AARP The American Association of Ridiculous Propaganda

Pretending to represent the elderly, the American Association of Ritired People (AARP) the Washington based credit card company once more showed its true colors in an interview with Brookings Institute economist Robert D. Reishauer, former head of the Congressional Budget Office (CBO). We will cover this interview and piece of absolute propaganda point-by-point in what follows. The following chart will be important in what we're going to cover.

Has Social Security ever been raided? from AARP BULLETIN -- January 2000 Vol. 41, No. 1, Washington, D.C.

INTRO: After months of partisan rhetoric in which leaders of each party accused the other of "raiding" Social Security, many Americans were left with the feeling that their Social Security taxes have been stolen over the years. .............. Bulletin Editor Elliot Carlson last month asked Brookings Institution economist Robert D. Reischauer to discuss the raiding issue and the impact of congressional action on the Social Security trust fund. Reischauer served as director of the Congressional Budget Office (1989--95) and recently was named president of the Urban Institute, a leading Washington research group, effective February.

AARP American Assoc. of Ridiculous Propaganda

POOP People's Open Opposition Party

BULLETIN: GOP House Speaker Dennis Hastert said on "Face the Nation" in September that House Republicans were not going to "dip into Social Security or raid the Social Security trust fund." Has the fund been raided--its money stolen? REISCHAUER: The raiding notion is based on a misperception; the government has never raided the trust fund. The Social Security system lends its surpluses to the Treasury, which uses these resources to finance other government activity and thereby to borrow. All the money lent to the Treasury will be paid back with market-based interest when Social Security needs the funds to pay benefits. 2) BULLETIN: When these surpluses are loaned to the government to finance other programs, is the trust fund made weaker as a result? REISCHAUER: Not in the least. Such lending does not affect current or future benefits, or current or future program revenues or the balances in the trust fund. And it therefore has no (negative) impact at all on the strength and security of the system. The Social Security system has to do something with its surpluses. By lending them to the Treasury, it is investing them in the most secure of assets--namely U.S. government bonds. 3) BULLETIN: Now the last Congress, in its appropriations for fiscal year 2000, exceeded the spending caps by about $35 billion or $37 billion, leaving the non-Social Security portion of the budget about $17 billion in deficit. Presumably this deficit will be financed by tapping the Social Security surplus. Will the trust fund be poorer by this amount? REISCHAUER: No, this will not affect the strength of the trust fund in any way. 4) BULLETIN: We now have a standoff in Washington in which the leaders of both parties are pledging they won't touch the Social Security surplus to finance either increased spending or tax cuts. From an economic standpoint, is this a good development for Social Security? REISCHAUER: Yes. Both parties have pledged to use surpluses in Social Security only to reduce the debt that the federal government has issued to the public. That does not constitute fundamental reform of Social Security. But it will strengthen our economy and our budget in ways that indirectly will benefit Social Security. For example, redeeming national debt will free up resources that the private sector can use for productive investments that will boost economic growth. If the economy is larger, the unavoidable burden of supporting benefits for ever larger numbers of retirees will be easier to bear. 5) BULLETIN: So the standoff between the parties is a good thing. REISCHAUER: Yes. It's not a substitute for fundamental Social Security reform, which at some point will be required. But as far as Social Security is concerned, it's certainly a lot better than using these resources to finance tax cuts or more spending. 6) BULLETIN: We now have Republican leaders--and many Democrats joining them--calling for a "lockbox" mechanism that would seal off the Social Security surplus from being used to pay for other government activities. Can this be done? REISCHAUER: There's no effective procedural way to create a lockbox. Nevertheless, we have recently adopted a psychological lockbox that may be more effective than any new formal budget rules. For at least the three decades before 1999, we regarded the measure of fiscal rectitude to be; Balance in the overall budget. Counted as part of the overall budget was everything from Social Security to defense on the spending side and from payroll taxes to gas and income taxes on the revenue side. .......About a year ago we changed our measure of fiscal rectitude to be; Balance in the budget, not counting the surpluses in the Social Security program. .......This means there is a political imperative to wall off the surpluses that develop in Social Security and use them for debt reduction. 7) BULLETIN: If enacted, would the "lockbox" make the Social Security trust fund any safer than it is now? REISCHAUER: No. It would have no impact on the security of the trust fund. The trust fund is as secure as possible right now. 8) BULLETIN: How did the government's increased fiscal rectitude work in practise last year? REISCHAUER: In fiscal year 1999, the non-Social Security part of the budget was in deficit by about $1 billion, while Social Security recorded a surplus of about $124 billion. So the Treasury Department used $1 billion of the Social Security surplus to finance that tiny deficit in the non-Social Security accounts. The other $123 billion was used to pay down the national debt. 9) BULLETIN: Was that $1 billion lost to the Social Security trust fund? REISCHAUER: In return for that $1 billion the Social Security trust fund received $1 billion of Treasury securities. Those bonds were every bit as sound and secure as the $123 billion worth of bonds that the Treasury gave to the trust fund for the surplus that it used to redeem debt held by the public. 10) BULLETIN: Many people trace Social Security's financial ills to President Johnson's decision in 1968 to unify the Social Security trust fund with the general budget. Even lawmakers embrace this idea. Speaker Hastert declared on "Face the Nation" that Congress has spent Social Security trust funds "ever since LBJ in [1968], passed the Great Society and funded the Vietnam War and took the Social Security trust fund and put them on the budget." REISCHAUER: That is wrong. The unification of the budget had no substantive impact on the way in which Social Security surpluses were invested or the soundness of the Social Security trust fund. 11) BULLETIN: So the workings of the program continued unchanged? REISCHAUER: Correct. 12) BULLETIN: If Social Security's problems can't be traced to raiding of the trust fund, what is the cause? REISCHAUER: The problem is largely one of demographics and past decisions to pay previous generations of retirees adequate benefits even though they made very modest contributions to the system. The baby-boom generation will soon be retiring and the smaller baby-bust generation that follows won't contribute sufficient amounts to support the benefits promised to the baby boomers unless payroll tax rates are raised significantly. .......In addition, we are living longer. Tomorraow's retirees will receive benefits for more years than today's or yesterday's retirees. Unless we raise the age of eligibility along with the increases in longevity, taxes will have to be raised or benefit levels cut a bit. 13) BULLETIN: Despite all that, we keep hearing from politicians that the reason the trust fund is in trouble is because it's been raided. REISCHAUER: While that is not the case, the perception may be a healthy development. Such rhetoric is being used to give politicians the intestinal fortitude needed to achieve and maintain balance in the non-Social Security part of the budget. .......If both parties try to score points by accusing the other of "raiding the trust fund" whenever policy proposals threaten to create deficits in the non-Social Security portion of the budget, then it's more likely that fiscal discipline will be maintained. 14) BULLETIN: So there;s a silver lining to the rhetoric on Social Security. REISCHAUER: Yes.

Of course the trust fund has never been raided. It never holds any real money, therefore it cannot be raided. We've covered this months ago and in great detail. In fact, we covered it in terms of the same Hastert speech they are referring to here. But isn't it interesting how, despite the title of this article, AARP can ask the question and R. can focus on the trust fund instead of the rip-off? Then, R. goes on to talk about "borrowing" as though this isn't outright theft. Even covering how you will pay it back under the "Pay-It-Again, Sam" plan and "Bedwetters." Mr. Reischauer qualifies to be included under confessions of the guilty.

Question 2: Now, we've got AARP deliberately directing the question to the trust fund. Not asking how the general fund (Treasury) "borrows" this money, under what sort of contract, and what the hell does "weaker" mean? Does the trust have influenza or some other illness? We are talking about money here are we not? Of course, the system isn't impacted negatively. We're talking about surpluses here. SS has more than enough money to operate. It's the surplus that's stolen and it looks as though R does not consider increased national debt as a negative.

Quest. 3: If it wasn't so deceptive, you would have to believe that AARP or its Bulletin Editor is one of the dumbest people around. How could it make the trust fund poorer? Social Security is taking in over $6.6 billion per month in excess, Congress takes it all every month, and the trust fund gets nothing but more bogus bonds. The trust goes up, not down. And the public debt becomes greater. The national debt rose $130 billion last year from just this sort of activity.

Q 4: This is the plan to pay off the national debt with our retirement money while pretending that it isn't stealing as usual. (see: the Clinton plan and Laundering) The truth is that there is no magic way to pay off the national debt. Go to any mortgage table or any mortgage banker and you will find that paying off $5.7 trillion, at the lesser interest rate of 5% (we pay 6 or better), will take 50 years to pay off the debt with annual payments of $350 billion. You can look at alternate reductions from there. The stretch of imagination R is telling you, is that Joe Blo investor will buy something else if he can't buy bonds. If he buys a yacht, the sales tax will "indirectly" benefit Social Security. From his yacht, Joe won't mind kicking in a little more for the retired. That's what R is saying. Read it again.

Q. 5: It's a good thing they're stealing our retirement money to spend it on something worthwhile; i.e., a feeble attempt to pay down the national debt that they're run up on our children. Laundering

Q. 6: Finally, he's giving us some straight scoop but it's still wrapped up in deceptive verbiage. "There's no procedural way to create a lockbox" because all cash remains in the General Fund, the Treasury. Also why there's never cash in government trust funds either. The so called "lockbox" is nothing more than a "psychological" promise not to steal this money or spend it elsewhere. A means of making it embarassing for a politician to ask for this money on the floor of Congress; i.e., a politician who begs for millions every election is supposed to be embarassed to ask for Social Security's money. .......Then R goes on to tell you how other entitlement money (gas tax) has been counted as "revenue" but now they promise not to do this with Social Security surplus.

Q. 7: No kidding. Since the trust fund holds no cash, only promissory notes (debt for you and your kids to pay again), how can it be insecure?

Q. 8: Don't you just love the words? Fiscal rectitude work in practise. A professor once told me that if you can't say it in plain English, it's only because you don't understand it. ........R. is then giving us plenty of reason to believe that he's been out of the loop too long. Nothing worse than getting the numbers wrong. Almost $69 billion was what Social Security had for a surplus and was stolen by Congress. The rest of the $124 billion he's talking about was INTEREST paid the trust with more bonds; i.e., no cash transfer, just an addition to your future bill. How much, if any, they used on the national debt is pure speculation. The national debt rose $130 billion last year, all due to interest paid trust funds. There was no deficit from borrowing honestly on the open market.

Q. 9: This $1 billion is pure crapola, meant only to make you think that there was a minor exchange. If you read carefully R is telling you that they take all of the surplus and substitute bogus bonds in the trust fund, surplus and interest together. The interviewer is just too stupid to realize this or knows damn well he doesn't want to clarify it.

Q. 10: Is this a question? The statement is absolutely false and R. tells him that. There is absolutely no Bill, Act, document, memo, letter, Executive Order, or anything at any time in the Johnson Administration having to do with the "unified budget" way of accounting. The idea of lumping everything together is an accounting procedure probably implemented by some grunt. .......The important thing is, along with Q. 11, that Social Security surpluses have always been stolen. It's simply that so long as the amounts were relatively small no one noticed, cared or let the cat out of the bag. They would be easy to make up from taxes in the general fund if needed during any given year prior to 1983. (see Chart, above)

Q. 12: Finally, a real question. You might as well take everything talked about to this point and throw it out the window. .......Yet, R answers by giving the party line about the baby-bommer myth and actuarial superstitions that are only partly correct and easily managed. They would expecially be easily managed if Social Security surpluses were invested where they did some good. .......The AARP interviewer doesn't want to hear this and tries to get the subject back on track.

Q. 13 & 14: All they do is go back to the beginning here. Relying on the absolute stupidity that some Congressmen, like Speaker Dennis Hastert, may truly believe there is money in trust funds. I'm sorry, but I don't think most congressmen are that dumb. I think its simply easier to refer to trust funds this way; i.e., the same way the common man would, as a fund holding real assets. Only federal government trusts hold nothing but notes of legal indebtedness. But you do, hopefully, see the sort of trouble and open door to propaganda privded by such misuse of words, don't you? .......What's damaging, is that most of the senior citizens that receive and read this publication will believe this article and are a somewhat captive audience for AARP. Most are unknowledgable about computers and the Internet, and in fact are downright afraid to touch a computer. They will never read an article like this little antinomy, and they certainly cannot go to AARP's web site to read the rest of the interview, as the American Association of Ridiculous Propaganda recommends at the end.

THE END