What happened to it?
Want to know how and why this happened? Hang on, I’m going to tell you anyway.
For seven years in a row, beginning in the Ford Administration, Social Security had a shortfall due to higher and higher unemployment. Fewer people paying into the system. Social Security could have adjusted for this as they had so many times in the past, but they didn’t and had to turn to their trust fund each year. They never withdrew more than $5 billion at a time, but it was enough to make politicians go bonkers. Each time, money had to be taken out of the General Fund of the Treasury. Money the politicians had already earmarked and promised elsewhere.
Social Security knew that all it had to do was to wait for the recession to end, for employment to pick up, and the problem would be over. Besides, they still had about $25 billion left in their trust fund. But the Washington borrowholics started running around Washington like Chicken Little crying about how Social Security was falling apart, wanting to change what hurt them, and asking Alan Greenspan to come over from his private practice to help.
In March of 1983, only one month later and after the above “problem” was over, Congress passed and Reagan signed a bill raising FICA taxes to 12.4 percent and 15 percent for the self-employed.
This bill took Social Security off the pay-as-you-go system and put it on what was called a “partial reserve” system. In other words, from this point forward Social Security would garner more revenue than required to meet commitments to the retired and disabled. For years to come, Social Security and Medicare would each accumulate a surplus from FICA taxes.
There is nothing wrong with a partial reserve system, as long as the reserve is invested wisely. It could have made Social Security into something resembling a true pension plan rather than the supplemental retirement system it was originally meant to be.
Many times I feel that younger generations need to be reminded of the utter devastation caused by the Great Depression of the Thirties. People jumping off roof tops, almost anyone with debt losing everything they had, even their homes. Soup and bread lines, and needy people snatching clothes off their neighbor’s backyard laundry lines. The government sponsored CCC and WPA programs where, for example, people dug and refilled ditches or calculated square roots with pencil and paper just to be employed—to take handouts with some dignity. The breeding ground for much needed unions like the communist led CIO, later to become the AFofL/CIO and finally just the AFof L or AFL. Marches in streets to protest job shortages and unreasonably low wages. A period of ten years where the rate of population increase dropped more than in half because Americans were afraid to bring children into the world and immigrants feared coming here, despite the rise of Hitler’s terrorist regime in Europe. A period that wrecked more havoc than any war the country has ever been in, followed almost immediately by the rationing of staples like gas, food and clothing to support a war effort and send much of our workforce overseas.
The few children that were born in the thirties went to schools that were half the size they had been for children born before the depression. In the fifties, this smaller number entered the workforce and kept Social Security humming along perfectly despite their small numbers. Compare that to the fear stories of people now living a few years longer and supposedly about to drain the supplemental retirement system. None of the spinsters mention the depression babies, do they?
Also, the fear mongers will point to figures showing that, when Social Security started, as many as 14 people were contributing to the retirement of one benefactor while, today, the figure is more like 3-to-1 and will someday be down to 2-to-1. What these propagandists do not tell you is that, when Social Security started, the amount of payroll deduction by each working person was one percent, with nothing from the self employed. Scramble that one percent of payroll into the mix and see what the comparison becomes. Payroll contributions didn't rise to 2 percent until 1950 and the self employed were not included until 1951. It hit 3 percent in 1960 after the disabled were included.
Social Security was not a new or American idea. Germany and, on our own continent, Chile already had such systems in place long before we adopted one. And such a system had been under discussion in the United States since shortly before the First World War. The Great Depression only made the need overwhelmingly obvious.
When I hear economists and commentators spout figures saying that today’s average Americans don’t have more than $1,200 in savings and carry about $7,000 on credit cards, I wonder how today’s smugness might compare to that of the 1928-29 flapper’s era. The period just before the Great Depression.
Unfortunately, everything we have contributed in excess to the Social Security system has been stolen by Congress and the Administration, the federal government, and spent where it was not supposed to be spent. Since 1983, Social Security has been turned into a slush fund for politicians to spend willy-nilly without having to instead clean up their own wasteful habits—pork barrel favors and outlandish spending. Efforts to legislate behavior and education have been a small part of this waste.
Republicans and Democrats alike have participated in the completely nonpartisan venture of ripping-off their own citizens. And it doesn’t apply only to Social Security. Dozens of other entitlements from gas taxes to Indian Trust funds have been plundered with equal abandon.
Since they leave double payment nonmarketable bonds behind in debit accounts that they call “trust funds” we can easily measure the extent of this pillage. For instance, the Social Security Trust Fund now holds a grand total of $1.007 trillion of these double payment promissory notes that you or your children and grandchildren will have to redeem some day. In one way or another, you will buy them back in what amounts to a second payment, double taxation. You made the first payment to a partial reserve system that should have been working for you. Instead, your extra payments actually work against you. They are stolen, replaced by bogus future tax bonds, and given more phony bonds in annual interest. The net result is that you go more than 100 percent in the hole.
This rip-off continues at the rate of about $12 billion a month, right now, today, and will continue until someone puts a stop to it.
You don’t hear any candidates for President talking about this, do you? In fact, we’ve got candidates who talk about providing prescription drugs for the elderly while the Medicare Trust Fund topped one-quarter trillion this year, $250 billion in extra payments that are gone, blown, spent on whatever else they wanted and it sure wasn’t prescription drugs.
We’ve got one candidate who talks about “lock-boxes” for Social Security and Medicare, after Senate Democrats have already shot down two such lock-box bills that passed the House of Representatives by votes of 416-to-12 and 422-to-2 during the last year and a half. One of these bills, the latest one (HR-3859), even promised to lock up Social Security and Medicare excesses for everything except payment against the national debt. Another thing that this same candidate makes a big to-do about.
Well, some of the Treasury’s figures for fiscal 2000 are in now. And guess what? The national debt went up, not down. It’s almost $5.7 trillion now. Five years ago, when we had government shut-downs over balancing the budget, the debt stood at a ceiling of $4.9 trillion. That’s an $800 billion increase in just over four or five years folks. Does that sound like your present government has been paying down the debt? Go figure.
Personally
I was once a Democrat. After seeing what has transpired in the last eight years, I will never vote a democratic ticket again. And I’m not sure I’ll vote Republican either, although in this election it seems to be the lesser of two evils. Still, I can’t ignore what happened in the twelve years preceding the Clinton Administration. Years when Reagan put us on the path to a sky-rocketing national debt, trickle-down economics, and started the Social Security slush fund. Not to mention the Iran-Contra sale of weapons to our enemy and the “big red menace” from Nicaragua where we supported the ex-henchmen “freedom fighters” of a dictator. Seems like the two cults are equally to blame for the mess they are now in.
Just because one candidate seems to self-destruct with almost every word he utters, it doesn’t necessarily follow that we can trust the other guy.
Also, I am now firmly convinced that the only reason the two cults finally came together on a November, 1997, agreement for a Balanced “Unified” Budget was that they figured out when the entitlement rip-offs would be large enough to replace any deficit (honest borrowing) ever run in the past. The Beltway bandits were able to anticipate slush fund multiples far exceeding anything that ever came from honest borrowing through the sale of Treasury securities on the open market; i.e., running a deficit. Enough to pay off the national debt that they had run up to beat the Russians into the ground and still have change left over.
A “Unified” budget is nothing more than an accounting trick of lumping everything together in order to make it more difficult to decipher precisely how much is being stolen from entitlement surpluses. It has no other purpose.
The entitlement trust funds now account for almost 40 percent of the national debt. That’s a rise from 17 percent in 1992. A rise due mostly to the current government’s money laundering operation of moving debt from one credit card to another. Paying down the cash bearing interest “public” side of the national debt while running up the entitlement trust fund side where they can simply issue more bogus bonds to cover interest payments due. A scam extension of the main scam.
One candidate even promises you a rebate on the interest money saved. Just like a car dealer, he promises that if you give him $100 billion, he’ll give you back the $7 billion he saves on interest, “targeted” to certain members of the public. Isn’t that nice?
It’s enough to make one wonder why we need a government at all. We could hire managers who would do a better job and be held accountable at the same time.