Tuesday, December 21, 2010

Social Security

Social Security


By Richard E. Noble

The original Social Security legislation was passed in 1935. It covered employees who were 65 years of age or older. The funds collected for Social Security were to be kept separate from general revenue funds and payments made into the system were to be credited to the individuals who paid them.

In 1939 survivors' benefits were added to the system and then in 1956 disability benefits were also added. In addition in 1956 women were allowed to retire at age 62 with decreased benefits and in 1961 men were allowed the same encouragement. The idea, as I remember at the time, was to encourage elderly men and women to remove themselves from the workplace to provide greater opportunities for younger workers and new workers entering the job market.

In 1965 Medicare was added to the Social Security System as opposed to initiating a new and separate health care system for the elderly or revamping the health care system for everyone. National Health coverage was lacking and in need of serious adjustments even at that time. In fact a National Health Care plan was suggested in 1935 but was considered politically disadvantageous.

In 1969 the Johnson administration began counting Social Security funds in the federal budget. This was done as you can imagine for political purposes.

By adding the Social Security funds into the federal budget instead of keeping those funds separate as per the original legislation in 1935 the deficit spending on the very unpopular Vietnam war could be made to appear less troubling. Wars cost money and Vietnam was costing a bunch. Traditionally taxes or a special tax would be levied to pay for war expenses. But because Vietnam was so unpopular President Johnson didn't dare propose a war tax on anybody. Instead he borrowed the money to support the war and ran high deficits which were, of course, then added directly to the National Debt. In other words, he ran up the balance on the nation's credit card and made the cost of the war appear to be less by adding into the budget the Social Security collections. Borrowing and adding to the National Debt is considered by most established economists as an inflationary practice which results in a form of regressive taxation. Regressive taxation (inflation etc.) means that the burden is placed on the middle classes and lower classes as opposed to the wealthy. Inflation is often described as the "grocery store" tax.

In 1974 Congress and President Nixon get into a battle as to who will control the nation's purse strings. The president impounded funds allocated by Congress for projects distasteful to his party. By refusing to spend the money the executive basically usurps the traditional power of the Congress over budget and spending. Congress then passes the Congressional Budget and Impoundment Control Act which precipitate an office of Budget Management. Congress now has an organized centralized method for budgeting and allocating funds. But this new process continues the misdirected policy of including Social Security funds into the unified budget. This, in effect, reduces the protected Social Security Trust fund to a part of government's general spending.

In 1982 Alan Greenspan is commissioned to study the growing Social Security "deficit" problem. Greenspan recommends an increase in the Social Security payroll taxes. He recommends this in order to build a surplus in the Trust Fund to compensate for the baby-boomer retirement surge that he predicts will begin in 2010.

In the mean time the Reagan administration and the Bush administration continued the borrow-and-spend policy of the Johnson administration to support Star Wars, the general rebuilding of the Military and Bush #1's wars.

Ronald Reagan in just five years as President trippled the National Debt. By the end of the Reagan/Bush years these two conservative presidents quadrupled this nation's National Debt to 4 trillion dollars. It had taken all the previous presidents, from George Washington through Jimmy Carter to get the National Debt to slightly less than 1 trillion.

By 1983 surpluses begin to appear in the Social Security Trust Fund.

By 1989 there is over 50 billion extra dollars in the Fund but Congress and President Bush #1 decide to include this surplus in its general revenue expenses. There is another war going on you will remember.

Senator Daniel Patrick Moynihan tries to get the Social Security payroll tax rescinded on the grounds that if Congress is going to spend the baby-boomers Social Security in place of taxing people for Bush's war, the tax should be abolished and Social Security should be returned to a pay-as-you-go program. Mr. Moynihan was trying to protect the Social Security Fund not undermine it.

A November 5, 1990 Congress passed The Budget Enforcement Act. Though it had been stated in the original Social Security Bill that the Trust Fund would be kept separate from the general revenue and spending funds, this new law restated the premise and made an actual law against doing otherwise. But regardless President Clinton and now president Bush decided to disregard this law and continue including the Social Security Trust Fund and its ever growing surpluses due to the Baby Boomer tax increase of 1983.

Every president from Lyndon Johnson forward was guilty of misappropriating the social Security Trust fund money. They did this basically to make their deficit spending look better to the electorate and in Clinton's case to make his surpluses appear to be greater than they really were.

Bush II compounded the deception or theft by telling the public that the government had extra money and that it should be returned to the taxpayers. Bush II, in effect, gave the Baby Boomers' Social Security money to the rich and the wealthy via his so called tax cut. It should really have been called a Social Security give away, rather than a tax cut.

Now, not only does the Social Security Tax or revenues have to be increased, all the money that was pilfered from the Fund from Lyndon Johnson forward must be reimbursed.

To add insult to injury not only did the government pilfer the money from the Social Security funds to use to finance its wars and send dividends to the rich and famous, it "borrowed" these funds in a manner never before seen. It took the money from the Social Security Fund and instead of replacing these funds with negotiable, interest bearing treasury bills, it replaced the money with non-negotiable, non interest bearing markers. In other words like the Anderson Accounting scam, they simply juggled the books.

It does no good to say that all the people serving in the Congress from Johnson forward should be prosecuted for embezzling government funds but nevertheless the problem will have to be solved.

As an old retired person I hope that my contemporaries will not allow any future U.S. government to simply cut benefits and undermine the system. The government is at fault for not managing the peoples’ money and for not making the necessary financial adjustments when necessary. The government is responsible and should be held responsible.

I have one idea – no foreign interventions or wars for the next ten years and the saving on defense spending to be deposited into the Social Security Trust Fund. With the exception of World War II and the British invasion of 1812 where we were actually attacked, the remainder of U.S. wars were optional. I suggest that we take the "option" in the future. Skip a war here and there in our future and we will have more than enough to fund Social Security and numerous other seemingly impossible benefits.

1 comment:

Anonymous said...

I found this on the Social Security website:

Q1. Which political party took Social Security from the independent trust fund and put it into the general fund so that Congress could spend it?

A1: There has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government. The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been "put into the general fund of the government."

Most likely this question comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no effect on the actual operations of the Trust Fund itself

What do you think of this? It's amazing, right there in black and white the SSA is denying the raiding of the trust fund. It's a pretty clever answer if you ask me.