ENGLISH
FOR
CONGRESS POSITION PAPER (Revised January 2012)
The
Federal Social Security Program has been the most outstanding
surviving legacy of the reforms implemented by Franklin
Roosevelt's Administration as the consequence of the national
economic and financial collapse following the stock market crash
of 1929. Other significant reforms such as the
Glass-Steagall Act to erect secure firewalls between the
banking, insurance, and stock markets have been negated by the
so-called financial deregulation (i.e .oversight abdication)
legislation enacted in the late 1990s. These oversight
hazards have been exacerbated by the rapid increase in the
number and impact of hedge funds which operate in concert with
the advent of widespread speculation in derivatives by many
financial institutions, including those chartered and insured by
the Federal government. Fortunately, the former Bush
Administration was unsuccessful in its attempt to raid the cash
contributions of workers flowing into the Social Security
program and divert them into financial markets under the guise
of privatization and individual management of pensions.
When the Social Security System was established, it was funded
on a pay-as-you-go basis. Estimates of the cash needs to
pay beneficiaries in the near future were used to set and
periodically adjust the shared percentage of payrolls withheld
from both employees and their employers to provide funding for
current benefit outlays. Occasionally, these
estimates were affected by recessions that caused shortfalls in
payroll contributions needed to pay benefits and the Congress
was then suddenly obliged to provided stop-gap funding from
General Revenue receipts. The Reagan Administration
implemented a so-called program to "save Social Security" by
mandating a 15% surcharge on payroll tax receipts beyond that
needed to pay current benefits with the surplus amount "saved"
then deposited into a fraudulent "Trust Fund" that would
"be there to pay estimated benefits through the year
2030". The flaw in this trust fund concept is that the
surplus cash from payroll taxes was then given to the Treasury
to fund Reagan's tax cuts and his arms race for "Star Wars" and
other weapons systems used to intimidate the Soviet Union.
Special bonds (i.e. IOU's) earning a lower rate than market rate
of interest were then printed in exchange for the surplus cash
and deposited into the so-called "Trust Fund".
The fallacy of this funding gimmick was that the Federal
government ended up lending money to itself that would have to
be repaid from future budget surpluses when cash from the trust
funds would be needed at that time to pay benefits.
That time is now rapidly approaching and when the present
surplus in payroll tax receipts will turn negative and the trust
fund will need to be tapped to obtain cash to continue benefit
payments. But, alas, thanks to the profligacy of the Bush
Administration and ongoing economic policy failures, no
budget surpluses are forecast anytime in the future and either
payroll taxes will have to be increased or benefits reduced
if Social Security checks are not then returned marked
"insufficient funds"! What isn't mentioned is that
over $3 Trillion of workers’
pension contributions into the trust fund has been spent for
other purposes such as tax cuts for the already wealthy and
replaced with low-interest bonds (IOU's). No doubt, future
Congresses will desperately try to avoid paying off these bonds
because to do so would necessitate deliberately running ever
larger budget surpluses every year after 2007 to provide cash
from the Treasury when it is needed to redeem Trust Fund bonds and prevent future
funding shortfalls for continued benefit payments. For
their part, the Democrats in Congress are still in denial over
the fact that they were "rolled by Reagan" and keep spreading
the fiscal fiction that the trust fund is still "there to
guarantee future benefit payments"! Of course, future
Congresses could obtain the needed funds for honoring benefit
obligations by simply continuing to increase the National Debt
limit by a Trillion Dollars or more every year ( i.e., the way
the previous Congress did to fund the wars in Iraq and
Afghanistan, aka "Cheneynomics").
The short term solution to the onrushing Social Security funding
crisis is to rescind the extended Bush Administration tax breaks
for the wealthy, cut the defense budget in half by ending the
ongoing foreign wars and withdrawing all U. S forces to U. S.
territory (please read the Military Restructuring Issue paper),
and to replace the widely avoided and evaded corporate income
tax with a Federal corporate Gross Receipts Tax (also please
read the Budget, Deficit, and Taxation Issue paper).
Budget deficits must be eliminated to create a budget surplus
sufficient to redeem Social Security trust fund bonds when
additional cash is needed to pay future benefits. In the
longer term, the Social Security program's funding must be taken
out of the unified budget and separately managed the same way it
existed before Johnson combined it into a unified fund so he
could to steal its cash surpluses to pay for the Vietnam War.
Future trust fund surpluses should be invested solely
into specially established self-liquidating VA and FHA
guaranteed mortgage programs for first time low income home
buyers. Why shouldn't low income workers whose payroll
taxes are kept in the trust fund also not benefit as homeowners
from the fund's investment management policy during their
working years before reaching retirement age?
See Pension Security issue paper.
Return to home page
________________________
Designed by Imad-ad-Dean,
Inc.