March 30, 2011
-- by Dave Johnson
Today is a national call-in day to let Senators know that there is support for keeping Social Security out of the budget debate.
Here are some facts. Social Security cannot borrow, so it does not contribute to the deficit. In fact, working people have been paying a large share of their earnings into Social Security to save for their retirement, and because of this the program has been running a huge surplus. The government has been borrowing FROM Social Security to fund tax cuts for the rich. This borrowed money was used to purchase Treasury Notes, just like China does when we borrow from them, and those notes earn interest, just like China's, which also helps fund the program. So all of this money people have been putting aside for their retirement adds up to a huge trust fund, which doesn't get used up until approx 2037 -- if the economy doesn't get better; later if it does. Even then it only runs a bit short.
So the only threat to Social Security is that if nothing is done there might be some cuts in benefits in 2037. The solution is not to cut benefits to avoid cuts in benefits. That doesn't make sense. The solution is to "raise the cap." Today only incomes below about $100K pay into Social Security. Raising that $100K "cap" fixes the problem. Better yet, remove the cap on incomes above $250,000.
The following is from the Strengthen Social Security coalition, of which Campaign for America's Future is part:
We need you to call your Senators and demand that they vote for the Sanders/Reid Social Security Protection Amendment.
Senator Sanders and Majority Leader Reid are leading the fight in the Senate to protect Social Security from drastic cuts.
Their amendment simply says:
Social Security benefits for current and future beneficiaries should not be cut and Social Security should not be privatized as part of any legislation to reduce the Federal deficit.
Call your Senators RIGHT NOW at 1-866-251-4044. You’ll be given a choice of which of your state’s two senators to be connected with. Call BOTH of your senators if you have the time. It only takes a minute each.
Tell the person who answers the phone:
- I am a voter/constituent living in [your state]. I am calling to tell the Senator:
- I oppose all cuts to Social Security and
- I urge them to vote yes on the Sanders/Reid Social Security Protection Amendment.
Please take the time for this very important effort today. This is for all of us who depend on Social Security.
Call Today: 1-866-251-4044.
AFTER YOU CALL:
Stay involved, the threat to Social Security continues. Please click to stay involved in the fight.
Posted by Dave Johnson at March 30, 2011 9:42 AM
I so wish the above statement was accurate. I have dedicated the past ten years of my life, and more than $30,000 in personal money, to the cause of trying to educate the public to the "real" Social Security problem. I am a lifelong progressive Democrat who wants to save Social Security, as we now know it, for generations to come. Having devoted the past decade to researching and writing about Social Security financing, it saddens me to see individuals and organizations, who are friends of Social Security, adding to the confusion instead of exposing the true problem.
THE HARSH REALITY is that every penny of the $2.6 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been diverted into the general fund and spent on such things as tax cuts, wars, and other government programs. None of the money was saved or invested in anything. There are no Treasury Bonds, or any other kind of real assets, in the trust fund. THE MONEY IS ALL GONE! THE SOLUTION IS TO DEMAND THAT THE GOVERNMENT ACKNOWLEDGE THE THEFT AND MAKE PROVISIONS FOR REPAYING THE STOLEN MONEY.
Allen W. Smith, Ph.D.
Professor of Economics, Emeritus
Eastern Illinois University
Posted by: Allen W. Smith, Ph.D. at March 30, 2011 10:29 AM
The money is gone, you say?
Is that what you tell the Chinese and Japanese when THEY want to cash in a bond?
Seriously, this is the exact same as any other debt the country has.
Yes, the money went out to tax cits for the rich and military spending.
The answer, of course, is to get the money from where the money went, which is to tax the wealthy and cut the military budget at least in half.
I first stumbled onto the great Social Security scam more than ten years ago while doing research for my first Social Security book, "The Alleged Budget Surplus, Social Security, and Voodoo Economics." On September 27, 2000, I appeared on CNN with anchor Lou Waters to discuss the newly published book. I tried my best to convince Waters that Social Security money was being spent for non-Social Security purposes, but he seemed more amused than interested in what I was saying, and he finally asked me, "Are you a voice crying in the wilderness?" As things turned out, I was a voice crying in the wilderness in 2000, and I continue to be such a voice a decade, and three books, later. Every penny of the $2.6 trillion in excess Social Security revenue, generated by the 1983 payroll tax hike, has been spent on whatever politicians chose to spend it on.
When my book, "The Looting of Social Security," was published in early 2004, I thought I was about to expose the Social Security scam and end the looting. On February 26, 2004, I was one of two invited guests to appear on the CNBC morning news to respond to Fed Chairman Alan Greenspan's call for Social Security benefit cuts the previous day. I used the occasion to hold my new book in front of the camera and say, "Alan Greenspan should be ashamed of himself for what he is not telling the American people." By doing so, I apparently drove the final nail into the coffin of my new book. Several weeks later, the book mysteriously disappeared from bookstores nationwide, and was listed as "unavailable" by Amazon.com. I tried to get my publisher to revert the rights to the book back to me so that I could publish it elsewhere, but the publisher refused. So I was effectively muzzled during the period of the Bush privatization campaign.
Early reviews had hinted at just how explosive the revelations of the books would be.
The Boston Globe reported, “If you…have the stomach for a truly demoralizing read…you might wish to take up , ‘The Looting of Social Security,’ by Allen W. Smith…With dismal clarity, Smith lays out the step-by-step history of how a national pension plan was transformed into an outright shakedown of working people…”
ALA Booklist wrote, “Smith…has written a scathing account of massive fraud on the part of our nation’s leaders, who have plundered every cent of the Social Security Trust Fund surplus that was specifically earmarked for the retirement of baby boomers.”
Someone, some group, or some government agency decided that the public should not be allowed to read the book.
Of course, I had no way of knowing that Greenspan’s call for benefit cuts was the opening salvo in a major organized effort to privatize Social Security. Bush’s campaign to partially privatize Social Security had not yet been publicly announced, but it was in the planning stage. Those behind the privatization effort wanted to frame the Social Security debate on their own terms. My book would have at least been a distraction, and it might have been an outright threat to the success of the Bush privatization campaign. I’m sure that Alan Greenspan saw at least a video of the challenge I made to him during that CNBC appearance. I also think he would have recognized how “inconvenient” the release of my book would be for the privatization campaign. There is no way that I can know for sure whether Greenspan or the Bush Administration played any role in the removal of my book from the market, but neither can I rule them out as possible suspects.
Allen W. Smith, Ph.D. www.thebiglie.net
Posted by: Allen W. Smith, Ph.D. at March 30, 2011 10:35 AM
To Dave Johnson:
"Is that what you tell the Chinese and Japanese when THEY want to cash in a bond?
Seriously, this is the exact same as any other debt the country has."
Again, I so wish that what you are saying was correct. But it is not. For the past 25 years, the government, and some organizations, have brainwashed the people into believing the above.
The Social Security Amendments of 1983 supposedly "fixed" Social Security. Upon signing that legislation, President Reagan made the following comments:
“Our elderly need no longer fear that the checks they depend on will be stopped or reduced. These amendments protect them. Americans of middle age need no longer worry whether their career-long investment will pay off. These amendments guarantee it. And younger people can feel confident that social security will still be around when they need it to cushion their retirement.
These amendments reaffirm the commitment of our government to the performance and stability of social security."
If the intent of the law had been followed, Social Security would be fine today. But that didn't happen. The surplus Social Security revenue was supposed to be used to purchase pre-existing marketable Treasury bonds in the open market from investors who were selling them. If that had been done, your statement would be correct. Marketable U.S. Treasury bonds are "as good as gold." They are traded on world financial markets, and any attempt to default on any such bond would be seen as a default on all bonds. It would create panic in the financial markets and cause permanent damage to the credit standing of the U.S. in the eyes of the rest of the world. We can be absolutely certain that our government cannot, and will not, ever default on any of its marketable Treasury bonds. So, if the Social Security surplus had been invested in such bonds, as was the intent of the 1983 legislation, the debt to Social Security would be identical to the debt to China. U.S. Treasury bonds owned by Bill Gates, pension funds, the Chinese government, and all other serious investors in the world are public-issue, marketable U.S. Treasury bonds. Unfortunately, none of the Social Security money was invested in such bonds or in anything else.
If the government had followed the intent of the 1983 legislation, and other federal laws such as the Budget Enforcement Act of 1990, Social Security would not even be in the news today. The problem with following the law, from the perspective of crooked politicians, was that the surplus money would have ended up in the hands of the investors from whom the government purchased the marketable bonds, and there would have been no money for the giant slush fund to be used on other programs.
Allen W. Smith, Ph.D. www.thebiglie.net
Posted by: Allen W. Smith, Ph.D. at March 30, 2011 11:03 AM
As painful as this is for me to say, I have learned over the past decade of researching that you cannot rely on information from the Social Security Administration official website, or from their publications, to give a true picture of the status of Social Security. The SSA is in the public relations business, and its job is to sell the government's positions and policies, and to tell the public what the government wants the public to know.
For example, for years, the official Social Security Administration website has contained a statement to this effect. "All surplus Social Security revenue, not needed to pay current benefits in a given year, are invested in government securities." A statement similar to this still exists on the official website. But it is not true.
All government revenue from all sources, including the payroll tax, flows into the U.S. Treasury. The dollars from payroll taxes become indistinguishable from the dollars from the income tax, the corporate income tax, and all other sources of revenue. Through accounting entries, the government keeps track of how much money belongs to each fund. That is where we get the number $2.6 trillion that is supposed to be in the trust fund. However, all of that money was spent on other government programs as it came in. None of it was used to buy bonds. The government spent all of the money and replaced it with government IOUs, which are nothing more than accounting records of how much Social Security money has been spent on other programs. They are akin to a note that a bank robber might leave behind in the empty bank vault stating how much money he has stolen.
The IOUs are not marketable and were created specifically to be held by the trust funds. They could not be sold to anyone, even for a penny on the dollar. They cannot be used to pay Social Security benefits or anything else. If the government's debt to Social Security had just been written on a yellow legal pad, the legal pad would have the same status as the IOUs. Neither could be sold or used in any way to raise money. They are just records of the government's debt to Social Security.
THE DEBT IS REAL--THE BONDS ARE NOT.
Allen W. Smith, Ph.D. www.thebiglie.net
Posted by: Allen W. Smith, Ph.D. at March 30, 2011 11:36 AM
“SOCIAL SECURITY: The Attempt to Kill It”
The above words are the title to a book that I published in 2005, after my book, “The Looting of Social Security” had been censored and pulled from the market the previous year. Below is a short excerpt from that book:
“Allen W. Smith’s explosive book, “The Looting of Social Security” shocked many Americans when it was released…in January 2004. It exposed a little-known government practice that President Bush now routinely admits in his Social Security speeches. The government has been embezzling the Social Security surplus and spending it as if it were general fund revenue, for the past 22 years!”
The “killing of Social Security” is what the current campaign to “reform Social Security” is all about. The only short-term problem facing Social Security today is the fact that the government has stolen $2.6 trillion of Social Security money and spent it on other things. Now that Social Security is running annual deficits, it needs that money back, and the government has made no provisions for repaying it. It is because the government does not want to repay the money, that so many are calling for benefit cuts. The enemies of Social Security are trying to use the current cash-flow problem to convince the public that Social Security has failed and needs major reform. Privatization has always been the ultimate goal of those who oppose Social Security, and that is exactly were the present movement is headed. Step one is to convince the public that “Social Security is unsustainable in its present form.” If that can be accomplished Step two will be privatization.
Social Security does not have a $2.6 trillion surplus, and it cannot pay benefits until 2037. This would be true if the money had not been stolen, but it is not true now. Social Security does not have even enough money to pay full benefits for 2011, unless the government repays some of the looted money. All Social Security has is the current inflow of revenue from the payroll tax which will be about $45 billion short of being enough to pay full benefits for this year. Social Security does not have any money in the bank to fall back on, because that money has all been stolen.
The government owes Social Security $2.6 trillion, which it should repay, but Social Security has no way of forcing the government to pay that debt. The public has a way of enforcing repayment by putting so much political pressure on government officials to repay the money that the government won’t dare try to default. But the public is doing almost nothing today to encourage repayment. One of the least known facts about Social Security is that, although the government does have a moral obligation to pay Social Security benefits to those who have earned them, the government does not have a legal obligation to do so. In a 1960 ruling by the United States Supreme Court, (Fleming v. Nestor), the court ruled that nobody has a “contractual earned right“ to Social Security benefits. Section 1104 of the 1935 Social Security Act specifically states, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” According to the above strong language, Congress could do whatever it wanted to do with regard to changing or even eliminating Social Security.
The public needs to unite and make too non-negotionable demands:
1. We should demand that the government publicly acknowledge that it has spent $2.6 trillion of Social Security money for other things.
2. We must demand that the government repay that $2.6 trillion!
Allen W. Smith, Ph.D. www.thebiglie.net
Posted by: Allen W. Smith, Ph.D. at March 30, 2011 1:15 PM
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