This fiscal year, 1999, Social Security will have an excess of approximately $67 billion. This is all overpayment you contribute through your FICA taxes. Normally it would go on top of the $739 billion already attributed to the Social Security Trust Fund. Congress and the Administration have always taken this cash to spend elsewhere, replacing it with nonmarketable Treasury Bonds you or your children must someday redeem. It results in double taxation, plain and simple. And it represents criminal theft on the part of our leaders in Washington.
In his 1998 State-Of-The-Union address President Clinton promised to devote the entire year to coming up with solutions to Social Security's "problems." Problems he said were based on the fable that " 76 million baby boomers " were looming on the horizon and about to drain Social Security's assets. Although this lie about more than half of today's workforce being born between 1945 and 1965 was pure fabrication, the media spread it everywhere without bothering to check the census. It panicked everyone and set the stage for reform. Clinton claimed that the time to act was now. As he put it: "We must fix the roof while the sun is shining."
The intention was to develop ways of increasing the Social Security slush fund by cutting benefits, increasing the retirement age, and any other means that might seem palatable to the public. Having reduced the deficit and about to "balance the budget" (the "unified" budget) four years before the agreed upon date of 2002, the administration wanted to increase revenue somewhere. Simply put, your government would rather steal trust fund money than run a deficit; i.e., borrow extra cash honestly by selling more Treasury securities on the open market. And trust funds are growing to the point that they will, by 2002, provide enough cash to replace most needs for a deficit.
After a year and a half of debate, staged grass roots "town hall" meetings, and changing estimates of precisely when Social Security would go broke, we have nothing in the way of meaningful reform-nothing at all but childish plans to put all this cash in a cookie jar. Proof that you cannot count on the pirates, themselves, to come up with constructive solutions.
Both the President and the House of Representatives have proposed "lock boxes" as a way to protect Social Security excess funds until they can decide what to do. Admittedly, they are "protecting" the money from their own greedy grasp, but each plan differs only in terms of how many votes it takes to tap into these funds in case of an emergency need for the money and other small points. Hey, they've been robbing trust funds. What makes you think a lock box is going to stop them?
All a "lock box" means is that Social Security's and Medicare's excess money will not go the way of all government income. It will not be put into the general fund Treasury, but instead, will be put somewhere else. No one defines exactly where it will go. This is one of the silly things about the plan. There's more.
No interest
There is absolutely no mention of interest to be paid on this money locked away somewhere or how such interest would be paid. Would interest be paid in cash? Or would more bogus bonds be issued?
One thing's for certain. The government owes the Social Security Trust Fund approximately $48 billion in interest due against the $739 billion the trust held at the close of the last fiscal year. We should make them pay this interest in cash also. Put it all in the "lock box" instead of indenturing our children with additional debt. If the lock box idea is any good, then it should work for in-cash interest payments too.
Last year, the Social Security Trust Fund increased $99.1 billion. $55 billion came from excess payments every working American paid during fiscal 1998. $44 billion came from interest that was paid against the $640 billion the trust fund held at the close of the previous fiscal year. The interest rate was 6.9 percent.
Here's another interesting point. If the lock box idea is made effective this year, then the government is going to be forced to come up with some heavy cash. They've been spending Social Security's excess income for the last 8 months or so. This means that a good part of Social Security's excess $67 billion for this year is already gone. It's been spent on illegal wars in Kosovo, bailing out the IMF and other pork barrel projects. Would Congress and the Administration come up with real cash to replace it for the lock box?
Most likely, any lock box law would not go into effect until next year. That means the interest would not be due until the following year. Any hope of real cash interest payments would be 2 years in the future--more stalling.
You lose
No matter how you look at it, $67 billion sitting idle in a lock box, not working for you, not gaining interest, would be losing more than $12 million per day at the sort of interest rate trust funds are supposed to make, say 6.6 percent.
Trust fund nonmarketable bonds have always been paid a higher interest rate than marketable bonds. But, even if we figured it at the lower 5.9 percent that 30 year Treasury bonds sold on the open market are paying today, this would still amount to a lose of about $11 million per day.
Do you know of any private pension fund that operates this way? Instead, even the worst are gaining at least 10 percent interest, not losing it. The better ones, like TIAA-CREF, gain about 17 percent annually.
Just think of the kind of true retirement system Social Security could be if its trust fund wasn't in the hands of crooks.
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