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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April 23, 2011

The Great Social Security Theft

On March 16, 2011, Senator Tom Coburn (R-OK) uttered the following words during a Senate speech.

Congresses under both Republican and Democrat control, both Republican and Democrat presidents, presidencies have stolen money from social security and spent it.  The money’s gone.  It’s been used for another purpose.”

As an economist, who has been trying to expose the Social Security theft for more than a decade, it was refreshing to hear a United States Senator openly acknowledge the truth about the Social Security trust fund.  Although all members of Congress know about the theft, it is rare to have one publicly acknowledge it.  Since both Republicans and Democrats are equally guilty of raiding the trust fund and spending the money on other programs, neither party wants the truth to be made public.  

It all started with enactment of the Social Security Amendments of 1983.  A hefty payroll tax hike was imposed that  would require the baby boomers to prepay the cost of their own benefits, in addition to paying for the benefits of the previous generation, as was customary.  The surplus revenue from the tax increase was supposed to be saved and invested in real, marketable Treasury bonds, in order to build up a large reserve in the trust fund, with which to pay benefits to the baby boomers.   


That tax hike has generated $2.6 trillion in surplus Social Security revenue, which would be enough money to pay full Social Security benefits until 2037, if the money had been saved and invested.  But none of the surplus Social Security revenue was saved or invested in anything.  It was all spent on other things as it came in.  When the first surplus revenue showed up in 1985, a decision was made to deposit it in the general revenue fund and spend it, rather than save and invest it.  Under both President Reagan and President George H.W. Bush, the surplus revenue was siphoned off into the general fund.  But not without a challenge. 

Senator Daniel Patrick Moynihan, of New York, who had been a member of the Greenspan Commission, was outraged that the money was being spent as general revenue instead of being saved and invested for the baby boomers.  Moynihan introduced legislation in 1990 to repeal the 1983 payroll tax hike so there would no longer be any surplus to raid. The repeal legislation was supported by both conservative and liberal organizations, but it was aggressively opposed by the Bush administration.  President Bush was not about to give up his large secret slush fund.

The practice of depositing Social Security surplus revenue into the general fund and using it to fund such things as tax cuts, wars, and other government programs, continued under Presidents Clinton and George W. Bush. The last year of Social Security surpluses was 2009, so there wasn’t much surplus for President Obama to raid.  Beginning in 2010, Social Security began running permanent annual deficits.   

If the money had been invested in marketable Treasury bonds, we could be sure that it would be repaid, because any attempt to default on any marketable U.S. Treasury bond would be viewed as a default on all such bonds.  This would panic world financial markets and permanently damage the credit worthiness of the U.S. government in the eyes of the rest of the world.  The government cannot, and will not, ever default on these “good-as-gold” marketable Treasury bonds.  That is why the Social Security money was supposed to be invested in such bonds.  Since the Social Security money was spent and replaced with non-marketable IOUs, the debt to Social Security is in a different category than the debt owed to the rest of the world in the form of marketable bonds.  The government can, and may, default on its debt to Social Security.  As long as there is a chance that the money will eventually be repaid, we can hope that the money was only “borrowed.” But, if the money is never repaid, as seems increasingly likely, given the government’s extreme financial problems, it will clearly have been “stolen.”

 

5:22 pm edt 


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