Obama and the Social Security Time Bomb

The 1983 Social Security “fix” required the baby boomers to pay much higher payroll taxes so that they would prepay most of the cost of their own benefits. The higher taxes would generate Social Security surpluses for approximately 30 years, which were supposed to be saved and invested to build up a large reserve in the trust fund. Then, when the baby boomers began to retire in about 2010, the accumulated surpluses from the previous three decades would gradually be drawn down and used to supplement the payroll tax revenue, which was expected to become inadequate to pay full benefits by about 2015. The 1983 Social Security legislation laid the foundation for the greatest fraud ever perpetrated against the American people by their government. The $2.54 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has all been “borrowed” or “stolen” by the government and used to fund tax cuts for the rich, wars, and other government programs.

President Obama is the fifth president to participate in the great Social Security scam, but he has the dubious distinction of being the president, on whose watch, the Social Security time bomb, activated 25 years ago by President Reagan, will run out of time. All of the previous administrations knew that spending Social Security revenue, as if it were general revenue, was wrong and was a violation of both federal law and the public trust. But, they all had the luxury of knowing that the raided Social Security money would not be needed to pay benefits while they were still in office. However, President Obama learned early in his presidency that, unless the government ended the raiding and began repaying the money that had already been raided, Social Security would face a major financial crisis during his presidency.

Beginning in 2015, and every year after that, payroll tax revenue will be insufficient to pay full benefits. This was known in 1983 when the Social Security “fix” was enacted. The plan was to draw down the large reserve that is supposed to be in the trust fund and use that money to supplement payroll tax revenue so that full benefits could be paid until 2037. But that money has already been spent, so the government will have to come up with the money again to repay the $2.54 trillion that it embezzled. This might be manageable in the early years, when the difference between benefit costs and payroll tax revenue is minimal. But, each year, the amount of money needed to replace the looted money gets bigger and bigger. For example, Social Security will run a deficit of approximately $41.4 billion in 2010. But in 2020, the Social Security deficit will have grown to $101.4 billion. Five years later, in 2025, the Social Security shortfall will be $274.6 billion. In 2035, the government would have to come up with an astronomical $621.9 billion in order to pay full Social Security benefits.

When President Obama first saw these numbers, he must have almost gone into a state of shock. His predecessors left him with a lot of problems that can plainly be seen by the public—two wars, a collapsed economy, and a gigantic deficit and debt. But the embezzlement of the Social Security trust fund money was done without public knowledge, and it is doubtful that Obama knew anything about it prior to becoming a United States Senator, and he may have not known about it until he entered the White House. President Obama cannot just kick the can farther down the road as his four predecessors have done. He must find a way to raise the money to repay the government’s debt to Social Security, or cut Social Security benefits so the money will not have to be repaid.

Embezzlement is a crime, and every participant (all the presidents and members of Congress who supported the practice) knew they were committing a crime against the American people as they used the people’s Social Security money as general revenue over the past 25 years. Some individuals, such as the late Senator Daniel Patrick Moynihan of New York, attempted to end the raiding 20 years ago. On September 27, 2000, I launched my decade-long campaign to expose the Social Security scam with an appearance on CNN News to discuss my then newly-published book, The Alleged Budget Surplus, Social Security, and Voodoo Economics. For the past 10 years, I have been warning, as forcefully as I could, that a day of reckoning would come, at which time the government might consider defaulting on its huge Social Security debt. But nobody wanted to listen. That day of reckoning is now upon us.

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.

77 comments on this article so far ...

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  1. catguy00 said on September 18th, 2010 at 10:57am #

    The Tea Party candidates have been pretty open about privatizing social security and even medicare.

  2. dlgreen said on September 18th, 2010 at 1:49pm #

    This really demonstrates the carelessness of this “dissident” website. The idea that social security is not actuarily sound has been debunked by Dean Baker and others, see cepr.net. The idea that it is not sound is promoted by billionaire Peter Peterson and other conservatives in the name of “bipartisanship.” There really is a trust fund, and that money is owed to the fund by the federal government. The argument above is simply bogus, and does not belong on a serious site.

    David Green

  3. teafoe2 said on September 18th, 2010 at 2:29pm #

    d green I can’t make sense out of your argument. You claim that SS is “actuarily sound”, but it seems like its soundness is contingent on the US government paying back to the SS Trust Fund the $$ it has illegally “borrowed” from it. Which seems to be the same thing said in the article, except that the author has less faith in the politicians running the three Branches right now, and seems to be of the opinion that Default is a real possibility, one that would leave retirees up a crick without a paddle.

    If that’s not what you’re saying, please clarify? I hope your objections to the author’s views are serious enough, and well-founded enough, to justify your trashing of the DV editors…?

  4. Deadbeat said on September 18th, 2010 at 6:02pm #

    I think there has been a lot of hyperbole being irresponsibly thrown out by Dr. Smith. I’ve been following the Social Security issue for a long time and closely ever since Doug Henwood revealed in 1994 that Robert Reich was understated growth estimates to make it appear that the system was in trouble of “bankruptcy”.

    What Dr. Smith bring to the table is that the bonds used by the Trust Fund are not typical treasury bonds that are sold to the public but a special type of “non-marketable” treasury bond. For me this was a new piece of information because I had long believe that they were T-Bills. Because these bonds are non-marketable, it’s been argued that these bonds do not represent an asset or are backed by any real asset.

    Thus the question is really whether or not you believe the full faith and credit of the United States. I do, but the politicians and media are using propaganda to convince the public that Social Security is in “trouble” to lower expectation and create fear, uncertainty and doubt about the system.

    In other words, there is NOTHING wrong with Social Security. This is IMO a propaganda war and IMO Dr. Smith, unfortunately is adding to the confusion rather than provide clarity.

    For example the Republican Bill Archer is quoted as saying …

    “If one believes that the trust fund assets are worthless,” argued former Representative Bill Archer, then similar reasoning implies that “Americans who have bought EE savings bonds should go home and burn them because they’re worthless because the money has already been spent.”

    Thus these bonds are redeemable and IMO the government can raise funds by putting a transaction (sale) tax on security transactions. Or they can eliminate the SS salary cap. Or they can raise income tax rates on the rich by adding more brackets (there use to be 14 graduated brackets).

    Mr. Smith sounds the clarion but never suggests a restoration of the progressive tax rates that existed prior to 1981. IMO he is inferring a dangerously fallacious idea that these bonds are “worthless” and therefore misleads readers into thinking that there are cob webs in the trust fund vault — a crisis in the making.

    The crisis will be the false anxiety of a public believing that Social Security was “raided” when in fact it’s not. Where the public has been swindled is on the basis that the government has relied on a hugely REGRESSIVE tax to fund government operations on the lie that SS was unsound while giving huge tax breaks for the rich.

  5. allenwsmithphd said on September 18th, 2010 at 6:14pm #

    TO: David Green

    I am afraid, Mr. Green, that you have had your head burried deeply in the sand for a very long time. I stumbled onto the great Social Security scam more than ten years ago. I was shocked and outraged, and I wanted to tell the whole world so they would be outraged too. But nobody wanted to listen. Harry Markopolos tried to warn the SEC about Bernie Madoff’s Ponzi scheme for nine years. If the SEC had listened, thousands of investors would not have lost billions of dollars. I have been trying to warn the public about the Social Security fraud for even longer than Markopolis tried to warn the SEC. During that time $1.5 trillion of the Social Security contributions of working Americans has been embezzled and spent.

    Please read the following excerpt from Fortune’s Senior Editor at Large, Allan Sloan’s August 10 Washington Post column.

    Excerpt from Allan Sloan’s August 10, 2010 column, “Social Security, the trust fund and funny money”

    “Let me show you in two different ways how useless the fund is. The first is a quote from the introduction to the 2009 Social Security trustees report, the second is the graphic by my Fortune colleague Robert Dominguez that accompanies this article.
    Allen Smith, economics professor emeritus at Eastern Illinois University and author of “The Big Lie: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” spotted the 2009 quote, and it is telling.
    It says: , “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, reductions in other government spending, or additional borrowing from the public.”
    In other words, the trust fund is of no economic value.”

    Allan Sloan is one of the most highly respected business journalists in this country. Do you think he would have quoted me and referred to my book if what I am saying is not true?

  6. allenwsmithphd said on September 18th, 2010 at 6:43pm #

    To David Green:

    You wrote: ” There really is a trust fund, and that money is owed to the fund by the federal government. The argument above is simply bogus, and does not belong on a serious site.”

    As small children, many of us were very reluctant to give up our belief in Santa Claus. It was fun believing in Santa Clause and we wanted to hold onto that belief as long as possible. There was no harm in doing so, but clinging to an erroneous belief about the Social Security trust fund can do enormous harm to the future of Social Security.

    I am a strong supporter of Social Security as we now know it, and I hold the same disgust against Pete Peterson as you do. I have vigorously opposed all attempts to privatize Social Security and I have worked to save Social Security, as it now is, for more than a decade. It is people like you, Mr. Green, who have placed the biggest obstacles to my efforts to get the truth out. Every dollar of the $2.54 trillion in Social Security surplus revenue, generated by the 1983 payroll tax hike, has been systematically diverted to the general revenue fund and used to fund such things as tax cuts for the rich, wars, and other government programs. The government of the United States has embezzled the people’s money secretly for the past 25 years. This action has been supported by five presidents and most members of Congress. It is a crime against the American people that the public is entitled to know about. I think you owe the editors of Dissident Voice a very big apology. They often print the truth when the mainsteam media ignore it. Are you against freedom of the press? Are you against holding our elected representatives accountable for their actions? I have devoted ten years of my life, and a substantial amount of personal money, to the cause of trying to save Social Security for future generations. I have published four books on Social Security. I have appeared on CNN, CNNfn, CNBC, and more than 170 radio shows in my effort to save Social Security for posterity. Would you please tell us what you have done, other than trying to prevent the truth from getting out.

    Allen W. Smith, Ph.D.
    Website: http://www.thebiglie.net
    Email: moc.loanull@sadoownori
    Phone: 1-800-840-6812

  7. mariejanvier7 said on September 18th, 2010 at 6:55pm #

    I feel like a fool, because last year in my Introduction to Business and Management class, my instructor tried to warn us about the trouble that Social Security is facing. I did not agree with him, he called me an optimist.
    Dr. Smith, your article makes me realize that our economy system needs a reform. The Social Security fund is like ghosts money. It is not a matter of not trusting our system of economy, the American people have the right to know whether there is a Social Security fund or not.

  8. jlohman said on September 19th, 2010 at 12:28am #

    Nothing is going to change until we have public funding of campaigns. What is it about political bribes do we not understand? Politicians spend money because they ARE PAID to spend taxpayer dollars, and robbing the SSI fund gives them the cash to attract campaign dollars.

    We are at the mercy of corporations run for profits, enabled by a privatized congress that shares in those profits. Our problem is NOT government, and it is not R’s or D’s. It *IS* that government is owned by the special interests that want in the taxpayer’s pockets.

    As a former CEO my company would not have survived if I had an employee or board of directors who took money on the side and gave away company assets in return. Our country can’t survive this corruption either.

    If politicians are going to be beholden to their funders, those funders should be the taxpayers. And at $5 per taxpayer per year it would be a bargain. Even at 100 times that. We MUST lobby our senators and representative to co-sponsor the bill at: http://fairelectionsnow.org/about-bill

    Jack Lohman …
    http://MoneyedPoliticians.net

  9. commoner3 said on September 19th, 2010 at 4:20am #

    I agree with “Deadbeat” 100%. The SS is safe and sound and any shortfalls in the revenue in the Distant Future can be remedied easily by the steps suggested by “Deadbeat”.
    Allen Smith is nothing but a fear and doubt peddler and I am wondering which group he is shilling for. He is a part of a group that have been at it for quite a while trying to pave the way to cutting SS benefits and eventually completely privatising it.
    I am baffled and perplexed byDissident Voice” is publishing articles for that “False Prophet” and is advertising his book. Is it not Dissident Voice a progressive blog??!!

  10. shabnam said on September 19th, 2010 at 5:22am #

    {In other words, there is NOTHING wrong with Social Security. This is IMO a propaganda war..}

    I agree with Deadbeat.
    The same interpretation has been given by Paul Grugman, professor of Economics and Internationa Affairs and winner of Nobel Memorial Prize in Economics.

    Paul Krugman has said lies being spread about Social Security to eliminate this program that shows government program can work well. His points:
    Costs of Social Security are not unsupportable by the federal budget. SS has its own budget.
    “The program won’t have to turn to Congress for help or cut benefits, which the program’s actuaries don’t expect to happen under 2037 — and there’s a significant chance, according to their estimates, that that day will never come,” write Krugman.

    While it is true that a lot of Boomers will be applying for SS in the near future, Krugman says:
    {They will increase payouts from 4.8 percent of GDP to 6 percent of GDP. How much is that, in plain terms?}
    Krugman says it is significantly LESS than the rise in post 9/11 defense spending which was considered such a non-crisis financially that Bush was able to go ahead with his tax cuts for the rich.

    This federal program provides income for millions of Americans in their old age is 75 years now, and it is evidence that GOVERNMENT PROGRAM CAN WORK. Conservatives of all stripes HATE Social Security because it shows that the government can do some good, thus those who want to remove this piece of evidence are trying to eliminate it.

  11. jlohman said on September 19th, 2010 at 5:40am #

    ‘Tis funny. Or NOT! I’m watching CNN on how we may eliminate school buses because of their cost, and now we’re talking about eliminating Social Security. Which exactly makes my case: bankers give campaign contributions and school kids don’t. So our politicians will bail out one and not the other. These prostitutes, 100% of them, must be voted out of office.

    And we are wasting our time to complain about any other issue, because if we fix this one (corruption) we’ll fix them all.

    Jack Lohman …
    http://MoneyedPoliticians.net

  12. allenwsmithphd said on September 19th, 2010 at 7:32am #

    “Allen Smith is nothing but a fear and doubt peddler and I am wondering which group he is shilling for. He is a part of a group that have been at it for quite a while trying to pave the way to cutting SS benefits and eventually completely privatising it.”

    I invite those of you who see me as described above to please read some of my writings on Social Security. You can find excerpts from most of my books on my website at http://www.thebiglie.net. The above description of me couldn’t be farther from the truth. I am a progressive–probably far more progrssive than most of the people who read this blog. I have done as much as anyone to fight against the privatizing of Social Security.

    I published a book in 2005 entitled, “Social Security: The Attempt to Kill It,” which was my response to Bush’s privatization campaign. Chapter Five of that book is entitled, “The Plot to Destroy Social Security.” That chapter begins with the following words:

    “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).”…titled, “ACHIEVING A ‘LENINIST” STRATEGY.”

    I am not a part of any group, because few people have been willing to seriously listen to what I am saying. Yet, for ten years, I have dedicated my time and money to trying to alert the public to the great Social Security scam which threatens the future of Social Security. I totally support Social Security the way it is today and I have desparately been trying to alert the public to the fact that it is threatened by the practices and policies of our government. We must demand that the $2.54 trillion of looted Social Security money be repaid. If that is done, Social Security can pay full benefits until at least 2037. If we remove the earnings cap, Social Security can be made solvent for decades longer. PLEASE ANALYZE THE MESSAGE INSTEAD OF TRYING TO KILL THE MESSENGER!

  13. jlohman said on September 19th, 2010 at 7:35am #

    I’m for protecting it… putting it into a lock box. Can you imagine what would have happened to your retirement had Bush privatized it before the crash?

  14. allenwsmithphd said on September 19th, 2010 at 8:33am #

    TO: Deadbeat

    “I think there has been a lot of hyperbole being irresponsibly thrown out by Dr. Smith… In other words, there is NOTHING wrong with Social Security. This is IMO a propaganda war and IMO Dr. Smith, unfortunately is adding to the confusion rather than provide clarity.”

    There is nothing I can say to change your line of thinking. But I have spent the past 10 years researching and writing about Social Security funding. I was shocked and outraged when I first discovered the great Social Security scam more than ten years ago. It just did not seem credible that the United States government would deliberately and systematically divert the surplus Social Security contributions of working Americans into the general revenue fund and use the money to pay for tax cuts to the rich, wars, and other government programs. The first thing I did was to begin searching the Congressional Record to see if there at been any discussion in Congress of what appeared to me to be the “unthinkable.”

    It didn’t take me long to find the evidence I was looking for. In 1989 and 1990 the Senate held hearings on the issue during which U.S. Senators used words like, “embezzlement.” thievery” and “stealing” to describe what was taking place. Some examples:

    “…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund…in the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.”–Senator Ernest Hollings of SC, speech on Senate floor, October 13, 1989

    “…On that chart in emblazoned red letters is what has been taking place here, embezzlement. During the period of growth we have had during the past 10 years, the growth has been from two sources. One, a large credit card with no limits on it, and, two, we have been stealing money from the Social Security recipients of this country.”–Senator Harry Reid, speech on Senate floor, October 9, 1990

    On January 21, 2005, David Walker, Comptroller General of the U.S. Government Accountability Office (GAO) made the following statement.

    “There are no stocks or bonds, or real estate in the trust fund. It has nothing of real value to draw down.”

    I did not ask for this awful job. It just fell into my lap. I discovered that the government was violating federal law and the public trust. I learned that the government was systematically taking the Social Security contributions of working Americans and using those funds for non-Social Security purposes. My first opportunity to try to break this news to the media and the public came on September 27, 2000 when I appeared on CNN News to discuss my then new book, “The Alleged Budget Surplus, Social Security, and Voodoo Economics.” Anchor Lou Waters labeled me as “a voice crying in the wilderness.” I continue to be such a voice a decade later. I know this will sound crazy to most people, but I feel almost like a modern-day Paul Revere with a civic duty to warn my fellow citizens that danger is on the way. I don’t enjoy this job, but as long as I know about an impending danger that the public needs to be alerted to, I will continue as one who is trying to save Social Security as we now know it by alerting the public to the misdeeds of our government.

  15. jlohman said on September 19th, 2010 at 8:58am #

    Allen you believe what you believe, and I hope you are wrong. But why do you spend so much time on the “effect” and none on the “cause” (our corrupt political system)?

    Jack Lohman …
    http://MoneyedPoliticians.net

  16. Don Hawkins said on September 19th, 2010 at 9:46am #

    “Forget the politicians. The politicians are put there to give you the idea that you have freedom of choice . You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the state houses, the city halls, they got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear.”
    – George Carlin

    Was Carlin correct?

  17. commoner3 said on September 19th, 2010 at 10:51am #

    Re: allenwsmithphd said on September 19th, 2010 at 7:32am

    Dr. Allen Smith,
    As they say, the proof is in the pudding. ALL your RECENT articles serve nothing but spreading fear, doubt and uncertainties about SS,
    claiming that the Trust Fund is looted and is good for nothing ,although many economists and many of your readers pointer to the fallacy of your position.
    The Trust Funds is not empty but has US government bonds that are, by law, have to be honoured like all OTHER US debts. These bonds have the faith and credit of the US government behind it, and you keeping repeating the Trust Fund is empty which is not true.
    You claim that you are a progressive and cares too much about SS , but your writings are to the contrary, and are the writings of someone who has joinied the rising number of shills who want to gut SS because it is a successful government program and divert its funds to the vultures of Wall St. who are circling above in waiting.

  18. teafoe2 said on September 19th, 2010 at 11:16am #

    Of course Carlin was correct. The only thing lacking in his statement is that he didn’t mention the Zionist Fifth Column.

    JLohman, your assumptions are those of a capitalist CEO, therefore they are superficial. You can “write your Congressman” (sic) from now to doomsday and nothing willl change. More fundamental change is needed. Starting with the concept of Property enshrined in our institutions and legal system.

    Mr Allen Smith may or may not be misguided, but I don’t think there is any need to attack the DV editors for publishing his views. It seems to me they’ve given rise to an informative discussion.

    To me, the key question is outlined in the following quote: >”…the bonds used by the Trust Fund are not typical treasury bonds that are sold to the public but a special type of “non-marketable” treasury bond. For me this was a new piece of information because I had long believe that they were T-Bills. Because these bonds are non-marketable, it’s been argued that these bonds do not represent an asset or are backed by any real asset.

    Thus the question is really whether or not you believe the full faith and credit of the United States.”<

    At another point another discussant refers to "worthless IOUs". Can we assume that the reference is to these non-marketable bonds?

    So the question becomes, assuming that these bonds are held/owned by the Social Security Admin — probably better verify that? — that if funds are needed beyond current FICA contributions, will the SSA attempt to redeem enough of these bonds to make up the shortfall?

    Since the SSA is part of the Exec Branch, could POTUS block SSA from trying to redeem bonds in order to balance its budget? Could Congress interfere using its Oversight powers, or by special legislation?

    That last possibility seems to me worrisome…?

  19. allenwsmithphd said on September 19th, 2010 at 11:19am #

    In the Summary of the 2009 Social Security Trustees Report, a single sentence, buried deeply within the report, spills the truth about the so-called “trust fund bonds.” That sentence reads:

    “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, reductions in other government spending, or additional borrowing from the public.”

    The Social Security trustees make the following points very clear:

    1. The Treasury receives no new net income from the redemption or interest paid on the so-called “trust fund bonds.”

    2. The Treasury, must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”

    I invite all readers who believe that the trust fund holds enough money to pay full benefits until 2037 to explain to the rest of us where the money is going to come from, given the above official statement by the Social Security trustees. You are entitled to your own opinion, but you are not entitled to your own facts. Please tell us where the money to pay all those benefits is going to come from. And please don’t say it will come from Santa Claus or the Easter Bunny.

    Beginning in 2015, payroll tax revenue will be insufficient to pay full Social Security benefits. That is when the surpluses in the trust fund were supposed to begin to be drawn down to supplement the inadequate revenue in order to pay full benefits. But there are no surpluses in the trust fund because the money has all been spent. As a result, Social Security benefits will have to be cut in 2016 and all the years that follow unless the government repays the raided Social Security money.

    The fact that the government has violated federal law, and the trust of the American people, by misappropriating Social Security revenue for a quarter century, is a big sin. The failure to repay the Social Security contributions that have been taken from working Americans, would be an unforgivable sin.

  20. jlohman said on September 19th, 2010 at 11:32am #

    teafoe2: “JLohman, your assumptions are those of a capitalist CEO…”

    Wow, and my right-wing family calls me a left-wing wacko!!! :-)

    But you read this and then tell me what I am. I do believe I’m a capitalist, but a pragmatic one with a good sense for business, jobs and healthcare.

    http://moneyedpoliticians.net/2010/08/02/how-many-more-jobs-must-wisconsin-lose/

  21. teafoe2 said on September 19th, 2010 at 11:50am #

    Mr Smith, that the redemption of the bonds doesn’t provide any new income to the US Treasury doesn’t mean that nobody winds up with more cash than they had before redeeming some bonds.

    If interest is paid on these bonds, somebody must be receiving the payments. If bonds are redeemed, doesn’t that mean that the holder transfers the bonds and receives cash? Or if not actual cash, receives liquid assets in some form?

    Can you please clarify how this process works? Thanks.

  22. teafoe2 said on September 19th, 2010 at 11:56am #

    Jloman, whether you are a capitalist or a dead salesman is of no interest to me. My comment was not intended to denigrate you as an individual, but to help explain why you hold such a primitive, superficial view of the US political process.

    It is possible to obtain minor concessions, tiny reforms, you can get a speedbump put into your cul-de-sac if you pester long enough, even get the sewer mains repaired sometimes. But changes of the magnitude under discussion will never come about by “working within the system”. Been there, done that, no cigar.

  23. jlohman said on September 19th, 2010 at 12:16pm #

    I agree that working within the system is difficult, but I sure would hate to see the alternative. Armed rebellion? Civil war?

    Yea, we’re headed that way if we don’t fix it fast, but let’s not give up just yet.

    Of course, the reason we can’t get there is because the incumbents have control and demand all of the private money, and the Fat Cats know whom to schmooze, and money buys elections, and challengers without money fail, thus the current politicians like things just as they are; corrupt but legal.

    Our best shot is the fair Elections Now Act which is being brought forward by the Dems (conveniently, just before election but without time for passage). But here’s the link: http://fairelectionsnow.org/about-bill

    I’d suggest calling your reps but they are either very against it or very for it, and your one voice is not going to sway them. If you can encourage a group, all the better. Public demand may sway some of the more honest ones.

  24. Deadbeat said on September 19th, 2010 at 12:53pm #

    Dr. Smith writes …

    In the Summary of the 2009 Social Security Trustees Report, a single sentence, buried deeply within the report, spills the truth about the so-called “trust fund bonds.”

    I don’t have too much time to respond to this but if the trust funds is the main problem then one needs to examine what are the implications of a default. Dean Baker wrote a piece on this back in 2005 that may be of interest …

    Defaulting on the Social Security Trust Fund: What It Would Mean, and How It Would Be Done

  25. Deadbeat said on September 19th, 2010 at 3:15pm #

    Dr. Smith writes …

    TO: Deadbeat
    There is nothing I can say to change your line of thinking.

    That’s not true. You’re writing did change my mind regarding the trust fund bonds. As I wrote I credit you for bring that piece of information forward. Before your articles I had believe that the bonds were actually T-Bills. But having said that, the next question is what’s the implications. Here is where I am in disagreement with your approach. I think your writings serves to dredge up fear and uncertainty rather than a plan of action especially with regard to regressive vs. progressive taxation.

    Also for the record I was a Social Security survivor recepiant so I’ve taken an interest in SS since the late 1970’s and especially since 1994 when Doug Henwood outed the then Clinton Labor Security Robert Reich who deliberately understated growth estimates (using figures that were beneath the Great Depression) to make it appear that SS was headed for bankruptcy.

    In addition you site Ernest Hollings. Hollings was co-author of the right-wing Gramm-Rudman-Hollings Balance Budget Act of 1985 in order to lock in the huge tax cuts the rich received after 1981 and two years after the regressive tax burden shift from the 1983 Greenspan Commission that lied about the Social Security. Are you so naive to believe that Hollings knew NOTHING! Hollings was an major player and his involvement in the G-R-H was going to see to it that SOCIAL PROGRAMS got slashed in order to achieve a “balanced” budget.

    David Walter on the other hand has been shilling for Pete Peterson ever since he left government. Walker has made a nice career for himself shilling for Petersen whose only goal in life (especially the last 40 years) is to eliminate Social Security.

    Dr. Smith, I am not impressed by the people you seem to be impressed by. At least a hack like Bill Archer did provide some truth about the implication of the U.S. failing to meet its debt obligation. This is why they need a propaganda war and you are falling for it because you have relied on the wrong sources. Dean Baker has looked closely at this and as I previously mentioned Doug Henwood who IMO is the only person I trust on this topic especially after he busted the “liberal” Robert Reich on the numbers in 1994.

    The plot is to set the EXPECTATION. This isn’t just a game of what’s in the “trust fund”. In the end it all comes from TAXES. This is really PSY-OP war. If they cut benefits and then transfer these bonds to the private sector (because people are expecting cob-webs) you can bet bottom dollar those bonds will be redeemed.

    Action is what needs to be avocated. The solution is to tell the public that they’ve been OVERPAYING Social Security taxes since 1983 and to put SS back on pay-as-you-go and eliminate that regressive overpayment by TAXING THE RICH. Start taxing ASSETS, start taxing stock sales, restore the PROGRESSIVE income tax back to pre-1981 (or pre-1960’s) levels. Get the rich to FORK UP. At that point you’ll then see TRUE NATURE of David Walker and his greedy ilk.

  26. jlohman said on September 19th, 2010 at 3:32pm #

    TAXING THE RICH???

    The poor are not going to pull us out of theis, it will have to be the rich. But they own the politicians, so what now?

  27. Deadbeat said on September 19th, 2010 at 3:50pm #

    jlohman writes …
    TAXING THE RICH??? The poor are not going to pull us out of theis, it will have to be the rich. But they own the politicians, so what now?

    I don’t know about you but I’m poor as I am not rich. So the only way there’s going to be change is for the “poor” to organize and threaten an overthrow of the system — from top to bottom. That’s when you’ll see “compromise”.

  28. teafoe2 said on September 19th, 2010 at 5:26pm #

    Well, Mr Smith, after reading Dean Baker’s analysis it’s clear to me that there IS a problem, the Social Security program IS threatened. But…

    It’s clearly NOT an actuarial problem, but a POLITICAL problem. The threat comes from rich people & their stooges who are manuevering to prepare the public to accept a US Treasury default on legal obligations to the SS Trust Fund.

    So there is no compelling need to tax the rich any more than they are paying right now if the sole concern is to be able to keep paying full SS benefits. All the whining about it by Rethuglican politicians and their Dumbocrat accomplices is nothing but a typical Rich People snowjob.

  29. commoner3 said on September 19th, 2010 at 5:43pm #

    Re: Deadbeat said on September 19th, 2010 at 3:15pm #

    Dr. Smith writes …

    TO: Deadbeat
    There is nothing I can say to change your line of thinking.

    That’s not true. You’re writing did change my mind regarding the trust fund bonds. As I wrote I credit you for bring that piece of information forward. Before your articles I had believe that the bonds were actually T-Bills. But having said that, the next question is what’s the implications.
    ________________________________________________________

    Deadbeat,

    The provision that the Government bonds in Trust Fund is non marketable T Bills and Bonds is stipulated to prevent the government from selling these bonds
    in the open market and then spending the money and this time the Trust Fund will become really empty. But these especial T Bonds and Bills like the regular T Bills and Bonds has the full faith and credit of the Federal Government behind them.
    Of course the Government can renege on its debt to anybody and this will be a new complete different world with gigantic different problems.
    For example to US can renege on its debt to the Chinese and declare war on them if they challenge US about that, but this will be a complete new ball game with dire implications to everyone.

  30. allenwsmithphd said on September 19th, 2010 at 6:26pm #

    teafoe2

    Can you please clarify how this process works? Thanks.

    No cash interest is ever paid on the debt to Social Security. It is all a matter of accounting. The Treasury “pays” interest to Social Security by issueing more of the same kind of IOUs that the trust fund already holds. Until 2010, Social Security ran surpluses, so the issue of redeeming the IOUs did not come up. However, the government must take money from the general fund to redeem enough IOUs this year to cover the Social Security deficit. Similarly, in future years, the government will have to spend $2.54 trillion from the general fund in order for full benefits to be paid until 2037. The simplest way to look at it is that the $2.54 trillion in IOUs that the trust fund holds represents a claim against future income of the government. Yes, the government does owe the money to the trust fund, and it has a moral obligation to pay it. However, no provisions have been made for the future repayment of the looted money. Obviously taxes will have to be raised, if it is politically feasible to do so. But, without the support of the public and the Congress, taxes cannot be raised and, therefore, the government will be unable to pay its debt to Social Security.

    If the $2.54 trillion in surplus revenue, generated by the 1983 payroll tax hike, had been saved and invested in real assets as it was supposed to be, the government would have the money to repay its debt. But all of the money was spent on other programs. The crucial point is that those IOUs in the trust fund cannot be used in any way to pay benefits. They are not marketable and they have no monetary value. Beginning in 2015, and every year after that, the government will be unable to pay full benefits unless it increases taxes, decreases expenditures on other programs, or borrows the money from the public.

  31. Don Hawkins said on September 19th, 2010 at 6:32pm #

    Allen a simple question why was it done in this way.

  32. teafoe2 said on September 19th, 2010 at 6:36pm #

    it looks like the simplest way out for the US Treasury, Exec Branch & Congress is to borrow more money from the “public”, i.e., the PRC. Or maybe the Fed could create some money and lend it to the Treasury Dept?

  33. commoner3 said on September 19th, 2010 at 6:43pm #

    Re: allenwsmithphd said on September 19th, 2010 at 11:19am

    Dr. Allen Smith wrote:
    “The Social Security trustees make the following points very clear:

    1. The Treasury receives no new net income from the redemption or interest paid on the so-called “trust fund bonds.”

    2. The Treasury, must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”

    I invite all readers who believe that the trust fund holds enough money to pay full benefits until 2037 to explain to the rest of us where the money is going to come from ………………….
    __________________________________________________
    Dr. Allen Smith,
    And your point is??!! Nobody said the redemption of the “trust fund bonds” is to provide NEW NET INCOME to the treasury, but its only purpose is to close the gap between the money coming in and the money spent on benefits.
    As many people pointed before, simple PROGRESSIVE modifications to taxation,
    for example new taxes on hedge funds speculative transactions, rolling back some of W Bush obscene tax cuts for the super-wealthy, increase the wages that can be taxed for SS , etc etc can easily satisfy that gap.

    The above is a good example of the way you write your articles and title them.
    Your style is not the style of some one who wants to solve a problem but the style of someone who wants to scare and alarm his readers and spread doubt, confusion
    and uncertainties.
    Most of your readers are neither lawyers nor finacial experts. We are not crossing the Ts and dotting the Is here, and it is glaingly obvious that you want to scare your readers about the future of SS which is one of the best government run programs and which is currently badly needed by so many.

  34. allenwsmithphd said on September 19th, 2010 at 6:55pm #

    teafoe2 said on September 19th, 2010 at 5:26pm #

    Well, Mr Smith, after reading Dean Baker’s analysis it’s clear to me that there IS a problem, the Social Security program IS threatened. But…

    It’s clearly NOT an actuarial problem, but a POLITICAL problem. The threat comes from rich people & their stooges who are manuevering to prepare the public to accept a US Treasury default on legal obligations to the SS Trust Fund.

    BINGO. NOW YOU’RE TALKING MY LANGUAGE!

    I have never said Social Security had an actuarial problem. I have always insisted that the 1983 payroll tax hike did generate enough revenue to have paid full benefits until 2037. THE PROBLEM IS GOVERNMENT FRAUD.

    “The threat comes from rich people & their stooges who are manuevering to prepare the public to accept a US Treasury default on legal obligations to the SS Trust Fund.”

    This “manuevering” has been going on for the past 25 years.

    It started when Reagan decided to give big tax cuts to the rich. Those cuts were not affordable unless the lost revenue was made up somewhere else. How about a hefty increase in the regressive payroll tax? An income tax cut, accompanied by a payroll tax hike, would result in a transfer of income and wealth from the poor to the rich. Next step–appoint Alan Greenspan to chair the Social Security reform commission so he can give his blessing to a payroll tax hike. Just to make sure Alan comes through, why not promise to appoint him to the coveted Federal Reserve chairmanship? That way everyone can live happily ever after.

  35. allenwsmithphd said on September 19th, 2010 at 7:08pm #

    To: Deadbeat

    “Dr. Smith, I am not impressed by the people you seem to be impressed by.”

    I am not impressed by people. I am impressed by facts. I cited Hollings and Reid to show that the raiding of Social Security was being debated in the U.S. Senate 20 years ago. What they did before or after, is not relevant to the question of whether or not the raiding of Social Security was being discussed in 1989 and 1990.

    I cited a quote from David Walker in his capacity as Comptroller General of the U.S. Government Accountability Office on January 21, 2005. That was not just Walker’s opinion. It was the finding of the many competent employees of the GAO. It was the official opinion of the GAO.

    I am not at all impressed with the work Mr. Walker is doing for Pete Peterson. I am appalled by Peterson’s actions.

  36. Deadbeat said on September 19th, 2010 at 8:48pm #

    Dr. Smith,

    Please read the Dean Baker’s paper I posted. Baker’s paper provides real context. What we are talking about here is the advocation of the United States defaulting on its debt obligations and the ramification should that occur.

    The people you’ve cited as your sources according to Baker stands to gain $800,000.00/household in the event of a default to the SS trust funds bonds.

    The message you need to get across is that they are spreading FUD and fear rather than clear facts. I also recommend reading the last part of Jeffery Gates’ series that’s also posted on DV to understand the workings of propaganda. Here’s what he has to say in Staying on Message to Advance the Narrative

    Storylines don’t need to be true, just plausible. The point of psy-ops is not reality but credibility.

    DB

  37. Deadbeat said on September 19th, 2010 at 8:59pm #

    Dr. Smith writes …

    But, without the support of the public and the Congress, taxes cannot be raised and, therefore, the government will be unable to pay its debt to Social Security.

    The government can also issue new debt or print money or lift the salary cap or cut military spending, etc. Support from the public would come, Dr. Smith, if you’d join up with people like Dean Baker and Doug Henwood to properly inform the public of the realities rather than promoting the same confused message that only will benefit people like Pete Petersen.

  38. Deadbeat said on September 19th, 2010 at 9:02pm #

    Yet another observation,

    The government found $24 trillion to bailout the banks yet somehow for SS there’s no way according to Dr. Smith for the gov’t to find the money. Is Dr. Smith advocating for the U.S. to default on Social Security? Sounds like it to me.

  39. allenwsmithphd said on September 20th, 2010 at 5:40am #

    “Is Dr. Smith advocating for the U.S. to default on Social Security? Sounds like it to me.”

    ABSOLUTELY NOT!

    I have spent ten years of my life trying to prevent that very thing!

    Five years ago, I stood on a stage at Sheperds University, in Shepherdsville, WV, as co-speaker along with James Roosevelt, Jr. (FDR’s grandson), and predicted that if we didn’t stop the raiding and inform the public of the government fraud with regard to Social Security, a day would come when the government would attempt to default on its Social Security debt.

    Predicting something is very different from wanting it to happen. Predicting that something bad will happen is a way of urging people to take actions that will prevent it from happening. I have spent the last 10 years doing that. It is time to wake up and face the facts. Our government has stolen $2.54 trillion of the people’s money over the past 25 years and used it for other purposes. The people should become outraged and put enough political heat on the government so that it will be politically impossible for the government to default. Yet people are not willing to take even the first step of admitting and condemning the theft.

    The government has managed to keep their dirty deed from the public all these years only because the mainstream media suffers from “Dan Rather Phobia.” I was told by a former employee of the Federal Reserve Bank of New York that Tim Geithner and Ben Bernanke did not want this story to go public. He said that if they didn’t want the story reported, the mainstream media would not report it. He used the word “bought” describe why they would not report it. I think the more appropriate word is “fear.” When Dan Rather got fired for reporting a story that the White House did not want reported, freedom of the press suffered a big setback. If it weren’t for sites like Dissident Voice, some stories would never see the light of day.

    Deadbeat, I urge you to do some research and check out the facts for yourself. Check the federal budget for the years 1983 to 2010. If you do, you will see that the amount the government spent each years exceeded the combined revenue of the general fund and Social Security revenue. It is absolutely clear that all of the Social Security money was spent. WE MUST DEMAND THAT IT BE REPAID!

  40. Don Hawkins said on September 20th, 2010 at 10:43am #

    Predicting something is very different from wanting it to happen. Predicting that something bad will happen is a way of urging people to take actions that will prevent it from happening. It is time to wake up and face the facts. Our government has stolen our minds over 25 years and used it for other purposes. The people should become outraged and put enough political heat on the government so that it will be politically impossible for the government to keep our minds. Yet people are not willing to take even the first step of admitting and condemning the theft of our minds. A mind is a terrible thing to waste well so is a planet that can support life so far the only one we know of we must demand we want our minds back. I’ll bet our minds are in a super computer in a secure location and sure hope nobody hit’s the delete key. WE MUST DEMAND THAT OUR MINDS BE GIVEN BACK TO US.

  41. Deadbeat said on September 20th, 2010 at 1:41pm #

    Dr. Smith writes …

    Five years ago, [I] predicted that if we didn’t stop the raiding and inform the public of the government fraud with regard to Social Security, a day would come when the government would attempt to default on its Social Security debt.

    You were wrong five years ago and you are still wrong today and it FEEDS the right-wing attacks on Social Security.

    Here’s where you’ve erred…

    The government is NOT committing fraud! I’ll say it again…

    The government is NOT committing fraud

    What’s going on is that Social Security is LENDING its surplus to the United States Government. Social Security is a TRUST FUND that the government ADMINISTERS. It’s been this way since 1935.

    What’s been going on since 1983 is that the taxes being collected for Social Security is over and above what’s needed on a year to year basis to pay out benefits. The excess has been LENT to the United States government to fund operations; money that should have been raised via the PROGRESSIVE income taxes.

    Again Dr. Smith I am NOT impressed by the people you cite. Who cares whether you stood on a stage with RICH people who’ve been getting away from paying their fair share of taxes since 1981 (actually in 1978 Jimmy Carter lowered Capital Gains taxes). This is what wealthy “defenders” of Social Security avoid telling people.

    Dr. Smith says …

    Our government has stolen $2.54 trillion of the people’s money over the past 25 years and used it for other purposes.

    Doc where have you been? The Bush/Obama administrations gave $12 TRILLON to the banks with a commitment for an additional $12 trillion. $2.54 trillion is PEANUTS compared to the money they found for the banks. You’ve been riding this clarion that the U.S. will “default” on 2.54 Trillion. It is clear that the U.S. can find the money to make good on the bonds.

    In addition, you conveniently omitted the lead-up to the question you chose to responded to. I wrote …

    The government found $24 trillion to bailout the banks yet somehow for SS there’s no way according to Dr. Smith for the gov’t to find the money.

    Again here is Dean Baker from CEPR…

    Is Defaulting on the National Debt on the Table

    Given the ease with which the country can borrow, and the relatively minor burden posed by interest payments there is no reason for the United States to default on its debt. But of course there is also no reason for it to cut Social Security payments, which would amount to a defacto default on its debt to the Social Security trust fund. Near retirees have already paid for their Social Security with their Social Security taxes. These taxes were used to buy the U.S. government bonds held by the trust fund. If the government substantially reduces scheduled benefits, this is effectively defaulting on these bonds.

    I agree that we must hold the government’s feet to the fire but what you are doing, Dr. Smith, is worse because you are inducing FUD and reinforcing the bogus ideological attacks against Socialism.

    The real success of Social Security is that it is a WORKING and LIVING example of how Socialism CAN function and operate. And that scares people like Peter Petersen.

  42. Max Shields said on September 20th, 2010 at 2:56pm #

    Deadbeat the wise person knows that truth is a paradox. The arrogant…well they think they’ve got all the answers with “dead” certainty.

    Look the basis of this phony economy is GDP. The economists, for the most part live and die by it. As it is grows as people’s lives are systematically destroyed. Social Security, though has proven itself useful and resilient, it is has done little to diminish the dispair of the ever sinking populace into states of relative poverty.

    But it is interesting how you use the liberal capitalist, Dean Baker, to buttress your “point”.

    Wasn’t it you, Deadbeat, who said socialism cannot exist in a world where capitalism rules? I do recall that to be your thinking. And yet you believe, with great convenience, that not only can it exist, but it can exist as a single program in a country that sees capitalism and democracy as one.

    But of course there is no “pure” market, no “pure” capitalism and no pure “socialism”. Good to see you are beginning to see the world is not black and white. That worldviews are simply preferences of perception.

  43. Don Hawkins said on September 20th, 2010 at 3:06pm #

    A light year is 5,865,696,000,000 miles (9,460,800,000,000 kilometers) or about 5.8 trillion miles and they said human’s could never travel at the speed of light we more than doubled it.

  44. teafoe2 said on September 20th, 2010 at 3:38pm #

    oh kryst max is back. here we go again, confusion not To but From the max.

    still pushing his “there’s a little truth in everything” rap.

    Social Security is a concession wrung from the capitalist ruling class by a combination of workingclass militancy and capitalist fear of the appeal of Bolshevism at a time it appeared Capitalism might be broken beyond repair.

    It has been and continues to be vitally important to most working class families, to retirees, survivors, disabled people and to their relatives who are relieved of all or part of the burden of supporting SS recipients.
    Deadbeat has done everyone a great service by posting accurate detailed information about the myths pushed by those hoping to “privatize” the Social Security Trust Fund.

    If you think anything in Dean Baker’s analysis is false or misleading, why don’t you quote the offending passage, then point out where it is incorrect?

    I doubt that you understand the subject matter well enough to even know if your opinion is different from Baker’s; it looks to me like your purpose is really just to try to annoy Deadbeat with a bunch of silly innuendo, and to push your nonsense notion that the differences between Capitalism and Socialism are so trivial as to be of no significance whatsoever.

  45. commoner3 said on September 20th, 2010 at 5:39pm #

    Re: Max Shields said on September 20th, 2010 at 2:56pm #

    MaxShield,

    And your point is..?? What the f*&k are you trying to convey …!! I am not smart enough to get your wise-ass theorising and abstracting.! We are not discussing GDP or the difference between Capitalism and Socialism and the merit or dismerit of each! We are discussing a very concrete subject here and nobody is theorising but your friend Dr. Smith is trying to bullshit us big time.
    Again, please stop being a wise-ass.

  46. Deadbeat said on September 20th, 2010 at 5:46pm #

    What Max and the good Doctor don’t know about me is that I once spent weeks online debating the irascible Michael Tanner of the Cato Institute over Social Security. I do know a lot about the system but and I didn’t make a dime defending it. If it wasn’t for Social Security I wouldn’t have been able to finish school.

  47. allenwsmithphd said on September 20th, 2010 at 6:02pm #

    TO: All readers of this blog.

    I have been trying to respond to individuals, like Deadbeat, who have raised questions or made points directly to me, but that is accomplishing nothing. Deadbeat thinks he has all the answers and is unwilling to do any research to find out where he is wrong. And, indeed, he is very wrong. For his information, I did read the specific article written by Dean Baker that he asked me to read. Over the years, I have read most of Baker’s writings because I want to learn as much about various views on Social Security as possible. Mark Weisbrot, the cofounder, along with Dean Baker, of the Center for Economic and Policy Research, was once a colleague of mine. We both taught economics at the same university. When “THE BIG LIE” was first published, I wrote to Mark and sent him two copies of the book, one for him, and the other for Dean Baker. I hoped that they would read the book and get back to me with their responses. Unfortunately I never received any response.

    Dean Baker and Mark Weisbrot are two top-notch economists who have had a blindspot about Social Security ever since they co-authored the book, “Social Security The Phony Crisis,” in 2001. They have long maintained that the trust fund held the same kind of U.S. Treasury Bonds that everyone else holds. I debated Mark a few years ago on a radio show on that issue. He was adamant that the trust fund bonds were just like any other bonds. I have followed Dean Baker’s writings on Social Security closely, and his position is evolving. I remember when Baker argued that the government could not possibly default on its debt to Social Security because the Social Security bonds were just like all other bonds and the government could not possibly default on all it debts. In the 2005 article that Deadbeat cites, Baker says that the government could default on its Social Security debt without defaulting on its total debt. How could that be? If the government defaulted on any of its real, public-issue, marketable Treasury bonds, it would cause mass hysteria in world financial markets and permanently damage the credit-worthiness of the United States. It can never happen and it will never happen. Yet, Dean Baker, who has always insisted that the trust fund bonds were just like all other bonds, is now saying that the government could default on them.

    I have a lot of respect for Dean Baker who, like myself, is just trying to protect Social Security. He is in the same camp as Paul Krugman on this issue. Krugman, who has won a Nobel Prize in economics is a brilliant economist, but he is dead wrong on Social Security. I have tried over and over to communicate with Paul Krugman. I have publicly challenged Krugman to a public debate on Social Security. I have posted comments on his blog that his censors always block. I have not won a Nobel Prize. But, like Krugman, I hold a Ph.D. degree in economics from a major university and I have taught economics classes at the university level for 30 years. In addition, I have spent the past ten years researching and writing about Social Security.

    As I have said numerous times, I want to save Social Security for posterity through public education. I greatly appreciate the opportunity to communicate with others on blogs such as this, and I invite anyone who is interested to visit my website at http://www.thebiglie.net or contact me by email or phone.

    Allen W. Smith, Ph.D.
    Email: moc.loanull@sadoownori
    Phone: 1-800-840-6812

  48. mariejanvier7 said on September 20th, 2010 at 7:15pm #

    I don’t understand why some of the readers are angry with Dr Smith; he tried to tell us something about the Social Security fund. If we don’t agree, we can do our own research about the issue. I am a retired nurse; when I worked almost 20% of my salary went to pay for Social Security taxes only. I will be 90 years old in 2035. Now, with the advancement in medicine and technology people are living longer. The probability that I will be alived past my 90th birthday is very high. Since according to Dr Smith’s calculation, if President Obama does not take some sort of critical measures now to restore the fund, Social Security will die by 2035. It is scary, I do understand, but the American people need to know the truth.

  49. Max Shields said on September 20th, 2010 at 7:20pm #

    Commoner3 why are you so easily frightened?

    and teafoe2 “cryst” you never go away…have you nothing else to occupy your mind than to spout arcane nothings in the hope that it will find meaning on the DV blog?

    Deadbeat now that you’ve made your comment about debating Tanner, are you ready to do something worthwhile. Common there’s lots to be done.

  50. allenwsmithphd said on September 20th, 2010 at 8:31pm #

    To mariejanvier7

    Thank you so much for your polite post. With the kind of lively discussion that has been going on here, it is hard for anyone to know what is true and what is not. You have apparently read something into the discussion that I never intended to convey. You wrote:

    “Since according to Dr Smith’s calculation, if President Obama does not take some sort of critical measures now to restore the fund, Social Security will die by 2035.”

    That is not true. Social Security will continue to pay some benefits as long as the payroll tax exists. It just won’t be able to pay 100 percent of scheduled benefits after 2015 unless some arrangement is made to repay the government’s debt to Social Security. Current estimates are that it would be able to pay approximately 75 percent of scheduled benefits in 2037. But that is not good enough.

    In 1983, the government sought to “fix” Social Security so that it could handle the the surge of new retirees that the baby boomers would bring. Up to that point, Social Security had operated strictly on a pay-as-you-go principle. In most years the revenue from the Social Security payroll tax was approximately equal to the cost of paying benefits, so there were no large deficits or surpluses. But that would clearly change when the baby boomers retired.

    The “fix” included a major hike in payroll tax rates that were designed so the the baby boomers would pay substantially more payroll taxes than any other generation, so that when they reached retirement age they would have already prepaid most of the cost of their own retirement. It was a good plan that would have worked well if the government had saved the large Social Security surpluses and invested them in real public-issue marketable Treasury bonds as they were supposed to do. But they did not do that. Instead, when the first significant surpluses began to flow in during the second Reagan term, the government chose to divert the money to the general fund and use if for general government operations. Reagan’s precedent of using Social Security money for non-Social Security purposes has followed ever since. So the $2.54 trillion in surplus revenue has already been spent, leaving no reserve in the trust fund to supplement the payroll tax revenue which will soon be inadequate to pay full benefits.

  51. allenwsmithphd said on September 20th, 2010 at 9:04pm #

    This has been a lively discussion, which is good. However, with all the give and take, and the heated nature of some of the posts, I am not sure that the original message that I tried to get across is still in the minds of very many readers. So let me try again to make my points.

    1. The 1983 Social Security “fix” required the baby boomers to prepay most of the cost of their own benefits. The hefty payroll tax hike has generated $2.54 trillion in surplus revenue that was supposed to be saved and invested in real, marketable U.S. Treasury bonds.

    2. If the plan had been followed, the trust fund would now hold $2.54 trillion of “good-as-gold” marketable Treasury bonds, which the trustees could re-sell in the open market to raise cash with which to pay full retirement benefits to the baby boomers.

    3. If that were the case, Social Security would be able to pay full benefits until 2037, after which, it would only have enough payroll tax revenue to pay approximately 75 percent of scheduled benefits. However, by simply removing the earnings cap so that everyone would pay payroll taxes on all of their earnings, enough additional revenue could be raised to pay full benefits for many more decades.

    4. If the plan had been followed, once the payroll tax becomes insufficient to pay full benefits in 2015, the government would simply dig into the surplus in the trust fund each year to supplement the inadequate payroll tax revenue.

    5. Social Security would not even be in the news today if the government had done what it was supposed to do with the surplus Social Security revenue. Unfortunately that did not happen. Every dollar of the $2.54 trillion that is supposed to be in the trust fund has already been spent on other things, leaving nothing of value in the trust fund.

    6. The official Social Security Administration website says that the surplus Social Security revenue was invested in government securities. That is in no way true. All of the money was spent on other programs, and it was replaced with IOUs called “special issues of the Treasury.” These IOUs are not marketable and they have no monetary value. They cannot be used to raise money with which to pay benefits. All the surplus Social Security contributions made by working Americans over the past 25 years is gone. It has all been spent. None of it has been saved or invested in anything. WE MUST DEMAND THAT THE GOVERNMENT REPAY THE MONEY!

  52. commoner3 said on September 21st, 2010 at 4:15am #

    Allen Smith wrote:
    “All the surplus Social Security contributions made by working Americans over the past 25 years is gone. It has all been spent. None of it has been saved or invested in anything. WE MUST DEMAND THAT THE GOVERNMENT REPAY THE MONEY!
    _____________________________________________________

    Dr. Smith,
    You started to sound like a broken record, repeating over and over the same misleading, confusing and obfuscating song to shake the people faith in SS and fill them with doubt, uncertainties and fear about one of the best and useful programs run by the government.
    For the THOUSANDTH time, the money borrowed by the government from SS Trust Fund was replaced by US Treasury bonds, that are backed by law and the faith and credit of the Federal Government.
    When there is shortfall between the SS tax collected and benefits paid in a fiscal year, some of this bonds are redeemed to cover that shortfall. So, not ALL these bonds have to be redeemed at once, but are redeemed few billions worth each year. Simple PROGRESSIVE taxation worth few billions of dollars can be used to finance that redemption. The Federal Government gave Wall St more than 2.5 TRILLIONS dollars in bailout money and guarantees and more than 12 TRILLIONS are set aside just in case, so few billions dollars each year for redeeming SS Bonds is not a problem.
    What is your sinister aim?! Who you are shilling for from Wall St?. Why are adamant on scaring people and filling them with doubt about SS. You are a Wolf in sheep skin, and that is worst kind. STOP the lies and misleading your readers.

  53. Max Shields said on September 21st, 2010 at 8:09am #

    Commoner3 have you taken Deadbeat talking point lessons?

    Who’s shilling who? You have this magnanious “trust” in the US government..the same government that has us in endless war, colonizing not only the world but most of the urban centers here. The same country that has allowed through its Supreme Court (yes it’s a branch of the government) to ensure Corporate rule. The same government owned and operated by a tiny percentage of a oligarchy.

    But because there is this “trust” with SS (a good token program, as token programs go), you think this SAME government is something that will ensure your SS future….And you are fearful that some poster on DV will pollute the minds of thoughtless Americans that the end is near.

    The end is near and SS is far from the reason. Wake up.

  54. Don Hawkins said on September 21st, 2010 at 9:57am #

    Max you made some very good point’s in that last comment.

  55. commoner3 said on September 21st, 2010 at 12:14pm #

    Re: Max Shields said on September 21st, 2010 at 8:09am #

    Max,
    Of course, the government lied and is lying up to its teeth and cannot be trusted. However, if the government reneged on its debt obligations to SS and other crditors, then the world will be entering a phase where the problems of SS will be a picnic compared to the upheavals and dislocations that the world will be entering into if that happen.
    The problem with Dr. Smith and his ilk, is that they are shilling for the government and Wall St. by trying to shake the public confidence in the SS viability, value and effectiveness to retirees and give the false impression that the system is bankrupt and good for nothing which is absolutely not true.
    The SS program with things the way they are right now is one of the best run , efficient and beneficial of the government programs to citizens of this country.
    Dr. Smith and his ilk campaign of misiformation, disinformation and lies about the SS program has two objectives:
    1) Since the program is” short of funds”, then the retirees have to accept increase in the retirement age accompanied by a cut in benefits. Of course the savings resulting from that will be channelled as more tax cuts for the super-wealthy and corporations.
    2) Since the program is in “bad shape and poorly managed”, then it is better to privatise it and hand it to Wall St. firms to manage it.??!!
    If SS is handed over to Wall St., then the vultures and thieves of Wall St. will not waste any time devouring the trust fund, and this time SS will be truely bankrupt!.

  56. allenwsmithphd said on September 21st, 2010 at 1:28pm #

    To: commoner3

    I had resolved not to respond to any more comments of this type. But I will not allow commoner to publicly continue his uninformed tirades and his attempts at character assassination. Everything I have reported on the blog is true and accurate. I have spent the past ten years researching and writing about Social Security solvency, and I think I know just about as much about it as anyone. I have devoted tens of thousands of dollars of my own money, and most of my time for the past decade, trying to alert the public to what is going on with their Social Security contributions in an effort to save Social Security through public education.

    I have stated repeatedly that:

    1. I am a progressive who has always supported preserving and protecting Social Security as it currently is.

    2. I have actively battled all attempts to privatize Social Security and published a book in 2005, “Social Security: The Attempt toKill It” which was exclusively devoted to denouncing President Bush’s campaign to privatize Social Security.”

    3. I have nothing but disgust for people like Pete Peterson and his cohorts.

    I have pointed all these things out in previous posts and I’m sure Commoner has read them. Yet Commoner at this stage in the discussion makes the accusation:

    ” The problem with Dr. Smith and his ilk, is that they are shilling for the government and Wall St. by trying to shake the public confidence in the SS.”

    That is just about the most insulting thing that anyone could say about me, given the fact that I have been battling both Wall Street and the government for the past ten years. I have been warned by friends and family that I might pay a price for taking on the government and Wall Street. I have already paid a big price. I appeared on CNBC on February 26, 2004, the morning after Greenspan’s first assault on Social Security was launched. I held my, then newly published book, “The Looting of Social Security” in front of the camera and said, as forcefully as I could, “Alan Greenspan should be ashamed of himself for what he is not telling the American people.” Several weeks later that book was mysteriously removed from the market, depriving the public at that time from learning the truth about the trust fund. I tried to get the publishing rights to the book back so I could publish it elsewhere but the publisher refused. It took me three years to get the rights back so that I could publish “THE BIG LIE.” I strongly suspect that Wall Street and/or the government, the people Commoner claims I am working for, played a role in keeping the book, and the information it contained, from becoming public knowledge. There is no way that I can know whether or not Alan Greenspan played a role in having the book censored, but I am sure he was happy to see it go. Why is Commoner doing his part to discredit me and the book. Why is he so worried about my message getting out to the public? Why does he rely exclusively on character assassination in attacking me? Is he not capable of doing some research so he can debate the facts instead of just throwing stones? Is it possible that Commoner is one of those people who do not want the truth about the trust fund to become public knowledge?

  57. Don Hawkins said on September 21st, 2010 at 2:58pm #

    I strongly suspect that Wall Street and/or the government, the people Commoner claims I am working for, played a role in keeping the book, and the information it contained, from becoming public knowledge.

    A wink and a nod what do you think Allen a good name for a book? It’s already public knowledge and I can tell your a good man Allen tuff day’s ahead and boring it will not be.

  58. allenwsmithphd said on September 21st, 2010 at 3:07pm #

    HOW HAVE THE GOVERNMENT AND THE MEDIA MANAGED TO KEEP SUCH A DARK, DIRTY SECRET FROM THE PUBLIC FOR 25 YEARS?

    When I first discovered that the government was raiding the trust fund and spending all of the surplus Social Security contributions of working Americans for non-Social Security purposes, I could not understand how the government was getting by with such an attrocious practice. I thought it must be because nobody had found out about it and reported it to the public. Therefore, when my book, “The Alleged Budget Surplus, Social Security, and Voodoo Economics,” was published in 2000, I almost expected the media to beat a pathway to my door to learn more about it. But I soon learned that the subject was something that the mainstream media did not want to hear about or report on. I found out that, as early as 1990, Senator Reid and others had used the words, “embezzlement,” “thievery” and “stealing” to describe the raiding in speeches on the Senate Floor. I learned this by searching the Congressionl Record. I did not find any news stories where these statements were reported in the public media. Similarly, when I tried to get the story out in 2ooo, most of the media gave me the cold shoulder.

    When my book, “The Looting of Social Security” came out in 2004, it received a couple of early good reviews, and I thought the story was about to come out. The Boston Globe reported, “If you have the stomach for a truly demoralizing read–you might want to take up, “The Looting of Social Security” by Allen W. Smith…”With dismal clarity, Smith lays out the step-by-step history of how a national pension plan was transformed into an outright shakedown of working people, a maneuver that began during Ronald Reagan’s administration.” But then on January 27, 2004, the conservative Washington Times carried a lengthy article denouncing both me and the book. The article appeared to be a red flag to the conservative community, warning that a book was about to come out that was not favorable to Ronald Reagan and the conservatives. Just a month later, on February 26, I held my book in front of the camera on CNBC and made a negative statement about Greenspan. My appearance on CNBC was probably the final nail in the coffin of my book. The content of the book was not something that Greenspan, the government and Wall Street wanted the public to read.

    Although we hear occasional reports of book banning and censorship, I was very troubled to learn that the right people, with the right connections, can keep information from reaching the public. A few months ago, I spoke with a former employee of the Federal Reserve Bank of New York about the difficulty I was having getting the media to report the story about the raiding of the Social Security trust fund. He had a simple answer for me. He said that Tim Geithner and Ben Barnanke would not want the story to get out, and that fact alone would keep the major media from reporting the story. He said people in high positions in government have contacts in most of the major media outlets who will see to it that stories they don’t want to be reported will not be reported. The very possibility that what he said might be true sent cold shivers up my spine. The ultimate ramifications of such an arrangement are UNTHINKABLE!

  59. commoner3 said on September 21st, 2010 at 4:04pm #

    Dr. Smith,
    I am a retired 69 years old Electronics Engineer with modest savings and who is relying to some extent on SS. I have a good understanding of how SS is working.
    I have nothing to do with anyone or any outfit. I consider myself populist/liberal and definitely left of center.
    As I said the proof is in the pudding. Imagine yourself a layman who is reading your bombasting writings and the way it is titled, then imagine what his frame of mind will be and what faith in SS will be left with him??
    Just look at the way you titled this article:”Obama and the Social Security Time Bomb”! What TIME BOMB??!!. Do you think finding few billions dollars each year for SS is a time bomb after the TRILLIONS OF DOLLARS that was given to Wall St. and the big Banks????!!!!
    You say your objective is protecting SS, but your writings is undermining SS.
    I am baffled, do you read and understand differently??!! Do you write in English and understand in Chinese??!!
    Many laymen after reading your writings will lose faith in SS and will be good soil of what the government and Wall St. want to do with the system which is cutting benefits and delaying retirement and eventually gutting it and raiding its Trust Fund.
    Some bloggers here directed your attention to the holes in your logic and suggested to you the writings of the progressive economists : Paul Krugman and Dean Baker who were answering many of the faulty assumptions and logic you raised, but for you to no avail. You kept sounding like a broken record repeating the same nonsense over and over.
    Why do I pick up on you? I am not an economist or preparing a book about SS??!!

  60. Don Hawkins said on September 21st, 2010 at 4:24pm #

    He said people in high positions in government have contacts in most of the major media outlets who will see to it that stories they don’t want to be reported will not be reported.

    So to get that story reported someone would have to report on themselves and this story will never be reported then again maybe it just was. The ultimate ramifications of such an arrangement are UNTHINKABLE! Some just on the off chance of course have an arrangement of the unthinkable.

  61. Don Hawkins said on September 21st, 2010 at 4:32pm #

    Our country also hungers for leadership to ensure the long-term survival of our Social Security system. With 70 million baby boomers in this country on the verge of retirement, we need to take action to shore up the system.
    Kay Bailey Hutchison

  62. Deadbeat said on September 21st, 2010 at 4:47pm #

    Dr. Smith writes…

    I have been trying to respond to individuals, like Deadbeat, who have raised questions or made points directly to me, but that is accomplishing nothing. Deadbeat thinks he has all the answers and is unwilling to do any research to find out where he is wrong. And, indeed, he is very wrong. For his information, I did read the specific article written by Dean Baker that he asked me to read. Over the years, I have read most of Baker’s writings because I want to learn as much about various views on Social Security as possible. Mark Weisbrot, the cofounder, along with Dean Baker, of the Center for Economic and Policy Research, was once a colleague of mine. We both taught economics at the same university. When “THE BIG LIE” was first published, I wrote to Mark and sent him two copies of the book, one for him, and the other for Dean Baker. I hoped that they would read the book and get back to me with their responses. Unfortunately I never received any response.

    You know it is one things to say someone is wrong but saying someone is wrong doesn’t make the Doctor’s rebuttals valid. What would makes the Doctor’s rebuttal valid is to point out where your counterpart erred. This is what I did with his arguments. I’ve pointed out where he erred. He insists that the U.S. government committed fraud. But he hasn’t yet provided evidence of fraud. Did the government and the media MISINFORM Americans? Here we are in complete agreement. I disagree with the implications and ramifications of his arguments.

    His primary argument against Weisbrot and Baker and the basis of his “credibility” is that he uncovered the Treasury Bonds in the trust fund are non-marketable bonds. Clearly Weisbrot and Baker were incorrect about this pertinent fact. But after that he engages in ad hominem to discredit anything they have to say about Social Security in a “I was right; they were wrong” fallacious hyperbole.

    What he hasn’t done is explain the ramifications of these bonds being non-marketable securities. What he has done is INFER that these bonds are “worthless”.

    The Doctor hasn’t argued against whether there are NO Treasury bonds in the coffers. If there were NO bonds that would be fraud. The basis of his whole argument is the type of bonds — marketable vs non-marketable. Therefore Baker is asking the RIGHT question in his paper I posted. Since there are bonds, does the United States plan to DEFAULT on its SS debt obligation. According to Dr. Smith’s arguments there is only one conclusion — they will — because he implies that the non-marketable securities are irredeemable. He states …

    If the plan had been followed, the trust fund would now hold $2.54 trillion of “good-as-gold” marketable Treasury bonds, which the trustees could re-sell in the open market to raise cash with which to pay full retirement benefits to the baby boomers.

    What he fails to tell us is that the government sell bonds that only certain institutions can buy (like banks) and not the general public. This is not new nor nefarious as he infers. The problem with his argument is that THIS IS HOW BONDS work and as an economist and teacher he should know this.

    The government sells all kinds of bonds to raise money that it spends. We can argue about spending policy but that’s not fraud. The REAL context is that Social Security LENT the money to the United States government to fund its operation to make up for the short fall due to the huge ONGOING tax cuts the rich received in 1981. The rich has not paid its fair share of taxes for 30 years! What the $2.54 trillion actually represents is a QUANTIFIABLE amount of money that the working class has LENT to the RICH to pay for the 1981 Kemp/Roth tax cut and working people are owed that money.

    The other issue is the Dr. Smith’s myopia about markets and money. What defines money in the United States is the U.S. government and the belief in the full faith and credit of the United States. There is NO REAL VALUE other than this belief which is imposed by LAWS and PUNISHMENT (i.e. POWER). Therefore the only conclusion is that the Doctor doesn’t believe in the full faith and credit of the United States. He might as well burn ALL his cash. But the real danger is that with all the distrust toward government his arguments are very seductive to those who don’t fully understand progressive vs regressive taxation.

    I didn’t write a book nor make a BUCK (I guess the Doctor has some faith in the U.S.) off of this issue but I’ve done my own research and studied economics. What I know about economics is that it is a useful tool but doesn’t explain everything because it minimizes an important component — POLITICS. This is a CLASS WAR. In 1983 in order to preserve the tax cuts the rich received in 1981 a false claim was made about Social Security being in crisis to convince working people of shifting the tax burden onto themselves. This and the other people he has sited above ALL want to lock in and maintain the tax cuts for RICH sociopaths.

    David Stockman
    [OMB Director David] Stockman’s power within the Reagan Administration waned after the Atlantic Monthly magazine published the famous 18,246 word article, “The Education of David Stockman”,[1] in its December 1981 issue, based on lengthy interviews Stockman gave to reporter William Greider. It led to Stockman’s being “taken to the woodshed by Reagan” as the White House’s public relations team attempted to limit the article’s damage to Reagan’s perceived fiscal-leadership skills. Stockman was quoted as referring to the Reagan Revolution’s legacy tax act as: “I mean, Kemp-Roth [Reagan's 1981 tax cut] was always a Trojan horse to bring down the top rate…. It’s kind of hard to sell ‘trickle down.’ So the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.” Of the budget process in his first year on the job, Mr. Stockman is quoted as saying: “None of us really understands what’s going on with all these numbers,” which was used as the subtitle of the article.

    There are several solution to this “crisis” but if it is about the surplus the most fair way to resolve it is to RESTORE the PROGRESSIVE tax rates prior to 1981 AND MAKE THE RICH PAY. There is nothing — ABSOLUTELY NOTHING — in his articles that I’ve seen where he advocates TAXING THE RICH! That’s why Lou Dobbs welcomed him onto his program. Dobbs is a long time REAGANITE who supports tax cuts for the rich and IMO he would have never invited him onto his program if restoring progressive tax rates was Dr. Smith’s prime advocacy. Unfortunately the prime advocacy of Dr. Smith is FUD.

    Again to be clear and fair to Dr. Smith. He revealed that the bonds are “non-marketable”. However what we’ve learned from the recent banking crisis is that the government, like the banks, can SELL their notes the Federal Reserve and redeem them for CASH. Or the government can retire the “non-marketable” bonds and issue “marketable” bonds as the need for cash arises. What the surplus has allowed for paying the tax cuts for the rich and that needs to end and SS should go back to pay-as-you-go as the surplus was never really needed and done only to allow the rich to keep the money it extracts from the working class everyday under Capitalism.

    1983 wasn’t the first time the government jerked around with Social Security. They did that back in 1969 when LBJ placed Social Security “on-budget” in order to conceal how the operating budget of the United States was oriented toward war and militarism. The real “fraud” is that Social Security shouldn’t even be “on budget” since it is not part of the U.S. government’s budget.

    Dr. Smith still has a real opportunity to educate American citizens about Social Security if he alters his advocacy to restoration of the PROGRESSIVE taxes and taxing the rich to pay back the loan working people have given to them since 1981.

  63. Don Hawkins said on September 21st, 2010 at 5:01pm #

    taxing the rich to pay back the loan working people have given to them since 1981. Sounds good to me but if it’s going to happen might want to hurry.

    Our amazing intelligence seems to have outstripped our instinct for survival. We plunder the earth hoping that accumulating material surplus will make up for the profound, unfathomable thing that we have lost. Arundhati Roy

  64. Deadbeat said on September 21st, 2010 at 5:04pm #

    I don’t about you Don but I take SS seriously and don’t see it as an either-or or competing with the “environment”.

  65. Don Hawkins said on September 21st, 2010 at 5:17pm #

    I hope am wrong DB and in about ten years you might change your mind on that and that could be pushing it. Everything will be competing with the “environment.

    “[The skeptic community overwhelmingly embraced what they formerly dismissed as] New Age claptrap … We give up! The nuts were right.”
    Nostradamus

  66. allenwsmithphd said on September 21st, 2010 at 8:02pm #

    The Doctor hasn’t argued against whether there are NO Treasury bonds in the coffers. If there were NO bonds that would be fraud. The basis of his whole argument is the type of bonds — marketable vs non-marketable.

    “If there were NO bonds that would be fraud.”

    THERE ARE NO BONDS IN THE TRUST FUND! That is the whole problem. I have repeatedly said this over and over. THERE ARE NO BONDS IN THE TRUST FUND.

    I have repeatedly included in my posts an official government declaration to that effect.

    On January 21, 2005, The Comptroller General of the U.S. Government Accountability Office(GAO) said:

    “There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”

    Leave out the part about there being no stocks or real estate in the trust fund and what you end up with is,

    “THERE ARE NO BONDS IN THE TRUST FUND!” This was an official statement by the GAO. If there is any branch of government that we can trust to tell the absolute truth about what is going on in government, it is the GAO. That is their entire function.

    Don’t bother to go on another tirade and say that you don’t believe that statement because that particular Comptroller General later left government and went to work for someone you don’t like.

    But we don’t have to rely on that statement. We all have access, through the internet, to the actual federal budgets. I have previously asked you to check out the total revenue of the government, including the revenue from the payroll tax, for every year between 1985 and 2009. Then compare that total revenue with the total expenditures by the government, including the payment of Social Security benefits, for each year during the same period. Although I read the article by Baker that you asked me to read, I know for sure that you have not checked out the figures that I asked you to look at. Because, if you had checked out the numbers, you wouldn’t still be singing the same tune.

    Please do yourself a favor and check out the federal budget for each year from 1985 to 2009. Here is what you will find. In each year, the government spent all of its general revenue, and then it spent all of the Social Security revenue, and then it had to borrow additional money from China and other lenders. If the government spent every dollar of the Social Security revenue, and none of the money was saved, where do you think the government got the money to invest in bonds.

    The Social Security administration never sees any of the surplus Social Security revenue. It goes directly to the Treasury where it is deposited in the general fund and spent for whatever it is needed for. The Social Security program never has possession of the money and therefore could not lend it to anyone. There are no real bonds in the trust fund although the SSA likes to call the IOUs bonds. So, since there are no bonds, or any other kind of assets with monetary value, in the trust fund, it is essentially empty. You said if there were no bonds in the trust fund, fraud would exist. The government has officially said there are no bonds, but we don’t have to rely on that statement for evidence. We can just take a magnifying glass and go searching for any money that might somehow have made its way to the trust fund so the Social Security trustees could have invested it in bonds. Please resist the urge to reply until you have checked out the budget deficits. If you can show me Social Security revenue that was not spent on general government operations, but was saved and invested in real bonds, I will stant corrected.

  67. allenwsmithphd said on September 21st, 2010 at 8:07pm #

    Excerpt from “THE BIG LIE”

    “Unfortunately, not a single dollar of the Social Security surplus is invested in public-issue Treasury bonds. The special-issue IOUs that the trust fund holds were created specifically for the trust funds, and they are held only by the trust funds. Private pension funds and other investors could not invest in the special-issue IOUs, even if they wanted to. However, no outside investor would touch these IOU’s with a ten-foot pole because they are worthless.

    As I have stated many times in this book, the Social Security surplus funds were not invested in anything. All of the money was spent by the government on other programs, so there was nothing left to invest. What the Treasury does when it spends Social Security money on other programs is to create IOU’s to serve as accounting records of the money “borrowed” from Social Security.

    Prior to 1994, the IOUs consisted only of accounting entries recorded in government ledgers or stored on computers. However, some members of Congress began to worry that someone might want to actually see the IOUs, so legislation was passed that required the physical printing of documents to serve as certificates of indebtedness, in addition to the accounting entry. Today, when a new IOU is issued, it is printed on a laser printer located at the Bureau of the Public Debt office in Parkersburg, West Virginia. Once printed, the document is carried across the room and placed in a fireproof filing cabinet. That filing cabinet is the closest thing to the mythical Social Security trust fund that exists.”

  68. Deadbeat said on September 21st, 2010 at 9:05pm #

    “Unfortunately, not a single dollar of the Social Security surplus is invested in public-issue Treasury bonds. The special-issue IOUs that the trust fund holds were created specifically for the trust funds, and they are held only by the trust funds. Private pension funds and other investors could not invest in the special-issue IOUs, even if they wanted to. However, no outside investor would touch these IOU’s with a ten-foot pole because they are worthless.

    Dr. Smith want to argue from both sides. but he cannot have it BOTH WAYS. Either there is NOTHING in the coffers or there are NOTES (digital or physical) that represents DEBT owed to the Social Security trust funds. Dr. Smith has never claimed that there is NOTHING present. What he is saying is that there ARE “special-issues IOU’s”. That is the very definition of a BOND! And these notes are backed by the FULL FAITH AND CREDIT of the United States. In other words he is saying that the U.S. plans to default on its debt to the Social Security trust fund. I”ll once again direct him to the Baker paper for the implication of such an event.

    He says …
    the Social Security surplus funds were not invested in anything. All of the money was spent by the government on other programs, so there was nothing left to invest.

    By the same logic ALL T-Bills are worthless since the government has primarily “invested” in huge tax cuts for the rich and military spending. By his logic coupon clippers & China will be getting cobwebs back from the United States.

    He says …

    Prior to 1994, the IOUs consisted only of accounting entries recorded in government ledgers or stored on computers. However, some members of Congress began to worry that someone might want to actually see the IOUs, so legislation was passed that required the physical printing of documents to serve as certificates of indebtedness, in addition to the accounting entry

    This only proves that prior to 1994 the government didn’t waste paper and after they decided (in an affront to Don Hawkins) to print the notes. Most banking even by the mid-1980’s is “paperless” and tracked on computers. The point is that the trust fund KEPT TRACK of the debt. If the intent was to commit fraud then there would be no effort to keep track of the debt. Dr. Smith and others would not be able to quantify it. The fact that the debt is quantifiable proves that there is one and that the United States is OBLIGATED to make good on it.

  69. Deadbeat said on September 21st, 2010 at 10:06pm #

    From Social Security Administration …

    Trust Fund FAQs

    Why do some people describe the “special issue” securities held by the trust funds as worthless IOUs? What is SSA’s reaction to this criticism? As stated above, money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.

    Far from being “worthless IOUs,” the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

    Many options are being considered to restore long-range trust fund solvency. These options are being considered now, over 25 years in advance of the year the funds are likely to be exhausted. It is thus likely that legislation will be enacted to restore long-term solvency, making it unlikely that the trust funds’ securities will need to be redeemed on a large scale prior to maturity.

  70. Deadbeat said on September 22nd, 2010 at 12:44am #

    Since Dean Baker hasn’t participated in this debate to rebut Dr. Smith, I found an article by Dean Baker written in 2006 that pretty much address Dr. Smith’s arguments…

    Fiction on the Social Security Trust Fund

    From the article …

    The logic is simple; if the public is convinced that the Social Security program can’t be sustained, then there is no alternative to privatization. If people buy the Social Security crisis story, then privatization may be the only way to save the program.

    A big part of the crisis story is to convince the public that the Social Security trust fund is just an “accounting fiction.” Politicians, columnists, and even policy analysts routinely repeat this assertion. They have gone to great lengths to imply that the trust fund is some bizarre and confusing entity that cannot be relied upon to help sustain Social Security. For example, [in 2005] President Bush visited the site where the bonds held by the trust fund are stored and announced that these bonds were “just sheets of paper.”

    Bonds are sheets of paper (like stock certificates), but those of us who live in a modern economy should not be troubled by this fact. In a modern economy, claims to wealth are most often just accounting entries – as everyone who uses a bank account presumably understands.

    Didn’t Dr. Smith tell us that NOTHING was there yet President Bush says he saw the bonds. Dr. Smith arguments are duplicitous, specious and extremely contradictory.

    As I have argued, keeping the feet of the government to the fire to honor its obligation is fine. To create fear, uncertainty and doubt is the apex of irresponsibility.

  71. allenwsmithphd said on September 22nd, 2010 at 7:09am #

    It is clear that Deadbeat does not want to seek out the truth about the trust fund. He just wants to rant and rave and argue for argument sake. I’m sure that there must be many other readers of this blog who have not posted their opinions. It appears that Deadbeat and Commoner have attempted to seize control of this blog, like two bulldogs who intimidate anyone who disagrees with them. They don’t want to engage in open debate of the facts, or do any research to seek new knowledge. I have repeatedly asked deadbeat to check out the federal budgets for the years 1985 to 2009 so that he can see that all revenue, including payroll tax revenue, was spent each and every year, and none of the surplus Social Security revenue was saved or invested in anything. Once you confirm that all the Social Securiy money was spent, and none of it was saved, there is no longer any question about whether any of it was invested. Money must be saved before it can be invested. Perhaps my efforts were not totally wasted in that others who read the blog can perform this exercise and see for themselves that all of the Social Security surplus was spent on tax cuts, wars, and other government programs.

    People who are afraid of the truth can do a lot of harm. As I have reported before, I have spent tens of thousand of dollars of my own money, and most of my time over the past decade, trying to alert the public to the truth about the Social Security raiding, in an effort to save the program. People like Deadbeat and Commoner have been the biggest obstacles to my efforts. I don’t consider such people to be true friends of Social Security. When you battle the effots of others who are trying to preserve Social Security, and refuse to do research that will enable you to make real contributions to the debate, you are not protecting Social Security. You are endangering its future. When our government misleads the public and attempts to keep information from the public that the public needs to know, it is essential that individuals and groups be willing to stand up and oppose such practices. I agree totally with the following quotation of Theodore Roosevelt on what “true patriotism” really is.

    “PATRIOTISM MEANS TO STAND BY THE COUNTRY. It does not mean to stand by the President or any other public officials save exactly to the degree in which he himself stands by the Country. It is patriotic to support him insofar as he efficiently serves the Country. IT IS UNPATRIOTIC NOT TO OPPOSE HIM TO THE EXACT EXTENT THAT BY INEFFICIENCY OR OTHERWISE HE FAILS IN HIS DUTY TO STAND BY THE COUNTRY.”

  72. Don Hawkins said on September 22nd, 2010 at 7:27am #

    I have no country to fight for; my country is the earth, and I am a citizen of the world.
    Eugene V. Debs
    or
    Nationalism is an infantile disease. It is the measles of mankind.
    Albert Einstein
    or
    It is lamentable, that to be a good patriot one must become the enemy of the rest of mankind.
    Voltaire
    or
    Patriotism is a kind of religion; it is the egg from which wars are hatched.
    Guy de Maupassant
    or
    I am not an Athenian or a Greek, but a citizen of the world.
    Diogenes
    or

    Can anything be stupider than that a man has the right to kill me because he lives on the other side of a river and his ruler has a quarrel with mine, though I have not quarrelled with him?
    Blaise Pascal

    Some new pictures in the old coffee shop and what Pascal wrote what do you think keep fear alive rally or reason so many questions so little time.

  73. Deadbeat said on September 22nd, 2010 at 8:19am #

    I can always tell when someone is LOSING a debate. They start with personal attacks rather than offer arguments that pertain to the issues. Now we have Dr. Smith questioning my “patriotism” and quoting an imperialist racist to boot to make his point. However if Dr. Smith wants to take the low road it will only convince me that we are dealing with a real sociopath here.

    Now that we got the name calling out of the way lets get to back to the arguments shall we.

    The basis of Dr. Smith’s arguments comes down to the type of bonds used to cover the Social Security debt. Dr. Smith even contends there are no bonds. The quote that I posted above is directly from the Social Security Administration and claims they do in fact have an accounting of the debt owed to the trust funds by the United States government.

    Either someone is grossly misinformed or is a lying sociopath.

    From the discussion herein we see that Dr. Smith contradicts himself about the accounting. Clearly the Social Security Administration has kept an accounting of the debt owed to it (either digitally or via paper). Dr. Smith confirms this accounting from his own arguments.

    In addition, Dr. Smith contends that the government did not use the surplus to invest in anything. This statement is hyperbole and is designed to confuse people who are unfamiliar with how fiscal policy works. This lack of knowledge of fiscal policy is why the right-wing are able to mislead people with simplistic bromides and cliches (the BC’s, ABC’s are reserved for Chomskyism).

    Fiscal (macro) accounting doesn’t work like a “household” (micro) which is the analogy that Republicans and southern-fried Democrats like to use to justify budget cuts (primarily to social programs). The Federal government has the full faith and credit of the United States behind it and can also print money when needed. The other and most important aspect of fiscal policy in a Capitalist economy is its continuous pump priming function. This is exactly what Bernake and the FED are doing in order to keep the economy going and what Obama did with his anemic stimulus. This is what Keynesian economics is all about — the use of fiscal policy to maintain steady DEMAND. Thus the Social Security surplus was RECYCLED into the economy. This is called “government spending”. No “household” can do this yet this is the simplified analogy that Americans are constantly bombarded with from the Libertarians and Conservatives.

    The REAL problem that Dr. Smith avoids is that this recycling of the REGRESSIVE surplus that was borrowed by the U.S. government should have come from PROGRESSIVE income taxes on the rich that was reduced in 1981 (see above). In other words the Social Security surplus was unnecessary however these bonds represents the money WORKING PEOPLE lent to the RICH to PAY FOR THEIR TAX CUT. Therefore Dr. Smith has PROVEN that there is a debt owed to working people by the federal government to the tune of $2.54 trillion dollars.

    According to SSA they acknowledge this debt (see posts above) and have started to redeem some of it (see posts above). However Dr. Smith presents this as some sort of nefarious con game because the debt is “non-marketable” or that the surplus was not invested in anything.

    Again the “not invested in anything” has to do with POLICY. For example we know that the two biggest area of “investment” over the past 30 years was in tax expenditures (tax breaks for the rich) and the military. However for the sake of argument let assume that the SS surplus was invested in things that improve society. Let imagine that the SS surplus was invested in building schools, road, and bridges, free transportation, health care, housing, education, child care, green stuff (for Don Hawkins sake), theater and the arts, math and science, etc. And then the SS bonds came due according to Dr. Smith there would be no money because the surplus was “spent and not invested in anything”. In other words he’d still be wrong.

    Dr. Smith chooses to dismiss my counter-arguments as “rants” because he cannot resolve his own contradictions. He is using the fallacious appeals to advance what is tantamount to a right wing agenda — one that will convince people that Social Security is in “trouble” so that they accept either cuts in their benefits, increases to the retirement age (which is grossly unfair to the poor and physical workers) or privatization.

    I do hope that Dr. Smith changes is stance and begins a conversion that will provide American citizens with accurate, clear, and non contradictory information and not FUD.

  74. Deadbeat said on September 22nd, 2010 at 8:36am #

    Dr. Smith writes …

    “THERE ARE NO BONDS IN THE TRUST FUND!” This was an official statement by the GAO. If there is any branch of government that we can trust to tell the absolute truth about what is going on in government, it is the GAO. That is their entire function.

    Don’t bother to go on another tirade and say that you don’t believe that statement because that particular Comptroller General later left government and went to work for someone you don’t like.

    This is obviously the comments of the notorious David Walker who now works for Pete Peterson who main goal in life is the destruction of Social Security. It is clear that Walker goal is to make himself RICH by attacking Social Security in a CLEAR CONFLICT OF INTEREST.

    For you to issue a warning for me not to address this is specious and only put the focus on you as to why you don’t want the assertions of David Walker rebutted
    especially since the Social Security Administration clearly states that they possess an accounting of the debt owed to it by the United States government.

    It is clear that Walker has a conflict of interest and that conflict is important to convey to reader here trying to learn about the Social Security trust fund. To demand suppression of that pertinent information only raise doubt about your own integrity to this issue.

  75. Deadbeat said on September 22nd, 2010 at 9:15am #

    Dr. Smith writes …

    In the Summary of the 2009 Social Security Trustees Report, a single sentence, buried deeply within the report, spills the truth about the so-called “trust fund bonds.” That sentence reads:

    “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, reductions in other government spending, or additional borrowing from the public.”

    I wanted to address this comment by Dr. Smith earlier but didn’t have enough time. What Dr. Smith is doing is a grievous disservice. He is distorting a true statement made by SSA into a nefarious one. The bonds held by SSA should NOT provide ANY revenue whatsoever to the Treasury because the money held by the Trust Fund does NOT belong to the U.S. government (i.e. Treasury). The role of Treasury is to ADMINISTER the Social Security Trust Fund.

    As I mentioned earlier (see above), this is the confusion caused when LBJ put Social Security “on budget” in 1969 in order to hide the real cost of the Vietnam War. Prior to Clinton so-called “balanced budget” in 1999, the only other time the government books was “in balanced” was in 1970 after Social Security revenues was placed onto the government’s budget. The budget is extremely misleading since Social Security revenue does NOT belong to the Federal government. See Chart …

    Pie Chart

  76. Deadbeat said on September 22nd, 2010 at 10:33am #

    This is from Dr. Smith’s article How Ronald Reagan and Alan Greenspan Pulled off the Greatest Fraud Ever Perpetrated against the American People comments are now closed on that article.

    Dr. Smith writes …

    6) In 1990, Senator Daniel Patrick Moynihan of New York, a member of the Greenspan Commission, and one of the strongest advocates the the 1983 legislation, became outraged when he learned that first Reagan, and then President George H.W. Bush used the surplus Social Security revenue to pay for other government programs instead of saving and investing it for the baby boomers. Moynihan locked horns with President Bush and proposed repealing the 1983 payroll tax hike. Moynihan’s view was that if the government could not keep its hands out of the Social Security cookie jar, the cookie jar should be emptied, so there would be no surplus Social Security revenue for the government to loot. President Bush would have no part of repealing the payroll tax hike. The “read-my-lips-no-new-taxes” president was not about to give up his huge slush fund.

    Actually Dr. Smith is incorrect. Moynihan introduced the bill he’s taking about in 1989. However Moynihan reintroduced a similar bill when Bill Clinton was president. It was called “The Social Security Solvency Act of 1998″. What the Dr. Smith failed to mention in his article was a particular provision in Moynihan’s plan …


    ADDRESS BY SENATOR DANIEL PATRICK MOYNIHAN

    I have a bill entitled “The Social Security Solvency Act of 1998.” Senator Robert Kerrey and I will introduce it in the Senate this week. Here are the specifics:

    I. REDUCE PAYROLL TAXES AND RETURN TO PAY-AS-YOU-GO SYSTEM WITH OPTIONAL PERSONAL ACCOUNTS

    B. Voluntary Personal Savings Accounts

    Beginning in 2001, the bill would permit voluntary personal savings accounts, which workers could finance with the proceeds of the 2% cut in the payroll tax. Alternatively, a worker could simply take the employee share of the tax cut in the form of an increase in take-home pay equal to 1% of wages. (Economists will argue that workers who do not opt for voluntary personal savings accounts will also, eventually, receive the employer share in the form of higher wages. But that’s a discussion for another time.)

    The magic of compound interest will enable workers who contribute 2% of their wages to these personal savings accounts for 45 years (2000-2045) to amass a considerable estate, which they can leave to their heirs. Some examples, in nominal dollars, for workers at various earnings levels, are shown above.

    That right! Moynihan proposed a PARTIAL PRIVATIZATION of Social Security which would have shifted money to Wall Street (remember that Moynihan was the Senator from New York) in exchange for returning the system to pay-as-you-go. Thankfully his plan didn’t happen.

    Somehow Dr. Smith failed to mention this while heaping praise onto Moynihan. Moynihan was a TWO-FACED politician. First he was a NEO-CON (Zionist). Second he was a flaming RACIST. Third he was a CLASS WARRIOR for the rich elites. Again I am NOT impressed with the people that Dr. Smith is impressed by. They disgust me and their job is to manufacture consent among the populous to support policies their works against their class interests.

  77. teafoe2 said on September 22nd, 2010 at 11:57am #

    after following this discussion for a couple of days, much that was unclear to me at first is now clear.

    At first I thought Dr Smith might be just an individual who had stumbled upon a governmental abuse, decided to try to “blow the whistle”, but had failed to understand the issue completely enough for his writings about it to be taken seriously by anyone, and in his frustration launched into a lot of activity trying to prove himself right.

    But after a couple more days, I think I was overly generous.

    The situation is nowhere near as dire as Smith makes it out to be, so why are we spending time & energy on his assertions when there are other matters crying out for attention?

    The Social Security Trust Fund clearly holds US Treasury-issued securities in an amount equal to the tax receipts borrowed from the Trust Fund and credited to the General Fund. Mr Smith wants us to believe that unless “we the people” rise up en masse, the US government will default on these securities. Absent some unexpected catastrophic event, I don’t see any chance at all of such a default.

    Others have outlined the devastating consequences such a default would have on not only the government’s functioning but also on global financial markets. But there are other reasons why not only is such a default extremely unlikely, but a substantial reduction in Social Security, Medicare, or HUD/HCV payments is similarly unlikely.

    The constituency for these programs is not limited to the direct beneficiaries, or them plus their relatives.

    Stakeholders also include the firms, and investors in those firms, which sell and/or rent products, services, or real estate to program beneficiaries. Big Agriculture, Big Retail, Big Energy, Big Pharma, Big Real Estate, the hospital industry and local governments all depend on spending enabled by these programs.

    Yes, certain capitalist sectors would like to privatize the funds paid out as benefits, but other capitalist sectors would thereby suffer unendurable losses. So some politicians parrot the “privatize everything” mantra in order to please those who dream of getting their hands on these funds, but when push comes to a vote other interests always prevail.

    So why is Mr Smith wasting our time in this way? Who knows, maybe he’s just a nice old crackpot with a pet theory:)