IOUs in Trust Fund Are Not Marketable Bonds

Most Americans seem to believe that the surplus revenue generated by the 1983 payroll tax hike was actually saved and invested in marketable U.S. Treasury bonds as it was supposed to be. The truth is that none of the surplus revenue was saved or invested in anything. Every penny of the surplus was spent to finance tax cuts, wars, and other government programs. Since it is impossible to both spend and invest the same money, none of the Social Security surplus revenue has been invested.

What the trust fund holds are IOUs that are called “special issues of the Treasury.” They can be held only by the trust funds, and they are not marketable, so they could not be sold to anyone even for a penny on the dollar. They serve simply as an accounting record of how much Social Security money the government has spent.

David Walker, Comptroller General of the U.S. Government Accountability Office (GAO), said on January 21, 2005, “There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.” If there was any doubt remaining as to the official position of the United States Government with regard to whether the trust fund holds any real assets, it should have been removed by the 2009 Social Security Trustees Report. This report was signed by Treasury Secretary, Timothy Geithner, Secretary of Health and Human Services, Kathleen Sebelius, Secretary of Labor, Hilda L. Solis, and Michael J. Astrue, Commissioner of Social Security.

Specifically, the 2009 Trustees’ Report states, “Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reduction in other government spending, or additional borrowing from the public.”

Thus, the government must finance the redemption of the Social Security IOUs and interest payments on these IOUs by raising taxes and/or reducing other government spending. They must do so because the IOUs are nothing more than worthless accounting records of the Social Security money that the government has “borrowed” or “stolen,” and spent for non-Social Security purposes.

Why do most Americans think the Social Security surplus revenue has been invested, when it clearly has not been? Because they are told repeatedly that the money has been invested by both the Social Security Administration and the AARP.

The AARP has a huge voice and impact on the Social Security debate, and they continue to tell their members, and the public, that the Social Security trust fund contains enough bonds to pay full Social Security benefits until 2037, despite the fact that the trust fund holds no real bonds. On July 18, 2004 the St. Petersburg Times published an article by personal finance editor, Helen Huntley that was based on four questions that had been previously submitted to both AARP Chief Executive, William Novelli and to me. In response to one of the questions, Novelli said, “Currently the Social Security trust fund holds more than $1.5 trillion of Treasury bonds that earn interest. These bonds are like the ones bought by private pension funds, insurance companies and individuals because they are the safest investment in the world.”

Novelli appeared to be talking about the “good-as-gold” public-issue marketable U.S. Treasury bonds that are held by investors around the world because they probably are the “safest investment in the world.” The only problem is that none of the Social Security money is invested in such bonds, although it could have been, and should have been invested is such instruments. If the surplus Social Security revenue had been invested in public-issue marketable bonds, the program would be in great shape today. But all of the surplus Social Security revenue was spent by the government, leaving nothing left to invest in anything.

The AARP continues to reinforce the myth that the trust fund holds real marketable bonds. In a recent policy statement the AARP said, “Right now, there is more money coming in than is going out. In 2008, Social Security’s income was $805 billion. It paid out $615 billion, leaving a surplus of about $190 billion. That $190 billion went into the trust funds.”

The above statement is simply not true. Not one dollar of that $190 billion went into the trust fund. The government spent it all on wars and other programs. Does the leadership of the AARP actually believe the myth that they helped create, or are they deliberately misleading the public? I don’t know the answer to that question, but I do know that the AARP is misleading millions of Americans about the financial status of Social Security, whether it is intentional, or the result of their refusal to reexamine the myth that they helped create. In either case, future Social Security recipients will be hurt by their actions.

Dr. Allen W. Smith is a Professor of Economics, Emeritus, at Eastern Illinois University. He is the author of seven books and has been researching and writing about Social Security financing for the past ten years. His latest book is The Impending Social Security Crisis: The Government’s Big Dirty Secret. Read other articles by Allen, or visit Allen's website.

34 comments on this article so far ...

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  1. Deadbeat said on December 3rd, 2009 at 4:20pm #

    Dr. Smith it would seem has drunk the “kool-aid” of the fear-based rhetoric being used by the likes of Cato Institute and Peter G. Peterson’s protoge David Walker whose real aim is to privatizes Social Security.

  2. Synic3 said on December 3rd, 2009 at 5:55pm #

    I agree with Deadbeat, this article is a blantant fear mongering to pave the way for privatizing the system and deliver it to Wall St. looters and fraudsters.
    These IOU like any other federal bonds or securities are guaranteed by the faith and credit of the US government. If you don’t trust US promisory notes, then who you trust.?!
    So far, the money collected yearly is enough to cover yearly payments for seniors. The need to withdraw from the IOU fund will start around 2018-2019.
    Social Security is one of the best managed and useful programs run by the government.
    I hope they don’t screw it DELIBERATELY, and say government bureacracy is useless and use this as pretext to privatize the system. That will be a disaster and ripoff that will befall senior citizens who need it the most.

  3. onecansay said on December 3rd, 2009 at 7:32pm #

    How better to help along the de-population of their perceived world.

  4. Max Shields said on December 3rd, 2009 at 8:56pm #

    Kool-aid?

    So, Deadbeat has no facts, but his usual “guilt through association”; who needs facts when you can just make a baseless dumbass comment like he drank the Cato Institute Kool-Aid.

    NOTHING in Mr. Smith’s article is advocating privatization of Social Security…Ok, show me where…

    In fact Mr. Smith is a critic of the Cato Institute.

  5. Deadbeat said on December 4th, 2009 at 2:35am #

    Max Shields writes …

    So, Deadbeat has no facts, but his usual “guilt through association”; who needs facts when you can just make a baseless dumbass comment like he drank the Cato Institute Kool-Aid.

    Max Shields the master of ad hominem has returned with slurs and attacks and offers no real arguments. Mr. Shields is a bitter little man who wraps his pro-Capitalist, pro Zionist and anti-Marxist rhetoric in a Chomskyite veneer in order to appeal to the venerable and gullible.

    The good Doctor unfortunately is aping the Cato, Peter G. Peterson fear mongering. If you want to read the one person who is the MOST authoritative about Social Security and has been battling the right-wing propaganda being advanced by the Doctor then you need to consult DOUG HENWOOD who first exposed the government shenanigans back in 1994!

    I know this for a fact because I used to exchange software with Mr. Henwood in order to get a free subscription to his newsletter back then. In 1994 he exposed how Robert Reich, then Secretary of Labor under Bill Clinton, deliberately UNDERSTATED growth projections to make it appear that Social Security was going bust! In fact back then I used to be engaged in online debates against the CATO Institute Michael Tanner.

    So Max you can crawl back under the rock from whence you came.

    Here’s the link to Doug Henwood’s website, Left Business Observer so you can schools your silly little ass.

    DB.

  6. Deadbeat said on December 4th, 2009 at 3:09am #

    [1] Peter G. Peterson, former Commerce Secretary under Richard Nixon and former INVESTMENT BANKER, set in motion the false notion of the “generation gap”. That there would not be enough worker to cover SS payments. This crap sounded good until you take a look at the ratio of non workers to workers and realize that the ratio was LARGER in the 1950’s than it is today.

    [2] Productivity gains of the past 30 years means that workers should be retiring at an EARLIER age but the government has raised the retirement age under the notion that people are living longer. So what the productivity gain means that people should be able to RETIRE EARLIER

    [3] The trust fund is BY LAW dedicated to Social Security and BY LAW will be paid off. The Government BY LAW has to make good on Social Security. However the Government is also engaging in several accounting tricks in order to REDUCE those payments. They are doing this by RAISING THE RETIREMENT age and by UNDERSTATING inflation in order to reduce COLAs.

    [4] Currently workers are being OVERCHARGED via the payroll tax in order to bear the tax burden that has been shifted away from the rich. It is the same regressive burden that Max Sheilds has no desire to fix and would rather have a regressive land tax rather than a PROGRESSIVE tax which would restore burden back to the rich. What should happen is that SS go back to a pay-as-you-go and taxes raised on Capital Gains, a security transaction tax, and restore the tax brackets and rate to pre-1981 levels.

    [5] The fact that the ruling class has no desire to create jobs is part of their agenda to privatize Social Security. Fewer workers put stress on the Social Security system since SS is funded by the payroll tax.

    Apparently Max Shields has nothing to offer but IGNORANCE and AD HOMINEMS.

  7. Deadbeat said on December 4th, 2009 at 3:13am #

    Oh I forgot David Walker is a well paid bullshitter who is now being paid by the INVESTMENT BANKER and Social Security privatizer Peter G. Peterson. I refer Max Shields to read early 1990’s book Who Will Tell The People by William Grieder who expose Peterson for the ruling class warrior that he is.

    And yet Max Shields has the NERVE to ridicule Marxism when people like Peter G. Peterson has spend a f-n lifetime using his influence to f-over ordinary workers.

  8. Mike2 said on December 4th, 2009 at 4:09am #

    Trust Fund Data – change in assets
    July 2009 – 523 (in millions)
    Aug -5,761
    Sept -4,319
    Oct -4,763

    The Law – The Social Security Act (Act of August 14, 1935) [H. R. 7260]

    SEC. 1104. The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.

  9. Synic3 said on December 4th, 2009 at 6:44am #

    Max Shields wrote:
    “NOTHING in Mr. Smith’s article is advocating privatization of Social Security…Ok, show me where…”
    _______________________________________________________

    Yes, Mr. Smith article didn’t directly davocate privatization of Social Security ,
    but he spreading confusing and misleading information that shake the people faith in the system and its viability and consequetly their resolve to defend the system against Wall St. vultures circuling above and waiting the chance to swoop down on Social Security.

  10. kalidas said on December 4th, 2009 at 9:15am #

    Never make Colonel like that..

  11. Allen W. Smith said on December 4th, 2009 at 12:30pm #

    Please don’t jump to the conclusion that I am a privatizer because I am trying to expose the raiding of the Social Security trust fund by both Democrats and Republicans. I am a dedicated opponent to any attempt to privatize Social Security. Anyone who doubts this should take a look at my 2005 book, “Social Security: The Attempt to Kill It.” I rushed that book through the publication process in order to help combat Bush’s Social Security privatization campaign.

    Below are some excerpts from that book:

    “The current Social Security ‘crisis’ was made in Washington. It has been 22years in the making, and it is the handiwork of presidents and Congresses (both Republicans and Democrats), the Cato Institute, the Heritage Foundation, and many other individuals and organizations.

    “The actual solvency problem is not with the Social Security program. It is with the government’s total budget. The 1983 payroll tax increase…took care of the baby boomer problem. Taxes were raised high enough so that the baby-boom generation paid both the cost of the retirement of the generation that preceded them, as was customary, and also prepaid most of the cost of their own retirement which was not customary.

    “The problems is that the government did not save and invest the Social Security surplus…Instead it ‘borrowed’ and spent (embezzled) every dollar of the Social Security surplus, replacing the money with worthless non-marketable special issue government IOUs.”

    From Chapter Five (The Plot to Destroy Social Security):

    “The playbook, upon which President Bush’s strategy for privatizing Social Security is based, was written in 1983 by Stuart Butler (a Cato director) and Peter Germanis (a policy analyst at the Heritage Foundation) and published in the Cato Journal, vol. 3, no. 2 (Fall 1983), The plan was titled “Achieving a Leninist Strategy.”…

    …”The Cato plot against Social Security was written three years before George W. bush sold his failing oil company an did some real soul searching as to what he should do with his life…

    “…Even at that early stage of Bush’s political career, the plot to destroy Social Security was already three years old and waiting for a president who would adopt it as his own plan someday….

    “President Bush and his fellow conservatives have certainly been following the strategy set down in the 1983 Cato plan…

    “The 1983 plot was clearly a declaration of war against the current Social Security program in the United States of America. But it was a lot more than that. It was a declaration of war against the American democratic system where individual Americans could theoretically decide the future of the nation through the power of their votes. The plot was clearly against the principle of majority rule.”

  12. Allen W. Smith said on December 4th, 2009 at 12:30pm #

    Please don’t jump to the conclusion that I am a privatizer because I am trying to expose the raiding of the Social Security trust fund by both Democrats and Republicans. I am a dedicated opponent to any attempt to privatize Social Security. Anyone who doubts this should take a look at my 2005 book, “Social Security: The Attempt to Kill It.” I rushed that book through the publication process in order to help combat Bush’s Social Security privatization campaign.

    Below are some excerpts from that book:

    “The current Social Security ‘crisis’ was made in Washington. It has been 22years in the making, and it is the handiwork of presidents and Congresses (both Republicans and Democrats), the Cato Institute, the Heritage Foundation, and many other individuals and organizations.

    “The actual solvency problem is not with the Social Security program. It is with the government’s total budget. The 1983 payroll tax increase…took care of the baby boomer problem. Taxes were raised high enough so that the baby-boom generation paid both the cost of the retirement of the generation that preceded them, as was customary, and also prepaid most of the cost of their own retirement which was not customary.

    “The problems is that the government did not save and invest the Social Security surplus…Instead it ‘borrowed’ and spent (embezzled) every dollar of the Social Security surplus, replacing the money with worthless non-marketable special issue government IOUs.”

    From Chapter Five (The Plot to Destroy Social Security):

    “The playbook, upon which President Bush’s strategy for privatizing Social Security is based, was written in 1983 by Stuart Butler (a Cato director) and Peter Germanis (a policy analyst at the Heritage Foundation) and published in the Cato Journal, vol. 3, no. 2 (Fall 1983), The plan was titled “Achieving a Leninist Strategy.”…

    …”The Cato plot against Social Security was written three years before George W. bush sold his failing oil company an did some real soul searching as to what he should do with his life…

    “…Even at that early stage of Bush’s political career, the plot to destroy Social Security was already three years old and waiting for a president who would adopt it as his own plan someday….

    “President Bush and his fellow conservatives have certainly been following the strategy set down in the 1983 Cato plan…

    “The 1983 plot was clearly a declaration of war against the current Social Security program in the United States of America. But it was a lot more than that. It was a declaration of war against the American democratic system where individual Americans could theoretically decide the future of the nation through the power of their votes. The plot was clearly against the principle of majority rule.”

  13. Deadbeat said on December 4th, 2009 at 4:03pm #

    By the same token Doc, the U.S. Military and all government programs are bankrupt since there is NO money set aside for their future budgets.

    The fact of the matter is that workers are being OVERCHARGED for Social Security and that overcharges should be returned to the workers. By Law the government cannot transfer SS trust money to other programs so they came up with the GIMMICK of transferring SS trust fund money to the “operating budget” via IOU’s so they can use that money to finance wars and their cronies.

    The changes made by Greenspan and the Democrats in 1983 was to coverup the revenue short fall caused by the 1981 Kemp Roth tax cut. So there was NEVER any real intent to “save” money. However BY LAW the U.S. Government has to make good on the trust fund.

    The rhetoric of “no money” is deliberate MISINFORMATION because it fails to explain how this accounting gimmick works and it give the impression that there is “no money” in Social Security. Rather than explain to workers they are being overcharged to let the rich get a free ride. This overcharge is social engineering the heightened EXPLOITATION of workers.

    Before 1983 Social Security was funded by pay-as you-go via economic and wage growth. Clearly the government found 13 TRILLION dollars to bailout the banks so by not providing CLARITY and using the language from the TRUSTEES you are in fact spreading their MISINFORMATION.

    Look, Doug Henwood exposed all of this in 1994 when he took Robert Reich to task for deliberately using 1.5% — BELOW DEPRESSION ERA growth rate of 1.9% projected out 75 years in order to make it appear that SS was going bankrupt. While during the same period the economy grew at a rate of 2.5%. Using Reich projection even the military would be bankrupt as well.

    The point Doctor is that you have to cut through the bullshit in order to provide accurate information to the American people and not absorb the sound bites either from the government or the mainstream media. The Clinton Administration intent was to GUT Social Security and Robert Reich as Secretary of Labor attempted to use his credibility as a Liberal economist to get citizens to believe that SS was going bankrupt in order for the citizenry to support “reform” (read privatization) of Social Security. The timing of the Monica Lewinsky scandal ironically prevented the Clinton Administration from doing that.

    The Government has been overstating the threat of SS going “bust” since 1983 and therefore you have to dig DEEPER in order to understand the politics.

    Also siting David Walker doesn’t help your case. David Walker is now a Peter G. Peterson protege. The WALL STREET INVESTMENT BANKER Peterson has for the past 4 DECADES been working to privatize Social Security. He has used his resources to fund all kind of think tanks and positions like the one you have promoted here to convince people to accept less benefits and to accept “reforming” the system.

    I’m sorry Doc but I’ve been tracking and debating this issue since the mid-1990s. Perhaps had I wrote a book like you I could have made some bucks. Today I’m a Deadbeat.

  14. Deadbeat said on December 4th, 2009 at 4:14pm #

    Oh as a matter of fact the very FIRST person to expose what the government was planning to do with Social Security was DAVID STOCKMAN. Who was David Stockman? He was the Director of OMB during the Reagan Administration from 1981 – 1985. He leaked how Reagan and the Greenspan Commission planned to screw the workers and shift the tax burden onto the payroll tax with the hope of having the “weight of the system” crush the workers so that they would welcome “reform” (read privatization”).

    BTW David Stockman was a Republican and an enthusiastic Reaganite until he saw first hand how vile Reagan, Greenspan and the weak ass Democrats truly are.

    Like I said Doc, understand the politics.

  15. Max Shields said on December 4th, 2009 at 4:21pm #

    Good to see your clarifications Mr. Smith.

    You’ll have to excuse Deadbeat, he seems to be going through a breakdown and spewing whatever as if meaningful words of wisdom…he’s a real putz.

  16. Deadbeat said on December 4th, 2009 at 4:29pm #

    Obviously Max Shields has nothing to contribute here other than ad hominems. You sound tired Max. Go find a Chomsky lecture and get some sleep.

  17. Hue Longer said on December 4th, 2009 at 5:19pm #

    There was a time around casual music conversations that anytime someone mentioned a drummer they liked, someone would say, “You can’t talk about that guy! Neal Pert is the best drummer”. Pointing out the fallacy would only get you a long list of Neal’s accomplishments.

    I’m sure Doug Henwood appreciates DB’s fandom as much as Pert appreciated the same from the same

    and please DB, get a refresher on ad hominem…the simple surface layer stuff can only be considered ad hominem because it detracts from the argument but calling someone a fuckwit is different than saying they are wrong because they are or are associated with a fuckwit. I don’t condone calling someone an idiot for not grasping what I’m saying, but were I to and they called that ad hominem? It makes a good study for irony.

  18. Deadbeat said on December 4th, 2009 at 7:30pm #

    And BTW Hue what does your rant have to do with Social Security?

    Here Hue perhaps you can educate yourself …

    Description of Ad Hominem

    Translated from Latin to English, “Ad Hominem” means “against the man” or “against the person.”

    An Ad Hominem is a general category of fallacies in which a claim or argument is rejected on the basis of some irrelevant fact about the author of or the person presenting the claim or argument. Typically, this fallacy involves two steps. First, an attack against the character of person making the claim, her circumstances, or her actions is made (or the character, circumstances, or actions of the person reporting the claim). Second, this attack is taken to be evidence against the claim or argument the person in question is making (or presenting). This type of “argument” has the following form:

    1. Person A makes claim X.
    2. Person B makes an attack on person A.
    3. Therefore A’s claim is false.

    The reason why an Ad Hominem (of any kind) is a fallacy is that the character, circumstances, or actions of a person do not (in most cases) have a bearing on the truth or falsity of the claim being made (or the quality of the argument being made).
    Example of Ad Hominem

    1. Bill: “I believe that abortion is morally wrong.”
    Dave: “Of course you would say that, you’re a priest.”
    Bill: “What about the arguments I gave to support my position?”
    Dave: “Those don’t count. Like I said, you’re a priest, so you have to say that abortion is wrong. Further, you are just a lackey to the Pope, so I can’t believe what you say.”

  19. Deadbeat said on December 4th, 2009 at 7:33pm #

    So Hue I’m all ears if you have anything to add to the discussion here on Social Security and the dangers of the good Doctor’s rhetoric regarding the Social Security trust fund.

  20. Hue Longer said on December 4th, 2009 at 11:15pm #

    I don’t have anything to add concerning Social security, DB.

    I do suggest you not take “attack” to be synonymous with mere unrelated verbal abuse, pay attention to the second step then understand that you commit it often (even without an unrelated “attack”). Now were I to say that because you do it, others don’t? ad hominem.

    Yours (and others) posts are riddled with it but you seem to only see it when someone calls you a bad name- As I said, technically ad hominem but only because it can detract from the argument being made NOT because it commits a fallacy in making a point to that argument being made. It’s smart speak word du jour and is intellectually embarrassing watching it being abused by those being called a putz.

    I DO hope you can use it to bring offenders correct correctly…learning it and applying it in our own thoughts and words is a good first step on the road to critical thought.

    Max, say you’re sorry :)

  21. Deadbeat said on December 5th, 2009 at 1:26am #

    I don’t have anything to add concerning Social security, DB.

    The problem here Hue is you have nothing to add to the discussion other than diverting the issue with your own pretentious ad hominem attack. I think you should take a look at why you are choosing to argue the tenor of the debate rather than offer some information about Social Security. This is a rather important issue that effects MILLIONS of American. Not just retirees Hue but also the survivors of many workers.

    The fact that the Doctor repeated the rhetoric coming from the trustees who for years has been trying to find different rhetorical explanations to rip off workers demand a vigorous defense. Apparently my position upsets you and rather than offer some substantive information you like Max Shields would rather divert the discussion to ad hominems.

    I’ve already taken the time Hue to address your interest in ad hominem and you can read that part of my previous response. However Hue the topic of discussion on this thread is SOCIAL SECURITY so once again Hue please ADVANCE the discussion regarding Social Security and offer REAL information that readers here need so that they can make an informed decision.

    Otherwise Hue you are just wasting bandwidth and are offering nothing to this very important topic of discussion.

    DB

  22. Deadbeat said on December 5th, 2009 at 1:56am #

    Just to provide some FULL disclosure. I was a recipient of Social Security Survivor Benefits after my father passed away and those benefits help pay for my complete education. Therefore I am extremely familiar with Social Security and vigorously defend it.

    In 1994, Doug Henwood exposed how the trustee report was structured to make it appear that the system was going bust which I explained about. Henwood didn’t ape the Trustee report like the Doctor has done in his book. Henwood went beyond those number and did his own analysis of the trustee report to uncover how Reich and the Trustees deliberately UNDERSTATED the growth number to make it appear that SS was going bankrupt. The media swiftly aped the report in order to create confusion and fear among the populous however what save SS was the irony of the Monica Lewinsky scandal.

    However the one bit of rhetoric that did manage to thrive is the notion that people are living longer in order to justify raising the retirement age. That is an actual cut of benefits that where they government hopes you die before you can ever hope to collect SS benefits.

    SS has been going under a full frontal attack especially since 1983. This notion of there being “no money” for SS or no money being “invested” is sheer sound bite rhetoric in order to create FEAR. Because by the same logic the government has to raise money every year to fund its entire operation thus all programs are pay as you go. SS should be restored as pay as you go and the overcharge returned to workers with the progressive income tax restored and also raise the inheritance tax, capital gains, and a securities transaction tax will shift tax burdens back onto the rich who clearly benefit everyday from Capitalism’s exploitation of workers.

    Oh and Hue, I really don’t give a damn if you don’t like the tenor of my defense of Social Security, especially since you’ve already admitted that you have nothing else to offer to this discussion.

  23. Synic3 said on December 5th, 2009 at 5:46am #

    Max shields, Hue Longer,

    I am not sure why both of you keep attacking DB despite that he presented his points very clearly and convincinlg and I agree with him 100%.
    I don’t think Dr. is honest when he says he is against privatizing SS. I cann’t help but see that he is trying to mislead his readers and convince them that SS is in dire situation and it is bankrupt which DB and I refuted.
    Do you work for a Wall St. firm or something? Are you from the super-wealthy class who is looking for more tax cuts paid for by the sweat and tears of workers??
    I find your attitude is baffling and sickening or are you couple of ignorants who don’t know what they are talking about??!!

  24. Max Shields said on December 5th, 2009 at 9:30am #

    Syinc3, and I don’t understand why you “agree with him 100%”.

    His “points” do not reflect the article but what appears to be a personal tangent. He introduces Chomsky into just about every discussion regardless of the appropriateness.

    That said, I won’t speak for Hue, but anyone who has read my posts on DV over the last 2+ years knows my position on economics. What Mr. Smith offers here is not only a statement of what has happened to Social Security but a clarification of his positions above.

    You (and Deadbeat) have chosen to ignore the obvious and go for some mis-guided understanding of it. Why would you say the Smith is not honest? Smith has NOT promoted privatization; either in the article he’s offered nor in his clarification.

    While I have not read Smith’s published work, it is noted by the editors of one of his works that he is clearly NOT a proponent of the CATO institute but the very opposite. So, why is it credible for Deadbeat and yourself to disregard this bit of information.

    It does seem syinc3 you are the one who is being mis-directed. Keep reading Deadbeat’s post…it’s generally all a Zionist conspiracy and a Chomskyeque ploy of one sort or another. History be damned. American Empire be damned – it’s a myth cooked up by the Zionists along with the need for oil from the Middle East, so Israel can take over the world. If that’s true, given what Zionists represent, and the neo-libs/neo-cons are doing to the world – THEY CAN HAVE IT (OR WHAT’S LEFT OF IT)!!!

  25. Synic3 said on December 5th, 2009 at 9:58am #

    Max Shields,

    Yes, I agree Dr. Smith didn’t call for privatizing SS directly, but as I said he is implying SS is bankrupt and not viable and shaking the people confidence in the system and their resolve to defend it against the vultures of privatization.
    Dr. Smith is not naive little kid. He know where the winds is coming from.
    Dr. Smith is like the guy who is saying to other guy defending himself: I never said that your sister is whore but all I said your sister was sanding alone in the street corner at night wearing heavy makeup but never mentioning the fact that he saw her boyfriend just entering a nearby store to buy cigerattes and she was propely clothed.

  26. Max Shields said on December 5th, 2009 at 10:37am #

    This is what Mr. Smith said in his first paragraph:
    “Most Americans seem to believe that the surplus revenue generated by the 1983 payroll tax hike was actually saved and invested in marketable U.S. Treasury bonds as it was supposed to be. The truth is that none of the surplus revenue was saved or invested in anything. Every penny of the surplus was spent to finance tax cuts, wars, and other government programs. Since it is impossible to both spend and invest the same money, none of the Social Security surplus revenue has been invested.”

    Now are you saying his facts are wrong? He is stating that the fund was meant to be invested in US Treasuries and not siphoned off for war and tax cuts. As a fact, doesn’t even sound controversial to me.

    I would take his point to be quite simple – put the earmarked social security money where it’s suppose to be rather than to pay for things that are clearly immoral (war).

    Deadbeats personal issue seems to blind him to the article’s clear point – if you want to have a viable SS than ensure its solvency…not by privatizing it but by ensuring it is managed according the the governance of the SS Trusteeship.

    Again, if there is something specific that Mr. Smith addresses than point it out…where is he even implying “privatization”? Forget the analogies, get to the point – WHERE IS IT IMPLIED IN THE ARTICLE?

  27. Synic3 said on December 5th, 2009 at 11:05am #

    Max Shields wrote:
    “Now are you saying his facts are wrong? He is stating that the fund was meant to be invested in US Treasuries and not siphoned off for war and tax cuts. As a fact, doesn’t even sound controversial to me.”
    _______________________________________________________

    The IOUs are exactly like the US Treasuries and exactly as US Treasuries it depend only on the faith and credit of the US government and by law it should be redeemed upon request from SS trust fund.
    By law the trust fund is solvent and it is the obligation of the US government to redeem these IOUs upon request.
    So if Dr. Smith ignores these facts and confuse and mislead his readers telling them that the trust fund is “bankrupt”, then definitely he has different agenda than to defend SS.

  28. Max Shields said on December 5th, 2009 at 12:04pm #

    Where has Smith mentioned bankruptcy of the SS trust or insolvency?

    He hasn’t. Nor has he recommended an alternative system, but rather simply stated what has been going on with the SS trust.

    Now if you want to make a case for why the SS trust is perfectly fine and money has been secured for future generations, than please do. I find it totally intellectually dishonest to read between lines and never make a case of your own; or point to fact based on what Smith has written that refutes his claims.

    But you are reading into this piece far beyond anything I can see AND, frustratingly, you are not making a clear presentation (other than some far off supposition) of what is occuring and precisely where Smith is wrong. Do that and I’m willing to consider. Otherwise your just following Deadbeat’s distorted view.

  29. Allen W. Smith said on December 5th, 2009 at 12:06pm #

    I have spent the past decade trying to save Social Security. I believe Social Security, as we know it today, is the most successful and popular program ever created by the government, and it is worth fighting for. On April 10, 2005, I was co-speaker along with JamesRoosevelt Jr. (grandson of President Franklin D. Roosevelt) at a Social Security forum at Shepherd University in Shepherdstown, WV. I spoke first. When Roosevelt spoke, he began by saying “First of all, I agree with 99 percent of what Dr. Smith said.”

    I have tried hard to convince people to join me in the battle to save Social Security. The obstacles to my efforts have come from two very different groups.

    1. The Cato Institute, the Heritage Foundation, and all the other conservatives who have hated Social Security since it began and have been trying to find a way to destroy it by privatizing it. I have debated, denounced and done everything else in my power to reveal the privatizers for what they are—enemies of Social Security .

    2. The second group that has prevented me from making much progress are those people with their heads in the sand who have bought into the lie that the government is using FICA taxes to build up a huge reserve in the trust fund that can be used to pay benefits to the baby boomers. The recommendations of the Greenspan Commission, and the intent of the 1983 legislation which called for the big payroll tax hike, was for the government to save all surplus Social Security revenue and invest it in real public issue, marketable, U.S. Treasury bonds. If that had been done, the Social Security Trustees could have sold these “good-as-gold” bonds in the open market whenever needed to raise money for paying benefits. Instead of being saved and invested, the surplus money was “borrowed” or “stolen” (whichever word you prefer) by the government and used to fund tax cuts for the rich, wars, and other government programs. Those who want to pretend that the politicians did put the money in the trust fund, and criticize those who are pointing out the truth, are setting up a huge barrier to those who are truly trying to save Social Security.

    We have to face up the fact that our government has spent $2.5 trillion that belonged to the American workers who made FICA contributions. The government did this without either the permission or the knowledge of the American public. I think it is the greatest fraud every perpetrated against the American people by their government. I think the American people should be outraged. You can only consider the money “borrowed” if the government eventually repays it. Since no provisions for repayment have been made, I think it is more appropriate to say the money was stolen.

  30. joed said on December 5th, 2009 at 1:33pm #

    Seems that any one comcerned about the health of the ss fund would want to know more about the veracity of this article. there is no reason to doubt what the author says because the amerikan people have been shat upon by their govt since the early 1980’s if not before.
    there is every reason to believe you have been riped off. your commonwealth has disolved before your eyes and ypou want to argue like a bucnh of old maids. but, you have the govt you diserve and you have the ss fund you diserve too. so enjoy the future as much as you can.
    what really makes me chuckle is that it seems you people think your ss fund is just fine and your ss investment you made through the years is really going to pay off in your future. hahaha.

  31. joed said on December 5th, 2009 at 3:56pm #

    simply manufacture uncertainty about any topic and most people will be paralized. so for a complete different topic but very closely related by how it is presented with the greatest of uncertainity is this from Bob Park’s What’s New column:
    “When scientific evidence of a threat to public health
    becomes overwhelming, government intervention can still be delayed for years by simply manufacturing uncertainty. That’s where of the global warming debate is right now. The fossil fuel industry is doing a job on us.”
    Well, like Dr. Smith says in this article, the ss robber barons have “simply manufactured uncertainity” for ya’ll, ya’ll.
    mr. novelli of aarp is culpable too! they know what they are saying, they are fully aware of the bleak future that lies ahead. so, you guys not only have the govt and ss you deserve, you also have aarp to be part of. aarp has the suplimental insurance to help with medicare payments. you guys really got ripped-off.
    hey, did you ever see the film, “the last picture show” it might cheer you up or you could read kafka’s “metamorphasis” for a good laugh.

  32. Synic3 said on December 5th, 2009 at 7:20pm #

    Dr. Smith wrote:
    “You can only consider the money “borrowed” if the government eventually repays it. Since no provisions for repayment have been made, I think it is more appropriate to say the money was stolen.”
    _______________________________________________________

    Dr. Smith,

    Are you saying that the government has no obligation what so ever by law to honor these IOUs which were guaranteed by the full faith and credit of the Federal Government.
    Or you saying the government will change the law and abondon its responsiblities toward these IOUs.
    If we have a government with bad intention toward the retirees, then even if the funds were left in the trust fund and ivested in markatable instruments, then there is no reason that the government can come , under the pretext of an emergencey, like the current economic crisis , and “borrow” the money to face the emergency.
    Any thing can happen to the trust fund if the government has bad faith.
    Your article which may be lawyery correct, will scare the public and it will lose faith in the system which make it ripe for the vultures hovering above ready to swoop down. We are not arguing lawyery stuff here and what is meant by “is”, we are talking about the impression that article leave with people.
    Did you forget that the title of your article “IOUs in Trust Fund Are Not Marketable Bonds”. What message such title convey??!!

  33. joed said on December 5th, 2009 at 7:56pm #

    simply manufacture uncertainty about any topic and most people will be paralized.
    there is every reason to believe you have been riped off by your bad faithed govt..
    your commonwealth has disolved before your eyes and you want to argue like a bucnh of old maids.
    but, you have the govt you deserve and you have the ss fund you deserve too.

  34. Deadbeat said on December 5th, 2009 at 9:21pm #

    Synic3 writes …

    [Is Dr. Smith] saying that the government has no obligation what so ever by law to honor these IOUs which were guaranteed by the full faith and credit of the Federal Government.

    Synic3, I appreciate your contributions to this thread. You clearly understand dangers of aping misleading rhetoric which is exactly what the Doctor is doing. This is why before I was attacked by Shields and Longer both who contributed nothing to this thread, I took issues with the Doctor’s position.

    By Law, unless it has changed and I don’t think it has, the government has to make good on its debts. The real issue is how many falsehoods will the politicians and the media promote to convince the American people into acquiescence to accept less from Social Security. The “no money” rhetoric is part of the acquiescence project as was Robert Reich’s Social Security “going broke” trustee report in 1994 and Alan Greenspan’s ruse that led to the overcharge and heightened tax burden on workers in the first place.

    Social Security is a very popular program and the politicans know that they have to lie to the American people to get them to accept less. How many time have you heard the Ron Paul types label Social Security a “Ponzi” scheme. The intent of the rhetoric that is unfortunately being aped by the good Doctor is designed to demoralize the public about Social Security.

    What Social Security needs is a vigorous defense, vigilance and an analysis that goes beyond the trustee reports and the misleading rhetoric coming from the politicians and the media. Otherwise you get a confused and befuddled message that only will weaken support for Social Security and cheat the workers.