interviews, and appeared on national TV three times.  I feel very much like Harry Markopolos must have felt during the  nine years he tried unsuccessfully to convince the SEC that Bernard Madoff was operating the world’s biggest Ponzi scheme.  If the SEC had listened to Markopolos in 1999, thousands of individuals and organizations would have avoided being swindled out of billions of dollars.

 

Similarly, during the ten years since I first began trying to alert the public to the fact that all surplus Social Security revenue is being fraudulently spent on other government programs, more than $1.4 trillion of additional Social Security money has been looted and spent.  That money, which belonged to the Social Security trust fund, and to American workers who had made Social Security contribution through the payroll tax, is gone, and the government continues to loot and spend more than $500 million of additional Social Security money each and every day!

 

This practice, which has been going on for the past 25 years. could be abruptly halted if President Obama would just issue an executive order instructing the Secretary of the Treasury that, effective immediately, all surplus Social Security money must be used to purchase public-issue Treasury bonds in the open market.  Each of the past four presidents also had the authority to end the looting, but they failed to do so. 

 

Issuing such an executive order today would prevent any additional looting during the remaining few years that Social Security will run surpluses. However, it would be like locking the barn door after most of the horses are already out and gone.  The government needs to make some kind of provision for repaying the $2.5 trillion that it has already looted and spent.  Whether or not it will be willing and able to do so, is not at all certain.   If you are convinced that what I am saying is true, please join me in the effort to stop the Social Security fraud.  It has been very lonely for me out there over the past decade, and I would surely like to have some company.

 
1:17 pm edt 


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