MSN - Money Perpetuating The Myth By Ed Henry -- Price of Liberty

12/03/08

MSN - Money
Perpetuating The Myth
By Ed Henry

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August 17, 2004

On July 26, 2004, MSN-Money published an article by Liz Pulliam Weston titled "5 Myths about Social Security" that was fairly good on small points but missed the big points entirely. The article is well worth reading and I recommend it to every American worker contributing payroll taxes.

The very first and the most important myth that Ms. Weston sets out to clarify involves the Social Security Trust Fund. She does a good job, but it's something like returning a kickoff 99 yards and then dropping or handing the ball to the opponents on their one yard line.

Here's what she says under the heading "Looking for the Cash Hoard:"

"Myth No.1: There is no Social Security trust fund. You may have heard this assertion so often that you'll be surprised to learn that there really IS a Social Security trust fund that collects our payroll taxes and invests the surplus. It's called the Old-Age and Survivors Insurance and Disability Insurance Trust Funds.

What isn't in the trust fund is a big hoard of cash.

Three-quarters of the money that's collected in Social Security taxes goes right out the door again in the form of benefits to Social Security recipients. The surplus that isn't needed to pay benefits is loaned to the federal government to pay for other programs.

In return for this loan, the trust fund gets IOUs in the form of special-issue, interest-paying Treasury bonds. The interest isn't paid in cash, however; the Treasury department issues the fund additional bonds for the interest amount. Last year, the fund was credited with $80 billion in interest; the total value of the securities is about $1.5 trillion.

Myth No. 2: Critics often deride these bonds as 'a bookkeeping entry' or a fiction, but they're real obligations of the U.S. government, said Steve Goss, Social Security's chief actuary. In the past, they've been cashed in when Social Security or its sister program, Medicare, temporarily ran low on funds. The last time was in the early 1980s.

'They're backed by the full faith and credit of the U.S. government,' Goss said. 'They're every bit as real . . . as any savings bond or Treasury bond any individual might hold in society.'

The problem, of course, is that the government now owes the trust fund so much money -- and relies on its surplus so heavily -- that real problems will be created when it comes time to cash in those IOUs. Uncle Sam is going to need to find another source of income to replace the surplus (or cut spending, or borrow money from somewhere else), plus come up with cash to pay the bonds it's already issued."

Read that last sentence very carefully. "Uncle Sam is going to need to find another source of income to replace the surplus (it's been stealing from our supplemental retirement system under "off budget" revenue), plus come up with cash to pay the bonds it's already issued."

Now, where do you suppose Uncle Scam is going to find the cash to pay off trillions in junk bonds it issued the trust fund, both to cover the money it stole under the pretense of "borrowing" or "investing," and then the interest handed the trust to carry on that fiction?

Do you think we'll raid Iran's treasury the way the Ayatollah accused the Shah of doing after he was deposed, the subject that started our entire conflict with Iran in the late Seventies and ended up with their holding our embassy people hostage. They haven't got that much money.

The government isn't a business, doesn't produce anything or have anything to sell except some parks or maybe Alaska or Hawaii. They get all of their revenue from you, the taxpayer.

So why pussyfoot around with the "need to find another source of income" – the government will get the money from you. They will raise taxes, cut benefits, put it on their credit card for your children and grandchildren to pay off, or any combination of these three choices. There are no other options.

And this means double taxation plain and simple, plus interest. The same people who gave them surpluses in the first place will be required to pay again. It's worse than any scam Enron, WorldCom or any private sector crooks have played on their employees, investors, and customers, their people.

It's already happening with many of the smaller trust funds and even with Social Security itself.

Seven of the ten months of fiscal 2004 the Federal Disability Insurance trust fund has been in the red. Receipts from payroll taxes allocated to this insurance have not been sufficient to cover outlays. Where do you suppose the money came from?

How can reporters, researchers, and economists portray the drain on the Social Security trust funds as something in the future when it's already happening?

It's even worse with the Unemployment trust fund:

In this case, taxpayers are covering taxes previously paid by employers, a slightly different form of double taxation. The Unemployment trust fund held as much as $94 billion before the economy went sour.

Notice with both of these trust funds that when there is a surplus the government takes that money and spends it elsewhere, "borrowing" it and usually increasing the trust's balance. When there's a deficit, they get the money from current income taxes, shorting other programs, or by borrowing it. They've got us coming and going.

In short, we might as well have taken bags full of cash into the Treasury, plunked it down and said: "Here, give me some debt." It's that ludicrous.

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