It’s Official: The Social Security Trust Fund is Empty
Allen W. Smith, Ph.D.
It’s official. The Social Security trust fund has no assets. It was declared empty by the Social Security Trustees in the 2009 Social Security Trustees Report, which was signed by Treasury Secretary Timothy Geithner and the other Social Security Trustees. The acknowledgement was in the form of a single sentence, buried deeply in the report. That sentence reads:
“Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”
There is nothing ambiguous about that statement. It says that the government does not receive any income from redeeming the bonds or from the interest that the “bonds” allegedly earn. Even worse, it says that the government must finance redemptions and interest payments by increasing taxes, reducing government spending, or going still deeper into debt.
Why is it that most Americans know nothing about this? It is because that, with a few exceptions, the media has not reported it. Instead, the media continues to help spread the misinformation that is dispensed by the AARP, other senior organizations, and many politicians. One exception is Allan Sloan, Senior Editor at Large at Fortune Magazine. He agrees with me that the Social Security trust fund contains no real assets.
If the “trust fund bonds” provide no net income to the Treasury, either in the form of interest payments, or through the redemption of the actual bonds, where is the government going to get the money to replace the $2.5 trillion that it has looted from the trust fund? I believe the American people deserve to have this question asked and answered by the media.
I appeared on CNN with Lou Waters on September 27, 2000 and tried my best to convince him that the government was spending all the surplus Social Security revenue. He looked at me in disbelief and asked, “Are you a voice crying in the wilderness?” As it turned out, I was a voice crying in the wilderness in 2000, and I continue to be such a voice a decade later. During the ten years that I have been trying to expose the government’s misuse of Social Security revenue, an additional $1.4 trillion has been looted and spent by the government.
People, who were in a position to know the truth, have been stating the above fact publicly for years. But nobody has been willing to listen. Some examples:
“I come to you as a managing trustee of Social Security. Today we have no assets in the trust fund. We have promises of the good faith and credit of the United States government that benefits will flow.”—Paul O’neill, Secretary of the Treasury, June 19, 2001
“There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”—David Walker, Comptroller General of the Government Accountability Office (GAO), January 21, 2005
“There is no trust fund, just IOUs that I saw firsthand that future generations will pay—will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs.”—President George W. Bush, Speech at West Virginia University at Parkersburg, April 5, 2005
Such public statements have been rare, and they have not received much news coverage. On the other hand, the AARP and the NCPSSM have no difficulty in getting media exposure for the misinformation they dispense. They bombard their members and the public with the message that Social Security is very solvent and can pay full benefits until at least 2037 without any action. That simply is not true. Although I have been a member of both organizations for years, I am persona non grata with both of them. They refuse to respond to my letters, emails, or phone calls. Although I have been a vigorous foe of privatization efforts and I have been working hard for more than a decade to help save Social Security as we now know it, by exposing the looting of Social Security, these organizations perceive me as an enemy and refuse to have anything to do with me. I think their intentions are good and that they just have their heads buried so deeply in the sand that they don’t want to hear anything but their own propaganda.
The sad fact is that, in just six or seven years, the cost of Social Security benefits will begin to permanently exceed payroll tax revenue, and the government will have to cut benefits or raise taxes. The public just seems to be incapable of accepting the harsh reality that for the past 25 years, our government has spent all of the $2.5 trillion in surplus Social Security revenue that was intended to be used for funding the retirement of the baby boomers. It is true that the government has a moral and legal obligation to repay the looted money, but it seems highly unlikely that it will do so. The primary purpose of the proposed fiscal commission is probably to sweep all the evidence of wrong doing under the rug and proclaim that Social Security must be cut in order to help reduce the deficit. If this happens, the evidence of “the great Social Security fraud” will be covered up, and Social Security benefits will be cut under the guise of a patriotic need to reduce the deficit.
Dr. Allen W. Smith, is Professor of Economics, Emeritus, Eastern Illinois University. The author of seven books, Smith has been researching and writing about Social Security financing for the past ten years. Visit his website at www.thebiglie.net.