Blogs by Allen W Smith
Government Loots $500 million From Social Security Trust Fund Every Day!
8/22/2008 9:55:38 AM
Every dollar of the massive Social Security surplus revenue, generated by the 1983 payroll tax increase, has been spent on other government programs, and the government continues to loot and spend more than $500 million of Social Security money each and every day. The net effect is that the trust fund is empty. Unless the government finds a way to repay the money, Social Security will face a crisis when the surpluses turn into deficits beginning in 2017.
Government Loots $500 Million From Social Security Trust Fund Every Day!
Remember the Social Security lockbox? During the 2000 presidential campaign, Al Gore promised to put all Social Security surplus revenue in a “lockbox” so it could not be spent on anything but Social Security benefits. Not to be outdone, George W. Bush promised to do the same thing. On February 27, 2001, during his State of the Union speech, President Bush said, “To make sure the retirement savings of America’s seniors are not diverted in any other program, my budget protects all $2.6 trillion of the Social Security surplus for Social Security and for Social Security alone.”
President Bush broke that promise to the American people. Under his administration, the government has used every dollar of the Social Security surplus to pay for tax cuts, wars, and other government programs. Currently, the government is looting and spending Social Security money at the rate of more than $500 million per day.
As a result of the ongoing looting, the trust fund is empty in terms of real assets. If the Social Security surplus revenue resulting from the 1983 payroll tax increase had been saved and invested as was the intent of the 1983 law, the trust fund would hold approximately $3.7 trillion in real assets by 2017 when the surpluses will come to an end. That would have been enough assets to ensure full benefit payments until at least 2041 when the youngest of the baby boomers would be 77 years old.
Unfortunately, instead of saving and investing the surplus revenue in real assets, the government has “borrowed” every dollar and spent it on other things. Therefore, when payroll tax revenue becomes insufficient to pay full benefits in 2017, there will be no reserve to supplement the inadequate revenue because the money that was supposed to be in the trust fund has already been spent on other things. This means that, in just nine years, Social Security will face a crisis. Unless the government finds a way to repay the “borrowed” Social Security money, there will not be enough Social Security revenue to pay full benefits.
The Social Security trust fund does not hold any real assets. On January 21, 2005, David Walker, the Comptroller General of the GAO sought to make it clear once and for all that the trust fund holds nothing of value. He said, “The left hand owes the right hand, and that has legal, political and moral significance. But it does not have any economic significance whatsoever. There are no stocks or bonds, or real estate in the trust fund. It has nothing of real value to draw down.”
When the government borrows and spends Social Security money, it issues IOUs that are called “special issue Treasury bonds” to the trust fund. But these are not real bonds like everyone else invests in. They are a gimmick created by the government to abide by the letter of the law that Social Security funds must be invested in government securities, but they are not consistent with the spirit of the law. They are simply accounting records of the money the government has “borrowed” from the fund and spent on other programs. They are simply IOUs which have no value unless the government finds a way to pay the money back. These special issue IOUs are available to, and held by, only the government trust funds. They are not marketable and therefore cannot be bought or sold at any price.
Money can be spent, or it can be saved and invested. But once money is spent, there is nothing left to invest. Not a single dollar of the trust fund money has been invested in anything. It was taken and spent, pure and simple. The IOU’s in the trust fund are simply an accounting record of how much money the government took. President Bush confirmed this fact on April 28, 2005 during a nationally televised news conference. He said,
“Our system is called pay as you go. You pay into the system through your payroll taxes and the government spends it. It spends the money on current retirees and with the money left over, it funds other programs. And all that’s left behind is file cabinets full of IOUs.”
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Government Loots $500 million From Social Security Trust Fund Every Day! - Friday, August 22, 2008