US President Barack Obama (C), alongside Erskine Bowles (L) and Sen. Alan Simpson (R), co-chairs of the National Commission on Fiscal Responsibility and Reform, speaks on financial reform in the Rose Garden of the White House in Washington, DC, April 27, 2010. (Photo by: Saul Loeb/AFP/Getty Images)
News » June 14, 2010
Social Security’s Porcupine Politics
Obama’s deficit reduction panel isn’t afraid of touching the ‘third rail’ of American politics.
If the status quo continues, said Bowles, who served as Bill Clinton's chief of staff, "America is going to be a second-rate power, and I don't mean in 50 years."
For decades, Social Security has been considered a “third rail” of American politics: touch it and you’ll get burned in the next election. George W. Bush only pushed for partial privatization of the insurance system after he began his second term, and his proposal went nowhere in Congress.
Five years later, altering Social Security is back on the agenda. In February, Obama created the bipartisan “National Commission on Fiscal Responsibility and Reform” to recommend ways to reduce the federal deficit, which is expected to reach $1.6 trillion this year. Convening the commission’s first meeting in April, Obama said that “everything has to be on the table.” Helping set that table, he appointed one of the country’s most outspoken critics of Social Security and other “entitlements” to co-chair the commission: Alan K. Simpson.
Simpson, a 78-year-old former Republican senator from Wyoming, knows what threatens America. “This is about your children,” Simpson said about federal deficit reduction on PBS’ Newshour in February, after his appointment. “This is about the future of America. This country is going to the bowwows unless we deal with the entitlements and Social Security and Medicare.”
Simpson supported Bush’s plan to privatize Social Security, which would have allowed people to divert a portion of their Social Security payments to the stock market. He isn’t the only commission member speaking about cutting Social Security. Erskine Bowles, Obama’s other appointee to co-chair the commission and a top Democratic fundraiser, said in March, “We’re going to mess with Medicare, Medicaid and Social Security.” If the status quo continues, said Bowles, who served as Bill Clinton’s chief of staff, “America is going to be a second-rate power, and I don’t mean in 50 years.”
According to the nonpartisan Congressional Budget Office (CBO), this year Social Security will pay out more in benefits than it receives in payroll taxes, a threshold the government hadn’t expected to cross until about 2016.
Other government expenditures are climbing more rapidly than expected during the 2010 fiscal year, in part due to the recession and continued high unemployment. According to the CBO, unemployment benefits will be up $39 billion, or about 83 percent over last year, and Medicaid will be up $17 billion, or 15 percent.
Federal Reserve Chairman Ben Bernanke laid out America’s quandary in April during a speech at the Dallas Regional Chamber of Commerce: “To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.”
The National Committee to Preserve Social Security and Medicare believes the deficit reduction panel will mainly target one thing: Social Security, which Barbara Kennelly, president of the advocacy organization, says “has not contributed one dime to our nation’s bleak debt and deficit picture.”
“To the contrary, Social Security’s trust fund surplus has been used for years to help balance the federal books,” Kennelly says. “Our hope is that this Presidential Commission will … ensure Social Security does not become a piggy bank to pay for the fiscal failures of the past.”
In December, the 18-member commission will issue its recommendations, which must be approved by 14 members. (Ten members are Democrats, and eight are Republicans.) Expect the group to advocates changes to Social Security, and expect Simpson to be right about what kind of national debate will follow: “It’s going to be like giving dry birth to a porcupine.”
ABOUT THIS AUTHOR
Margaret Smith, a summer 2010 In These Times editorial intern, is a journalism student at Columbia College in Chicago.
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Reader Comments
Most articles, currently being published totally ignore the most urgent problem facing Social Security. That problem is the fact that, every dollar of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike has already been spent by the government.
Most of the articles just amplify the misinformation that the AARP and the NCPSSM have been bombarding their members, and the public, with for years. The general message is that Social Security has $2.5 trillion in, “good-as-gold,” Treasury bonds stashed away in the trust fund that will make possible the payment of full Social Security benefits for decades to come without any action. The message may be comforting to those who believe it, but it is not true.
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.
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 have been trying to expose the Social Security scam 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 (D-SC) 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.”
A year later, on October 9, 1990 Senator Harry Reid (D-NV) made a similar warning in a Senate speech. He said:
“…on that chart in emblazoned red letters is what has been taking place here, embezzlement. During the period of growth we have had during the past 10 years, the growth has been from two sources. One, a large credit card with no limits on it, and, two, we have been stealing money from the Social Security recipients of this country.”
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
Posted by Allen W. Smith, Ph.D. on Jun 14, 2010 at 11:37 AM
In order to provide readers with more information than I could include in my earlier post, I am reproducing excerpts from an article that I recently published.
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.”
I appeared on CNN with Lou Waters on September 27, 2000 and tried 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. I have been trying to expose the Social Security scam for as long as Harry Markopolos tried to expose Madoff’s Ponzie scheme.
People, who are 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), Speech in Washington DC, 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.
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.
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.
Posted by Allen W. Smith, Ph.D. on Jun 14, 2010 at 11:40 AM
Any thinking person has known for years this was a Ponzi scheme. I never wanted to participate in Soc.Sec., but was required to pay my “Self-Employment Tax — approx. 1’1/2 times what most people paid).
Until the last few years Congress wasn’t even paying any — ZIP! Currently, while many of us are it terrible employment shape — they are still getting raises, better benefits and will not come under the new health plan. Clue: Theirs is better.
Since the unfunding of Soc. SEc is due to Congress stealing the money to pander for votes, it seems only right Congress should be the first to lose if “entitlements” must be cut.
Let’s push for a 28th Amendment with this provision…
28th Amendment will be as follows:
“Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators or Representatives, and Congress shall make no law that applies to the Senators or Representatives that does not apply equally to the citizens of the United States .”
Posted by whattheheck on Jun 15, 2010 at 7:18 AM
The people of The United States bailed out the big banks: those banks have been enjoying record profits.
The U.S. government took all of the surplus revenue out of Social Security: it has been enjoying making an empire.
A commission is not needed: it is time for the big banks and the U.S. government to bail out Social Security.
How’s that for a porcupine?
Well… seems to me the right and decent thing to do.
Posted by Christopher Stroud on Jun 15, 2010 at 8:17 PM
Here, here, Christopher Stroud! The talk of cutting Social Security is almost barbaric. How can we as a country neglect the most vulnerable citizens—and most everyday citizens! Social Security is vital to our country. And not only that, it is completely fiscally sound. Check out this great series on it at New Deal 2.0 this week: http://www.newdeal20.org/category/social-securitys-fiscal-fitness/
Posted by Bryce Covert on Jun 16, 2010 at 11:40 AM
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