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 8, 2010

The Ugly Road to Social Security's Current Problems
The Ugly Road to Social Security’s Current Problems The 1983 Social Security amendments included a “fix” for the baby-boomer problem, in the form of a hefty payroll tax hike.  Prior to 1983, the obligation of each generation of Americans had been restricted to paying for the Social Security benefits of the generation that preceded it.  However, since the baby-boom generation was much larger than any preceding generation, the 1983 tax hike required the boomers to prepay most of the cost of their own benefits, in addition to paying for the benefits of the generation that preceded them.  The boomers got hit with a double whammy, and they have paid more into Social Security than any other generation.     

The surplus revenue generated by the 1983 tax hike was supposed to be saved and invested to build up a large reserve with which to ultimately fund the retirement of the baby boomers more than 25 years down the road.  If the intent of the legislation had been followed, Social Security would now have enough money to pay full benefits until at least 2037, and there would be no talk today about the need to cut Social Security benefits.  Unfortunately, the plan was not followed.  Unscrupulous politicians have been stealing the surplus Social Security revenue and spending it for non-Social Security purposes for the past 25 years.   

The first surpluses came in, almost unnoticed, during the second Reagan term.  Instead of being saved and invested, the surplus money was deposited into the general revenue fund and used for other government programs.  When George H.W. Bush became President, he followed in Reagan’s footsteps with regard to the mishandling of the surplus Social Security revenue.  As the surpluses became larger and larger, criticism against Bush became louder and louder. The first significant Social Security surplus came in 1985 in the amount of $9.4 billion.  By 1990, the surplus had shot up to $56.6 billion and was projected to grow larger and larger over the next two decades.   

This was Social Security money, generated by the regressive payroll tax, and intended to be used exclusively for the payment of future Social Security benefits.  For the Bush administration to blatantly violate the intent of the law, and use the Social Security money for other government programs, was nothing short of embezzlement.  The whole issue came to a head in 1990 when Senator Daniel Patrick Moynihan of New York introduced legislation that would rescind the 1983 payroll tax increase and return the Social Security program to a pay-as-you-go system. 

Moynihan’s position was that, if the government could not keep its hand out of the Social Security cookie jar, then the jar should be emptied so their would no longer be any Social Security surplus to raid.  Moynihan’s proposal was supported by the conservative Heritage Foundation, the liberal Institute of Policy Studies, and the U.S. Chamber of Commerce.  But it was not popular with the Bush administration.  “It is an effort to get me to raise taxes on the American people by the charade of cutting them, or cut benefits,” Bush told reporters.  “And I’m not going to do it to the older people of this country.”  The real reason that Bush opposed the legislation was that, had it passed, he would have lost his large secret slush fund    

During the debate on the Moynihan bill, senator after senator characterized the ongoing raiding of Social Security as “embezzlement,” “thievery,” and “stealing,” and that is exactly what it was.  Money paid by working Americans for the purpose of building up a reserve for the baby boomers was instead going into the general fund and being used to offset the lost revenue that resulted from Reagan’s unaffordable income tax cut that benefited mostly the rich.   

The American public, and specifically future Social Security recipients, were the big losers when Senator Moynihan failed to end the raiding of Social Security in 1990.  Senator Moynihan had supported the 1983 payroll tax hike, and the only reason he was advocating its repeal was to prevent the Bush administration from continuing to pilfer it.  A far better solution, for Senator Reid and the public, would have been some arrangement that legally prevented the government from looting the money.  But President Bush wanted no part of any kind of arrangement that would have kept him from using the surplus Social Security revenue.  So the 1990 opportunity to end the raiding of Social Security was lost.   

President Bill Clinton continued the raiding of the Social Security surplus throughout his eight years, but the opportunity to change policy came up again in the 2000 presidential election campaign.  Al Gore acknowledged the ongoing looting of Social Security and promised to end it if elected.  Gore’s promise to end the practice of using Social Security revenue for non-Social Security purposes became so popular that candidate George W. Bush felt he had to make a similar promise.  So it appeared that, no matter who was elected President in 2000, the Social Security surplus revenue would be saved and invested, from that point on, as was the intent of the 1983 Social Security legislation.        

George W. Bush became the new president, but he reneged on his promise to protect Social Security, despite ongoing assurances that he would not touch the surplus.  During his State of the Union address on February 27, 2001, Bush said, “My budget protects all $2.6 trillion of the Social Security surplus for Social Security, and Social Security alone.” Yet he spent every dollar of the approximately $1.5 trillion in Social Security surplus that came in during his presidency.  During his 2005 campaign to partially privatize Social Security, President George W. Bush openly admitted that all of the Social Security surplus was being spent. In a speech in Pennsylvania, on February 10, 2005 Bush candidly admitted the raiding with the following words: “Every dime that goes in from payroll taxes is spent.  It’s spent on retirees, and if there’s excess, it’s spent on government  programs.  The only thing that Social Security has is a pile of IOUs from one part of government to the next.”  On April 5, 2005, during a speech in West Virginia, Bush said: “There is no trust fund, just IOUs that I saw firsthand that future generations will pay—will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs." 

President Obama has, so far, not officially changed the practice of his four predecessors.  However, this year, for the first time in nearly three decades, there is no Social Security surplus to loot.  The severe recession has resulted in a reduction in payroll tax revenue at the very same time that many senior unemployed workers are choosing to retire earlier than they otherwise would have, thus raising the total cost of benefits.       

Over the past quarter-century, the United States government has embezzled $2.5 trillion of the Social Security contributions of working Americans and used the money to fund wars and other government programs.  Unless that money is fully repaid, with interest, the future of Social Security, as we now know it, is doomed, and some politicians are already making plans to dance at its funeral.  The American public must not allow that to happen.  They must demand that the first priority of the deficit commission be to make provisions for the orderly repayment of the stolen money.  Beginning in 2016, payroll tax revenue will be insufficient to make full Social Security benefit payments.  Unless at least some of the money is put back into the fund by then, benefits will have to be cut.                                                                             Copyright 2010 Allen W. Smith 

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5:48 pm edt 


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