The Social Security payroll (FICA)
tax is earmarked exclusively for the payment of Social Security benefits, and politicians are supposed to keep their sticky
fingers off this money. Social Security has been self-funding since 1935, and the government has never
dipped into the general revenue fund to pay Social Security benefits. Throughout most of the 75- year history
of Social Security, payroll tax revenue has been just about equal to Social Security benefit payments. In
some years there were small deficits, which were offset by small surpluses in other years. Social Security
money was used to pay Social Security benefits, and Social Security benefits alone. The government was not supposed to touch
the Social Security revenue.
Presidential Commission on Social Security Reform, headed by Alan Greenspan, was given the assignment of fixing Social Security
for the long term. The primary problem that the commission had to wrestle with was the forthcoming retirement
of the baby-boom generation, the largest generation in U.S. history. The boomers would begin to retire
about 2010, and as more and more of them retired, the cost of benefits would exceed the payroll tax revenue coming from working
Americans. The commission decided that the baby boomers should pay higher Social Security taxes than any
other generation had ever paid. In addition to paying enough taxes to fully fund the retirement benefits
of the previous generation, which was customary, the baby boomers were required to pay additional taxes that would prepay
most of the cost of their own benefits, which was not customary. In other words, the baby boomers were
hit with a double whammy.
of the Greenspan commission were enacted into law as part of the Social Security Amendments of 1983. This legislation laid
the foundation for the biggest fraud every perpetrated against the American people by their own government. The
1983 payroll tax hike was designed to generate Social Security surpluses for the next 30 years. This surplus
Social Security revenue was supposed to be saved and invested in order to build up a large reserve in the trust fund.
Then, when the baby boomers retired and Social Security began to run deficits, the trust fund would be tapped and the
money would gradually be used to supplement the inadequate payroll tax revenue. If this had all been done,
Social Security would not even be in the news today. The trust fund would have contained approximately
$2.6 trillion of “good-as-gold” marketable U.S. Treasury bonds that could be gradually sold in the open market
so that full Social Security benefits could have been paid until 2037.
Here is where the fraud begins. When the surplus Social
Security revenue began to flow in during the second term of Ronald Reagan, politicians decided that, since the money would
not be needed for Social Security benefits for another 30 years, they might as well just put the surplus money in the general
fund where it could be used to create a giant slush fund that could be spent for whatever it was needed for.
As the surplus became larger and larger in subsequent years, Congress
continued to spend it as if it were general revenue, and that practice has continued to this very day. Approximately
$2.6 trillion of surplus revenue has been generated by the 1983 payroll tax hike, and every penny has been “borrowed”
or “embezzled” by the government and spent as general revenue. It was a violation of the intent
of the 1983 legislation, and, after passage of the Budget Enforcement Act of 1990, it became a violation of federal law.
Every dollar of that $2.6 trillion was specifically earmarked for paying future Social Security benefits, and the government
had no right to use any of it for other purposes. That money belongs to the Social Security trust fund
and to the American workers who made those contributions. Even the suggestion that Social Security money
should be used to offset the deficits created by incompetent and irresponsible politicians who have brought this nation to
the brink of national bankruptcy is outrageous. The first act by the deficit reduction commission must
be to make arrangements to repay the embezzled Social Security money.
I first stumbled onto the great Social Security scam more than a decade ago
while doing research for my book, “The Alleged Budget Surplus, Social Security, and Voodoo Economics.” At first
I would not allow myself to believe what I had found. It just did not seem credible
that the United States Government would take money from the Social Security contributions of working Americans and spend it
on other programs without either the knowledge or the authorization of the American people. But the more
research I did, the clearer it became that a fraud of historic proportions had been taking place since the mid-1980s under
both Democratic and Republican presidents and Congresses. I was outraged and wanted the whole
world to be outraged, but nobody wanted to listen. On September 27, 2000, I appeared on CNN with anchor
Lou Waters to discuss my new book. I did everything within my power to convince Waters and the national
TV audience that the government was spending all of the Social Security surplus on other programs. His
response was to ask me, “Are you a voice crying in the wilderness?” I was a voice crying in
the wilderness in 2000 and I continue to be such a voice ten years later. I have been on a relentless mission
for the past ten years to expose the Social Security scam. I have published four books on Social Security,
appeared on national TV three times and done more than 170 radio talk show interviews in my effort to alert the public to
the fact that the government was embezzling their Social Security contributions.
During the 2000 presidential election campaign, I made extensive efforts to
convince candidate Al Gore that he should break ranks with Bill Clinton and pledge to end the raiding of the Social Security
trust fund. I sent copies of my book and numerous letters to Gore, urging him to acknowledge the raiding
of the trust fund and to pledge that he would end the practice. I even sent Gore a last minute telephone
message through my Florida senator’s office the evening before Gore was supposed to deliver his acceptance speech at
the convention. Of course, I cannot be sure that I was the source of Gore’s “Social Security
Lockbox” proposal, but I believe that I was. The important point is that Al Gore publicly acknowledged
that the trust fund was being raided, and he promised to end the raiding. Not to be outdone by his opponent,
George W. Bush made a similar pledge, and the raiding of the trust fund became a major issue in the campaign. We will never
know whether or not Al Gore would have kept his promise to stop the looting of Social Security. But we
do know that George W. Bush did not keep his promise. He looted and spent approximately $1.5 trillion of
surplus Social Security revenue.
is running out. If the public is not made aware of the Social Security fraud before the deficit commission
makes its recommendations in December, I fear that all the evidence of government malfeasance will be swept under the rug
and future Social Security benefits will be cut. I need the support and help of other Americans, who care
about the future of Social Security, in getting the message out. I urge readers to contact me via email
or phone. I especially welcome journalists who might want to interview me and help expose the scam.
Allen W. Smith, Ph.D.
of Economics Emeritus
Eastern Illinois University