February 23, 2005

I’m against Bush’s Social Security reform plan despite the fact that we haven’t seen it yet. He claims everything is on the table, and we’ve only received hints of his plans, mostly from his 2001 Social Security committee that was chaired by Daniel Patrick Moynihan, the same man that together with Bob Dole raised payroll taxes far beyond necessity back in 1983. Bush put the fox back in the chicken coop. Did you expect something good to come out of it?

The democrats aren’t any better. In their arguments on Social Security, they avoid the really big and immediate Social Security problem because they too refuse to give up the cash-cow, the golden goose, the greatest slush fund that both political cults have, as Moynihan put it so eloquently, “enjoyed” for a long time with more to come, the surpluses payroll taxes generate and the government steals.

I’ve written plenty of articles on the hundreds of billions the federal government has malappropriated from payroll taxes, dedicated money that they’ve spent elsewhere. All anyone has to do is understand what $1.7 trillion in recorded debt or what 22.3 percent of the total national debt really means to taxpayers.

Today, let’s look at some of the other things neither political cult will tell you.

First, let’s talk about surpluses. You should all remember that fiscal 2000, the last year of the Clinton administration, was the year of a historic $237 billion surplus. The spinmeisters told you that much, bragged about it in fact, but they didn’t tell you where it came from.

The important missing data is that $87 billion of this 2000 surplus came from income tax overcharges that Bush was correct in cutting somewhat.

As Paul Harvey would say “the rest of the story” is that $150 billion came from entitlements with Social Security retirement overcharges accounting for the big $94.5 billion load and many other entitlements making up the $55.3 billion balance.

Some democrats will today claim that “surpluses are gone” which simply isn’t true, but that’s why they don’t want you to know the above.

Social Security, at least, is still producing enormous surpluses that the government spends elsewhere. Last year, fiscal 2004, it was $71 billion, the year before that it was $82 billion, and the year before that it was $89 billion. In the first year of the Bush administration, fiscal 2001, the Social Security surplus was a record $98.7 billion. This is not chicken feed.

As an aside, the figures showing a rise or decline in payroll tax surplus receipts (see chart) are probably the best indication of the job market in this country.

The Treasury faithfully reports these surpluses, but you have to follow trust fund increases and gather other reported information to figure them out. Most of all, you have to deduct the “interest” from the trust fund totals reported at the end of the fiscal year. To find this interest amount, you have to use the percentage (also reported) paid against the previous year’s balance. Most journalists don’t know how to do this, so they add to the confusion by reporting total trust increases or just avoiding the subject, which is just fine with the pirates.

What’s more, you can argue until doomsday about “who pays the most” in income taxes, but I’ll accept the idea that fewer than ten percent of the wealthiest taxpayers account for a huge percentage in income tax receipts for the government, maybe as much as eighty percent of revenue in this category. Therefore, they deserved the largest share of the Bush 2001 income tax cuts. It’s logical. The democrats who claim to be the party of the people should stop crying about it.

In January of 2001, shortly after George W. Bush was inaugurated, the Congressional Budget Office (CBO) presented “testimony” that predicted if left alone the 2000 surpluses would grow to almost $5.2 trillion by the end of a decade, ten years.

What the public wasn’t told, but every Congress and administration critter was privileged to know, was that roughly $2 trillion of this ten year increase would come from income taxes and more than $3 trillion would come from entitlements like Social Security overtaxes.

This would be wonderful news for a private sector company, but our federal government is a not-for-profit organization, even though many of its members do not seem to recognize that fact.

Of course, all of this was before the horrors of 9/11 months later and our entry into the “war on terror,” a war that in my opinion we’ve got about as much chance of winning as the “war on drugs” because we take the same ineffective action against both. If tons of illegal drugs can be smuggled into this country, so can tons of destructive weapons.

With all the things the Bush administration did to engage in this war, the one thing he didn’t do was take back the income tax cuts that were already going into effect over time. There may be a lot of reasons for not doing this, such as increasing taxes might have been a large factor in his father’s defeat. Instead, he increased borrowing. The national debt has been skyrocketing ever since and the democrats have been yelling and screaming about how the “tax cuts for the rich” have hurt us.

The democrats want these income tax cuts back. They want that predicted $2 trillion. The republicans won’t tell you why they’re not doing this because they would have to show you why, and that might expose the entitlement rip-off. You don’t hear anyone talking about payroll tax cuts do you, even when the economy soured.

Secondly, the manner by which the federal government reports deficits is radically different than the way they report surpluses. They switch accounting methods to fool you or keep you in the dark.

From the above, you will note that the entitlements like Social Security were a big part of the great surpluses of fiscal 2000 and later of 2001 when the Bush administration claimed to have the “second largest surplus” in history, a surplus of $127.2 billion. All of this was under what they call the “unified budget” way of accounting supposedly inherited from the Johnson administration.

When talking about deficits the way they’ve been doing for the last three years, the government will not mention Social Security surpluses. They only talk about how much the government had to “borrow,” sometimes “borrow outside,” to make ends meet.

Of course, Social Security surpluses were planned into the budget as “off budget” revenue when they made up the budget – so in this method of accounting it cannot be considered “over budget” now can it? Isn’t that cute?

For instance, everyone is now talking about a $417 billion deficit run last year, fiscal 2004. If you added in the money “borrowed” from Social Security and other entitlements, the figure would be close to $550 billion or thereabouts, maybe as much as our trade deficit of almost $600 billion. It’s hard to say because many entitlements are being drawn down now, including the Disability Insurance portions of Social Security. Entitlements that once produced a surplus but are not doing so today, such as Unemployment and others.

In short, the federal government’s “crooking the books” makes Enron and cheating private sector companies look like children playing in the same sandbox. In many ways, the nation has moved from voodoo economics to voodoo accounting.

Thirdly, the public labors under a great many misconceptions about government finance, some of which go to prove that they would be lost handling their own accounts, an option they’ve always had.

These misconceptions range from the idea that the government can just print more money, which if it could be done without an even more dramatic drop in dollar value would eliminate the need to borrow, to ideas of Social Security being a Ponzi plan. If Social Security were a Ponzi pyramid, like the chain letter that comes from his invention, people my age would all be multi-billionaires by now and after seventy years of Social Security success as a “supplemental” retirement insurance plan. Wouldn’t that be wonderful? Of course, we’d probably be paying a thousand dollars for a loaf of bread.

All of this comes down to the fact that the federal government is a not-for-profit organization that depends entirely on taxes for revenue. As such, the federal government is the real “pay-as-you-go” organization living from one fiscal year to another while bringing its books to a zero balance at the close of each fiscal year.

There is no one but the American taxpayer responsible for our national debt, both sides of it, or what is deceptively labeled “Debt Held by the Public” and “Intragovernmental Holdings.” It’s the latter where you will find the Social Security trust funds.

Debt is debt, and borrowing is nothing more than a tax on the future. Only taxpayers are held responsible for paying off any part of this debt and that’s what has always made investing in treasuries the “safest investment in the world.”

It has nothing to do with politicians of the federal government "never defaulting on their responsibilities." They couldn't pay off the national debt if they were all John D. Rockefeller clones.

When the government borrows from other countries, organizations, or individuals on the honest side of the debt, it’s all done under contract and should be called “Investor Debt” instead of “Debt Held by the Public” that is so named only in an attempt to separate it from the other scam side of the debt deceptively called “Intragovernmental Holdings.”

When the government “borrows” entitlement money, there’s no contract and the “lenders” don’t even know it happens. What’s more, it’s only these same lenders who must pay it off – that are forced to redeem this side of the debt as well.

Intragovernmental Holdings is where you will find the Social Security trust funds and that’s where we have double taxation plus interest.

It was the American workers who gave the federal government surplus payroll taxes in the first place. The government spent this dedicated retirement money elsewhere, and then gave us debt in return. We bought the debt now in most of Intragovernmental Holdings that should be called “Entitlements and Perks.”

If you can call that “borrowing,” you’re a better man than me Charlie Brown. I call it outright theft and I’m sometimes chastised for doing so. It’s my opinion that American workers might just as well have walked into the U.S. Treasury, plunked down bags full of their hard-earned cash and said; Here, give me some debt, and don’t forget to add annual interest so I’ll have more to pay back someday. It’s that ludicrous.

Whatever money is given the federal government will be spent. Once they have it, they believe it’s theirs, not the taxpayer’s. They will even use it to pay down the credit card (honest borrowing) debt that they’ve run up so they can run up some more. And they’ll tell you that your retirement money was used “for your own good.”

Enron would say the same thing. Weren’t they just protecting the company for their employees and stockholders?

The “Intragovernmental Holdings” side of our huge national debt is the greatest economic scam any government has ever pulled on its own citizens. It includes a lot more than the Social Security rip-off and it’s not even being discussed.

Holding 53 percent of the debt in this category is what makes Social Security the “third rail” of politics. Politicians don’t dare let it come under examination.

It's up to the taxpaying public to press the issue and no one else. And I'm afraid the so-called "watchdog" Fourth Estate and "think-tanks" have either been bought off, coerced into falling in line with the propaganda/coverups, or fear the global consequences of exposing this scam.

It's too bad, because the solution is so simple. Just STOP STEALING THE MONEY.

We are never going to get back what's already been stolen and spent, but we can certainly put a stop to what's happening today. Just last month, January 2005, the Social Security surplus taken was $16 billion.

It's this malappropriation of excess payroll tax money that is Social Security's only real, immediate, and continuing problem. We've got plenty of time to argue and debate the other issues once they're on the table.

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