THE BABY BOOMERS HAVE PREPAID THE COST OF THEIR BENEFITS
The baby boomers have paid more into Social Security than any other generation. The 1983 Social Security Amendments required the baby boomers to pay for the benefits of the generation that preceded them, which was customary. However, it also required the boomers to pay enough additional Social Security taxes to prepay most of the cost of their own benefits, which was not customary. The $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, was mostly paid by the boomers, but the revenue was used mostly to replace the lost revenue from the unaffordable Reagan income tax cuts that went mostly to the wealthiest Americans. Now, conservatives want to cut Social Security benefits to the baby boomers, who have already prepaid most of the cost of their own benefits.
When I first stumbled onto this information, more than a decade ago, I was outraged, and I wanted to tell the whole world, so they would be outraged too. But nobody wanted to listen. The whole idea of imposing the very regressive payroll tax on working Americans, and then using the revenue from that tax to help fund large income tax cuts to the very wealth is absolutely repulsive, at least to me. Is it repulsive to you?.
The most serious problem that Social Security faces is that the government has “embezzled” every dollar of the $2.5 trillion in surplus Social Security revenue that is supposed to be in the trust fund and spent it.
I have been researching and writing about Social Security for more than a decade, and I have published four books on the subject. The hard fact is that every dime of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been spent on wars and other government programs. Every month, for the past 25 years, the total receipts from the payroll tax have been split two ways. First, benefits for current retirees are paid from the Social Security revenue. Then, all remaining Social Security revenue, not needed to pay that month’s benefits, are deposited into the general fund and become indistinguishable from other general fund revenue.
Most workers think that at least some of the FICA taxes deducted from their paychecks will be saved and used to pay future Social Security benefits. But it doesn’t work that way. Not a single dime of payroll tax revenue has ever been saved and earmarked for the payment of future benefits. To put it bluntly, the government has “borrowed,” “embezzled,” or “stolen” every penny of the $2.5 trillion of surplus revenue that was supposed to be saved and invested. I consider this to be the greatest fraud ever perpetrated on the American people by their government. I have been trying to expose this awful truth for more than a decade, and some courageous people were trying to expose it even before I stumbled onto the scam in 1999.
On October 13, 1989, Senator Ernest Hollings of South Carolina issued the following warning in a speech on the Senate floor.
“…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund ..in the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.”
On January 21, 2005, David Walker, the Comptroller General of the GAO, tried to make it clear to everyone that the trust fund contained no real assets. He said:
“There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”
If anyone has any remaining doubts about whether or not the trust fund contains real assets, those doubts should be removed by the following statement from the 2009 Social Security Trustees Report:
“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.”
I urge everyone who cares about the future of Social Security to please visit my website at www.thebiglie.net to learn more about Social Security and my efforts to expose the scam. Excerpts from my latest book, “THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” are posted on the site. Please feel free to download them.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
Seventy-five years ago, the United States joined the rest of the developed world in making a commitment to provide a financially sound social security system that would take at least some of the worry out of the financial consequences of growing old. In developing the legislation, President Roosevelt stressed the importance of developing a “self-sustaining” system under which funds would be separate from general government financing. He emphatically insisted that the system “should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation.” Six years later, in 1941, President Roosevelt made the following statement:
“We put those payroll contributions in so as to give the contributors a legal, moral, and political right to collect their pension…with those taxes in there. No damned politician can ever scrap my Social Security Program.”
Over the past 75 years, many “damned” politicians have tried to scrap the Social Security system without success. But today with so many “damned” politicians gunning for Social Security, its future is probably less certain than ever before. The biggest threat to Social Security today is the bipartisan fiscal commission that will issue its report and recommendations in December. You can be certain that the conservatives on the commission will push hard for cuts in Social Security benefits.
It is time for those who support Social Security to stand up and be counted. Unless we wage a vigorous campaign against those who would destroy Social Security, we will allow a program, that has been successful and popular for three quarters of a century, to be dramatically altered. The only serious problem facing Social Security in the short term is the fact that the federal government has embezzled every dollar of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, and spent the money on wars and other government programs.
If the government had not looted the surplus Social Security revenue, or if the government repays the embezzled money. Social Security would be totally solvent until at least 2037. With a single action, Social Security could be made solvent for decades beyond 2037. That single action would be to remove the earnings cap so that every American worker would pay Social Security taxes on all of his or her income, just like everyone else, who currently earns less than $106,800, already pays.
THAT’S IT! The only actions required to enable Social Security to pay full benefits for many decades to come are:
1) The government must repay the $2.5 trillion that it has embezzled from the trust fund.
2) The cap on earnings subject to the Social Security payroll tax must be removed.
The Social Security program, which is based on sound principles, has operated successfully for 75 years. If the above two actions were taken, it could operate successfully for another 75 years and beyond. This doesn’t mean that actuarial adjustments, such as gradually raising the retirement age to correspond with the increased life expectancy, should not be given serious consideration. But there is no need to fundamentally change the principles upon which the program was initially built.
Conservative don’t hate Social Security because it does not work or is not sustainable in the long run. They hate it because it does work and can be successful indefinitely. The hate it primarily because it is a government operated program and they hate all such programs.
I have been researching and writing about Social Security for more than a decade and I am the author of four books on the subject. I don’t claim to know more about Social Security financing than anyone else. There are several good scholars who see the problems of Social Security as I do. However, I do consider myself more knowledgeable than most of Social Security’s harshest critics. I urge every reader who cares about the future of Social Security to visit my website at www.thebiglie.net to learn more. Those of us who want to protect and save Social Security, as we now know it, should be working together, because those who want to destroy it are well organized.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
Techdirt has not posted any stories submitted by allenwsmithphd.
(untitled comment)
The baby boomers have paid more into Social Security than any other generation. The 1983 Social Security Amendments required the baby boomers to pay for the benefits of the generation that preceded them, which was customary. However, it also required the boomers to pay enough additional Social Security taxes to prepay most of the cost of their own benefits, which was not customary. The $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, was mostly paid by the boomers, but the revenue was used mostly to replace the lost revenue from the unaffordable Reagan income tax cuts that went mostly to the wealthiest Americans. Now, conservatives want to cut Social Security benefits to the baby boomers, who have already prepaid most of the cost of their own benefits.
When I first stumbled onto this information, more than a decade ago, I was outraged, and I wanted to tell the whole world, so they would be outraged too. But nobody wanted to listen. The whole idea of imposing the very regressive payroll tax on working Americans, and then using the revenue from that tax to help fund large income tax cuts to the very wealth is absolutely repulsive, at least to me. Is it repulsive to you?.
Allen W. Smith, Ph.D.
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
(untitled comment)
I have been researching and writing about Social Security for more than a decade, and I have published four books on the subject. The hard fact is that every dime of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been spent on wars and other government programs. Every month, for the past 25 years, the total receipts from the payroll tax have been split two ways. First, benefits for current retirees are paid from the Social Security revenue. Then, all remaining Social Security revenue, not needed to pay that month’s benefits, are deposited into the general fund and become indistinguishable from other general fund revenue.
Most workers think that at least some of the FICA taxes deducted from their paychecks will be saved and used to pay future Social Security benefits. But it doesn’t work that way. Not a single dime of payroll tax revenue has ever been saved and earmarked for the payment of future benefits. To put it bluntly, the government has “borrowed,” “embezzled,” or “stolen” every penny of the $2.5 trillion of surplus revenue that was supposed to be saved and invested. I consider this to be the greatest fraud ever perpetrated on the American people by their government. I have been trying to expose this awful truth for more than a decade, and some courageous people were trying to expose it even before I stumbled onto the scam in 1999.
On October 13, 1989, Senator Ernest Hollings of South Carolina issued the following warning in a speech on the Senate floor.
“…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund ..in the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.”
On January 21, 2005, David Walker, the Comptroller General of the GAO, tried to make it clear to everyone that the trust fund contained no real assets. He said:
“There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”
If anyone has any remaining doubts about whether or not the trust fund contains real assets, those doubts should be removed by the following statement from the 2009 Social Security Trustees Report:
“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.”
I urge everyone who cares about the future of Social Security to please visit my website at www.thebiglie.net to learn more about Social Security and my efforts to expose the scam. Excerpts from my latest book, “THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” are posted on the site. Please feel free to download them.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
(untitled comment)
Seventy-five years ago, the United States joined the rest of the developed world in making a commitment to provide a financially sound social security system that would take at least some of the worry out of the financial consequences of growing old. In developing the legislation, President Roosevelt stressed the importance of developing a “self-sustaining” system under which funds would be separate from general government financing. He emphatically insisted that the system “should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation.” Six years later, in 1941, President Roosevelt made the following statement:
“We put those payroll contributions in so as to give the contributors a legal, moral, and political right to collect their pension…with those taxes in there. No damned politician can ever scrap my Social Security Program.”
Over the past 75 years, many “damned” politicians have tried to scrap the Social Security system without success. But today with so many “damned” politicians gunning for Social Security, its future is probably less certain than ever before. The biggest threat to Social Security today is the bipartisan fiscal commission that will issue its report and recommendations in December. You can be certain that the conservatives on the commission will push hard for cuts in Social Security benefits.
It is time for those who support Social Security to stand up and be counted. Unless we wage a vigorous campaign against those who would destroy Social Security, we will allow a program, that has been successful and popular for three quarters of a century, to be dramatically altered. The only serious problem facing Social Security in the short term is the fact that the federal government has embezzled every dollar of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, and spent the money on wars and other government programs.
If the government had not looted the surplus Social Security revenue, or if the government repays the embezzled money. Social Security would be totally solvent until at least 2037. With a single action, Social Security could be made solvent for decades beyond 2037. That single action would be to remove the earnings cap so that every American worker would pay Social Security taxes on all of his or her income, just like everyone else, who currently earns less than $106,800, already pays.
THAT’S IT! The only actions required to enable Social Security to pay full benefits for many decades to come are:
1) The government must repay the $2.5 trillion that it has embezzled from the trust fund.
2) The cap on earnings subject to the Social Security payroll tax must be removed.
The Social Security program, which is based on sound principles, has operated successfully for 75 years. If the above two actions were taken, it could operate successfully for another 75 years and beyond. This doesn’t mean that actuarial adjustments, such as gradually raising the retirement age to correspond with the increased life expectancy, should not be given serious consideration. But there is no need to fundamentally change the principles upon which the program was initially built.
Conservative don’t hate Social Security because it does not work or is not sustainable in the long run. They hate it because it does work and can be successful indefinitely. The hate it primarily because it is a government operated program and they hate all such programs.
I have been researching and writing about Social Security for more than a decade and I am the author of four books on the subject. I don’t claim to know more about Social Security financing than anyone else. There are several good scholars who see the problems of Social Security as I do. However, I do consider myself more knowledgeable than most of Social Security’s harshest critics. I urge every reader who cares about the future of Social Security to visit my website at www.thebiglie.net to learn more. Those of us who want to protect and save Social Security, as we now know it, should be working together, because those who want to destroy it are well organized.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
Techdirt has not posted any stories submitted by allenwsmithphd.
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