November 24, 2004

The propagandists tell us “surpluses are gone.” Yet, despite unemployment (fewer contributors) and people accepting lower paying jobs (lower payroll tax receipts) Social Security still managed to produce a $71 billion excess in fiscal 2004. In more prosperous years, it has been as much as $98.7 billion.

The federal government spends this money as fast as it comes in. Then they ask us to believe the impossible. They ask us to believe that the same money can be both spent and saved.

Pretending that they’ve merely “borrowed” or “invested” our retirement money, they place special obligation nonmarketable Treasury bonds in so-called “trust funds.” These are accounts that are part of the national debt and you might correctly ask; what good is a trust fund that holds nothing but debt? Social Security alone now accounts for more than twenty-two percent of the national debt.

To carry on the pretense of having borrowed or invested this money, without our permission by the way, they hand these phony trust funds annual interest with absolutely no cash involved. It costs them nothing to credit these accounts with more debt, increasing the taxpaying public’s obligation.

U.S. Treasury securities are considered “the safest investment in the world” for one reason and one reason only. That reason is that they are backed by every taxpayer in the United States . No matter how you look at it, what you call it, or whatever roundabout course the money takes, these bonds can only be redeemed with taxpayer money.

As a result, we have the greatest economic scam a government has ever forced upon its citizens. A crime where retirement money is first embezzled, misappropriated, or whatever nicer words you wish to attach to outright theft, and then the same people who were robbed are required to buy back their own money plus interest. It’s what I call the “Pay-It-Again Sam” scam and is nothing more than a system of double taxation plus interest.

America ’s workers might just as well have walked into the Treasury, plunked down bags full of their hard earned cash, and said; “Here, give me some debt. And don’t forget to add interest.”

Confident that they have protected themselves and are above the law, the Beltway Bandits flaunt their crime by not only punishing private sector companies for doing far less but they openly publish reports of their own activities. For example, Table 8 of the U.S. Treasury Monthly Statement shows exactly how much “excess” Social Security produces each and every month.

There it is, the surplus in black and white. The Treasury provides the same table showing the accumulated total for the year in its September Statement; just remember that it includes interest paid against the previous year’s balance. The table is too wide for this format, but if you want to see it click here. Surpluses are not gone.

Here's what the surpluses look like for the past few years:

In the Analytical Perspectives section of his fiscal 2000 budget, President Clinton said; "Trust Fund balances are available to finance future benefits...but only in a bookkeeping sense...they do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes or borrowing."

Other authorities have said much the same thing in various ways. You can read them by clicking here.

Still, the media, the watchdogs, and organizations like AARP that purport to be the vanguard of Social Security, all refuse to acknowledge these simple facts. It’s a conspiracy theorist’s paradise.

And the Beltway Bandits have thrown up all sorts of camouflage like “Intragovernmental Holdings” and “unified budgets” including claims that the law (devil) made them do it. All of which are belied by the fact that they do exactly the same thing to at least 20 other entitlements, including Medicare, Airways, gas taxes, and their own Federal Employees Retirement System (FERS) as well as Military Retirement.

The entire Intragovernmental Holdings portion of the national debt, currently standing at $3.1 trillion and 42 percent of the $7.4 trillion national debt, is composed of these nonmarketable bonds, more than 92 percent of which is held by entitlements as a form of double taxation plus interest.

Already double taxed

While everyone worries about what will happen when the baby-boomers begin to retire and Social Security must turn to its trust funds, we already have examples right before our eyes from fiscal 2004:

• Federal Disability Insurance had a shortfall and the “trust fund” that is part of Social Security was drawn down eight out of the twelve months of the year, ending on the plus side only because of interest received. Where did the monthly money to cover benefits to the disabled come from? Did it come from the Federal Old Age & Survivors Insurance surpluses? Was it borrowed from Japan or China ? Or was it taken from income taxes budgeted for other programs? Obviously, the problem is upon us before the baby-boomers come of age.

• Military Retirement had a shortfall ten months in a row and more than $17.8 billion had to come from borrowing or current taxes to cover what had already been paid previously by military personnel but was spent elsewhere by the government.

• The Federal Employee Retirement System (FERS) had a shortfall eleven of the twelve months and $29 billion had to come from somewhere to cover benefits. And this was after the system received more than $33 billion in interest. It’s the second largest trust fund in the bunch and federal employees don’t mind being ripped-off as long as the taxpaying public is covering their losses.

• Unemployment insurance, money once paid by employers, was drawn down $18.2 billion in fiscal 2004. The trust fund that once held as much as $92 billion in 2001 is now down to less than $45 billion, meaning that taxpayers have covered $47 billion in benefits for the unemployed because the government “borrowed” the original surpluses.

If you set aside $1,350,000 a day, every day of the month, every month of the year from the time of Christ until today, you still wouldn’t have enough to cover the trillion dollars that the Bush administration has run up the national debt in the last 18 months.

Why not give out tax cuts if you can tack a trillion dollars worth of debt onto the other end of the economy?

As John Denton put it; "It is economic stupidity to think that a nation can borrow itself into prosperity, and then tax the people to pay the principal and interest on the debt."

So where do we go from here?

Now that Social Security, the third rail of politics and the government’s primary slush fund, has shown its head again and is likely to be put once again on the front burner it would be foolish to presume that meaningful reform will take place.

Instead, we’ll get more convoluted schemes like “personal” or “ownership” accounts when workers already have these things just as they should have had real lock-boxes in the form of real trust funds when that issue was debated for years with no resolution.

Already, the spinmeisters and con-artists are portraying the subject as a highly complicated subject where “transitional” costs would be phenomenal.

It’s all a crock.

Actuarial data may be complicated and a matter for statisticians, and there may even be some minor irregularities to straighten out, but the insurance business isn’t where the major problem lies.

Real reform would start with the government putting an end to stealing the money. From there, only two logical choices are available.

Either reduce payroll taxes to breakeven, which would put immediate cash in worker’s pockets and help the economy, something that could have been done ages ago and would not change our situation one iota in the face of possible shortfalls – or – set up and put the surpluses being generated into a real trust fund.

What does it cost to set up a real trust fund, a few hundred dollars or possibly even a thousand or so? Certainly not the trillions being bandied about to frighten people. And even if this money did nothing more than draw simple interest we would be 100 percent better off than we are now.

Caught on the horns of their own dilemma.

President Bush can't make the case for his "personal accounts" without admitting that there are surpluses being generated and stolen from Social Security. Unless he does this, opponents will argue that allowing entry level youngsters to put part of their payroll taxes into his plan will drain the amounts available for today's retirees, what is a complete falsehood of course. But then, Bush's plan is full of faults anyway.

Expect the Social Security issue to die on the vine just as it has so many times before.

Any real reform will happen only with a massive effort on the part of you, the workers of this country who are being ripped off. Are you ready to take such action? You cannot sit back and expect someone else to solve this for you, especially the mathematically challenged media or the so-called watchdog organizations like AARP that are not really representing your welfare.

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