Only a tiny dent was made in the massive problems facing the nation. The missing $2.6 trillion from the Social Security trust fund, which played a major role in creating the economic crisis, is still gone. Except for Senator Tom Coburn (R-OK), nobody explained to the American people that the only reason that Social Security is in any trouble is because the government has stolen all of the surplus Social Security revenue and spent it on other programs.

On March 16, 2011, Senator Coburn said, during a Senate speech:

Congresses under both Republican and Democrat control, both Republican and Democrat presidents, have stolen money from social security and spent it. The money’s gone. It’s been used for another purpose.

The following morning, Senator Coburn said on MSNBC:

We have stolen $2.6 trillion from it. We put paper money in there. But the problem is we spent the money. We didn’t just take it. We took it and spent it.

To the best of my knowledge, no member of Congress, or other high government official, has attempted to rebut Coburn. How could they? Every member of Congress knows that what Senator Coburn said was absolutely true. They also know that there will not be enough revenue, from the payroll tax alone, to pay full Social Security benefits this year, or in future years. The government will have to take revenue from the general fund, to replace some of the stolen Social Security money, if full benefits are to be paid. This basic fact, which only a few members of the public know about, is the primary reason that so many politicians are calling for cuts in Social Security benefits. They do not want the government to have to repay the looted money.

What about the numerous articles that say Social Security has enough money to pay full benefits until 2036? They are based on the assumption that the $2.6 trillion in surplus revenue, generated by the 1983 payroll tax hike, was actually saved and invested in marketable U.S. Treasury bonds. But that was not done. As Senator Coburn has said, all of the $2.6 trillion in surplus Social Security revenue has already been spent. The money is gone.

In response to a question about Social Security, Senator Reid said, “it’s fully funded for the next forty years.” Now, I have been a long-time admirer and supporter of Harry Reid ever since he took a strong stand to end the looting of the Social Security trust fund 20 years ago, but I cannot condone such a big lie, which adds to the confusion about the true status of Social Security.

In 1990, Reid, along with a few other senators, was trying to protect the future of Social Security by telling the truth about it.  In a speech on the Senate floor, on October 9, 1990, Senator Reid made the following statement:

The discussion is are we as a country violating a trust by spending Social Security trust fund money’s for some purpose other than for which they were intended.  The obvious answer is yes…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 Reid was right in denouncing the raiding of the trust fund in 1990, but he didn’t follow through with his battle.  Once he got into a leadership position, he abandoned his fight to end the looting and just ignored the illegal practice after that.  The practice, which Reid described as “embezzlement” in 1990, has continued, unchanged, to this very day.  Every dollar of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been looted and spent on such things as tax cuts for the rich, two wars and other government programs.

Enough surplus Social Security revenue has been generated, by the 1983 payroll tax hike, to fund the payment of full Social Security benefits until 2037.  But none of the surplus revenue was saved or invested in anything. It was all spent and replaced with IOUs that are nothing more than claims against future tax collections.  Since the government has made no provisions to repay any of the $2.5 trillion, there is no way that Senator Reid can accurately say that Social Security “is fully funded for the next forty years.”

Beginning in 2015, the cost of Social Security benefit payments will be greater than the payroll tax revenue, and the gap between revenue and benefit costs will get bigger and bigger with each passing year.    ]

The government’s $2.5 trillion debt to Social Security is the real reason that so many politicians want to cut benefits.  They are trying to find a way to avoid having to repay the looted money.  I agree with Senator Reid’s contention that Social Security benefits should not be cut, but, instead of lying, he should be telling the truth about the looting, and demanding that the money be repaid.

It is time for Senator Reid, President Obama, and all others who are participating in the Social Security debate, to lay the truth on the line before continuing with the debate.  The basic, indisputable truth is that, although the 1983 payroll tax hike has generated enough surplus revenue to fund full Social Security benefits until 2037, that money has already been spent and is not now available for paying benefits.  The $2.5 trillion in surplus revenue is a legitimate debt that the government should repay, but no provisions have been made for the repayment of any of the money.  This means that the government will have to  1) raise taxes, 2) reduce spending on other government programs, or 3) borrow the money from someone else  in order to replace the looted Social Security money.

Given the fact that the national debt has skyrocketed from $1 trillion in 1981 to almost $14 trillion today, I think borrowing should be ruled out as an option for repaying the money.  Also, I don’t believe that it would be possible for members of Congress to agree to cut enough spending from other programs to replace the Social Security money.  If I am correct on these two points, that leaves raising taxes as the only viable option for repaying the money.

Given the fact that much of the surplus revenue from the 1983 payroll tax hike ended up in the pockets of the super rich in the form of income tax cuts, I propose a special tax on this group of taxpayers to recoup the missing Social Security money. The government used revenue from the Social Security payroll tax hike to fund tax cuts for the rich because that was where the money was.  I think the government should recover the “embezzled” money by taxing the rich.

The tax increase could be phased in gradually as the money was needed to pay benefits.  Just as it has taken 25 years for the government to “embezzle” the $2.5 trillion, the money could be repaid in installments over the next 25 years.  This would be a fair and economically sound way to undo the terrible wrong that has been done to the baby boomers, who have contributed more to Social Security than any other generation.  All previous generations had been required to pay only the cost of the previous generation’s benefits.  However,  the 1983 Social Security legislation required the baby boomers to prepay the cost of their own benefits, in addition to paying for the benefits of their parents’ generation.  The extra Social Security tax that the boomers were required to pay, by the 1983 legislation, has been taken from the boomers and given to the rich.  It is time to rectify that wrong.

We can be sure that the rich, who would have to pay the higher tax to fund the repayment of the Social Security money, will fight any such legislation with every weapon at their disposal.  But they are a small percentage of the voting public.  By contrast, Social Security directly or indirectly affects most Americans.  If those who truly care about the future of Social Security would organize and exert their full political powers, such legislation could be enacted, and Social Security could be made whole again.

One of the primary reasons that the Social Security trust fund today holds no real economic assets with which to pay benefits to the baby boomers is the fact that much of the money was used to fund tax cuts for the rich.  Since the rich got money that rightly belongs to Social Security taxpayers, why not use the political system to transfer that money from the rich back into the coffers of the Social Security trust fund?  Think about it.

A lot of people speak of those IOUs as if they can be pulled out and exchanged for money to pay benefit checks.  They can’t. As the Clinton administration budget of 2000 explained, the securities in the Trust Fund ‘do not consist of real economic assets that can be drawn down in the future to fund  benefits.  Those special-issue bonds can only be redeemed by raising taxes, cutting spending elsewhere, or borrowing — exactly what the government would have to do if the Trust Fund didn’t exist.  The Trust Fund, said the Clinton budget message, ‘does not, by itself, have any impact on the Government’s ability to pay benefits.

On December 20, distinguished business columnist, Allan Sloan, seven-time winner of the prestigious Loeb award, business journalism’s highest honor, called the trust fund “a mirage” in his Washington Post column.  In the column, titled, “New tax law reveals the mirage of the Social Security trust fund,” Sloan wrote:

My problem with the trust fund is that it’s a snare and a delusion for people who think that it makes Social Security financially sound.  It doesn’t do that, because having government IOUs in a government trust fund doesn’t make it any easier for the government to cover Social Security’s cash shortfalls than it would be if there were no trust fund.

These are not new revelations.  I have spent the past decade relentlessly trying to expose the Social Security fraud, and prominent government officials were screaming out the warnings two decades ago.

On October 13, 1989, Senator Ernest Hollings of SC stood on the Senate floor and  warned, “…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 21^st century version of Confederate bank notes.”

The Kansas City Star editorial and Allan Sloan’s Washington Post column seem to have stunned the AARP and the NCPSSM into silence.  These organization have repeatedly claimed that the Social Security surplus is invested in U.S. Treasury bonds just like those held by the Chinese government.  They have battled my efforts to get this same message out for a decade, but they seem to have had the wind knocked out of them by the Star and Allan Sloan.  So far, they have made no attempt to rebut either of the two articles.  The AARP and the NCPSSM have been claiming for years that the trust fund holds enough assets to pay full Social Security benefits until at least 2037, when, in fact, in the words of the Kansas City Star, it has no “real economic assets that can be drawn down in the future to fund benefits.”

The Kansas City Star and Allan Sloan have exposed the trust fund myth so clearly that I think the national debate will now turn to how and why the United States government violated both the public trust and federal law for a quarter-century in a way that caused a major transfer of income from the lower and middle class to the richest of all Americans.  By imposing a hefty increase in the regressive payroll tax in 1983, and then using a large portion of the new revenue to offset the lost revenue resulting from the unaffordable income tax cuts that went primarily to the richest Americans, the United States government engineered a major transfer of income from the lower and middle classes to the richest of all Americans.

So where does that leave Social Security?  The approximately $2.5 trillion in surplus revenue, generated by the 1983 payroll tax hike, rightly belongs to the Social Security trust fund and to American workers who paid the extra taxes.  But the money is all gone — “borrowed” or “stolen” by the federal government and spent for general government operations.  None of the money was saved or invested in anything, so the trust fund contains no real economic assets with which to supplement the payroll tax which will become inadequate to pay full benefits after 2015.

I believe it is time for the public to demand, in a very strong way, that the government make arrangements to repay its debt to Social Security.  It is futile for the AARP and the NCPSSM to continue to insist that Social Security is in fine shape and has enough assets to pay full benefits until 2037.  This just isn’t true.  What the organizations need to do now is put political pressure on the government to move quickly to enact legislation that would require the repayment of the looted money, as it is needed, over the next 27 years.  There is no way that the government could possibly come up with the $2.5 trillion in the near future, given the budget crisis.  But it can make a legal commitment to repay the money in installments.  Will that happen?  Not without major political pressure from the majority of Americans. The AARP and the NCPSSM have frittered away the past ten years when the problem could have been resolved. If the looting could have been stopped when I first began actively urging such action in 2000, the trust fund would today hold approximately $1.5 trillion (the amount looted during the past 10 years) in “good-as-gold” real assets.  Instead, it holds no real economic assets.

The reason I don’t believe the government will honor its debt to Social Security without major political pressure is that it does not legally have to repay the money.  The government certainly has a moral obligation to do so, but, because of a 1960 U.S. Supreme Court ruling, it has an out.  In the case of Fleming v. Nestor, the Court ruled that nobody has a “contractual earned right” to Social Security benefits.  This ruling was based on Section 1104 of the 1935 Social Security Act which specifically states, “The right to alter, amend, or repeal any provision of this ACT is hereby reserved to the Congress.” Based on this strong language, Congress could do whatever it wanted to do with regard to changing or even eliminating Social Security.

Many people argue that the government could not default on its debt to Social Security because of the effect such action would have on financial markets and the nation’s public image.  If the government held the same kind of real bonds that are traded on world markets, this would be true.  Public-issue, marketable U.S. Treasury bonds are default-proof, and that is the kind of bonds that the Social Security surplus revenue was supposed to be invested in.  If this had been done, Social Security would be in fine shape today.  But, instead of using the surplus Social Security revenue to buy such bonds in the open market, the government chose to spend the money and issue IOUs to replace the spent money.  These IOUs are non-marketable and could not be sold to anyone, even for a penny on the dollar.  The government has the legal authority to declare these IOUs null and void.  Since these IOUs are not traded, such action would have little effect on financial markets, and foreign governments would probably consider such action as an internal matter between the American government and its citizens.

The Social Security trust fund does not hold any real economic assets that can be drawn down to pay future benefits.  That is an indisputable fact today, and it has been true ever since the 1983 payroll tax hike was enacted.  Every dollar of the $2.5 trillion in surplus revenue, generated by the payroll tax hike, has been spent on programs unrelated to Social Security, leaving nothing to save or invest.

A few United States Senators tried to sound the alarm two decades ago, and I have dedicated the past ten years of my life to trying to alert the public to the awful truth about the Social Security trust fund.  For more than a quarter of a century, the United States government, under five presidents, has hoodwinked the American public into believing their Social Security contributions would be used for future Social Security benefits when, in fact, all of the surplus Social Security revenue was used to fund such things as tax cuts for the rich, two wars, and other government programs.

Today, thanks to the efforts of the editorial board of the Kansas City Star, and thanks to the courage and competence of Allan Sloan and a few other journalists, the big bad secret is finally out, and I think it is too late to get this cat back in the bag.

In addition to promising many times during the campaign that he would not raid the Social Security trust fund, George W. Bush made additional pledges after he was sworn in as President.  In his first State of the Union address, delivered on February 27, 2001, Bush said, “To make sure the retirement savings of America’s seniors are not diverted in any other program, my budget protects all $2.6 trillion of the Social Security surplus for Social Security, and for Social Security alone.” Four days later in his national radio address to the American people, Bush said, “We’re going to keep the promise of Social Security and keep the government from raiding the Social Security surplus.”

Once Bush became president, he reneged on his promise to protect Social Security, and he spent all of the approximately $1.5 trillion in surplus revenue that came in during his eight years in the White House.  But the American people have not been widely informed about Bush’s breach of promise.  It is understandable that, with the 911 terrorist attacks, two wars, and many other major news stories, the looting of Social Security would be pushed to the back burner. However, with the current economic problems, and proposals to cut Social Security benefits in the news today, the story of the awful truth about the Social Security trust fund should be front and center, but it is not.

Although I have been screaming from the rooftops for the past decade in an effort to expose the Social Security scam, my efforts have not been welcomed by the news media, by the AARP and the NCPSSM, or by the United States government.   I thought I would get the message out when my book, The Looting of Social Security, was published by a New York publisher in 2004, but that book became the victim of foul play.  I dared to publicly challenge Federal Reserve Chairman, Alan Greenspan, on national TV, when I appeared on CNBC on February 26, 2004.  I held a copy of the book in front of the camera and said, “Alan Greenspan should be ashamed of himself for what he is not telling the American people.”

Several weeks later my book was censored and removed from the market by someone, some organization, or possibly some government official.  With such a major effort to keep the public from finding out about the looting, I was dumbfounded when President Bush openly admitted it in February 2005.  Bush’s campaign to partially privatize Social Security was not going well, so his advisors apparently decided that they needed more ammunition with which to convince the public that Social Security was in trouble.

On Wednesday February 9, 2005, President Bush openly admitted that surplus Social Security revenue, generated by the payroll tax, is spent on other government programs.  President Bush’s exact words, as quoted in the official White House Press Office’s news release, were: “Some in our country think that Social Security is a trust fund—in other words, there’s a pile of money being accumulated.  That’s just simply not true.  The money—payroll taxes—going into Social Security are spent.  They’re spent on benefits and they’re spent on government programs.  There is no trust.”

On the following day, during a speech in Pennsylvania, President Bush said,  “Now one of the myths about Social Security is there’s a pile of money sitting there accumulating …That’s not the way the system works.  Every dime that goes in from payroll taxes is spent.  It’s spent on retirees, and if there’s excess, it’s spent on government programs.  The only thing that Social Security has is a pile of IOUs from one part of government to the next.”

This was a clear admission by the President of The United States that all Social Security surplus money had been spent and that the Bush administration was continuing to spend Social Security money each and every day.  The president was verifying everything I had been saying for the past four years.  I expected that the president’s acknowledgment would make the Social Security trust fund fraud the leading news story the following day, but it was barely covered by the media.

Today, five years after President Bush publicly acknowledged that the Social Security money was all being spent by the government, most Americans do not have a clue that this is happening.  Why is that?  Is there some kind of pact between the government and the major news media to keep the awful truth about the trust fund a secret?  Were journalists so intimidated by what happened to Dan Rather when he covered a story that the White House did not want covered that they have become too cautious in exercising their freedom-of-the-press rights?  I don’t know the answer to the awesome puzzle.  All I know is that the Social Security trust fund has been routinely and systematically raided for the past 25 years under five presidents and their Congresses. Nothing changed after the 2000 presidential election, but the major news media, who widely reported the looting in 2000, are not reporting it today.

I have repeatedly contacted CNN, and all the other major news networks, in recent months and I have submitted numerous op-ed pieces to the large newspapers trying to get this story out.  Now with the deficit commission recommendations for cutting Social Security benefits, the story is more important than ever. The American people deserve to know that, beginning in 2015, Social Security will be unable to pay full benefits unless the government begins repaying the looted money.  The government has made no provisions for repaying the money it owes to Social Security and is trying to find a way to avoid having to repay the money.

The American people were officially told by the Government Accountability Office (GAO) on January 21, 2005 that, “There are no stocks or bonds or real estate in the trust fund, It has nothing of real value to draw down.” 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 President of the United States has said,  “Every dime that goes in from payroll taxes is spent.  It’s spent on retirees, and if there’s excess, it’s spent on government programs.  The only thing that Social Security has is a pile of IOUs from one part of government to the next.”

When will the public be told the truth by current government officials?  When will journalists begin asking public officials the tough questions, that cry for answers, about the true status of the trust fund? The hour is late.

Early reviews revealed just how provocative the book was going to be.  The Boston Globe reported,  “… 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” and ALA Booklist said, “Smith has written a scathing account of massive fraud on the part of our nation’s leaders, who have plundered every cent of the Social Security Trust Fund surplus that was specifically earmarked for the retirement of the baby boomers.”

On February 26, 2004, I appeared on CNBC, to respond to Fed Chairman, Alan Greenspan, who had called for Social Security benefit cuts the previous day.  I held my book 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.” I now believe that this public criticism of the Fed chairman may have been the final nail in the coffin of The Looting of Social Security, which was very critical of Greenspan’s role in making the looting of the trust fund possible.

A few weeks after my controversial appearance on CNBC, the book mysteriously disappeared from bookstores, nationwide, and was listed as “unavailable” by Amazon.com.  I tried to get the rights to the book reverted back to me so I could publish my message elsewhere, but my publisher refused to surrender the rights.  Thus the book was effectively killed off, and there was nothing I could do about it.  I was unable to pinpoint exactly who was responsible for rendering the book “unavailable,” but a lot of people did not want the contents of the book to become public.  Certainly, people in government, such as Alan Greenspan and Karl Rove, as well as many others in the Bush administration, would have wanted to prevent the book from becoming public knowledge, if they could find a way to do so.

Although the public knew nothing about it at the time, Greenspan’s February 25, 2004 call for Social Security benefit cuts was the opening salvo in an organized campaign to dismantle Social Security, as we now know it, once George W. Bush was safely elected to a second term. On August 27, 2004, Greenspan again spoke of cutting Social Security benefits during remarks at a symposium in Jackson Hole, Wyoming.

“As a nation, we owe it to our retirees to promise only the benefits that can be delivered,” Greenspan said.  “If we have promised more than our economy has the power to deliver to retirees without unduly diminishing real income gains of workers, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels.”

Almost immediately upon his re-election, President George W. Bush made public his plan to partially privatize Social Security.  On November 4, 2004, Bush said, “Let me put it this way: I earned capital, political capital, and now I intend to spend it.  It is my style…I’ve earned capital in this election— and I’m going to spend it for what I told the people I’d spend it on, which is — you’ve heard the agenda:  Social Security and tax reform, moving this economy forward, education, fighting and winning the war on terror.”

Like other Americans, there is no way I could have known about the standby plan to privatize Social Security, which was already formulated at the time I appeared on CNBC and publicly challenged Alan Greenspan on Social Security.  Therefore, I didn’t realize just how big the potential impact of widespread readership of my book could be on the future plans of the Bush administration.  From the administration’s point of view, I’m sure that they were not going to allow my book, or a book by any other author, to sabotage their plan to privatize Social Security.  The book was a threat, and the threat had to be dealt with.

What is far more puzzling to me, than the opposition to my book in 2004, is the current effort to discredit me, and the book.  I was almost flabbergasted when I learned, just a few weeks ago, that a website that goes by the name of “Medicare and Medicare Programs” launched a smear campaign on September 22, 2010 against me and the book that has been off the market since 2004.  You don’t believe me?  Click on the following link and it will take you to that website.  I tried to find out who owns this website and who is behind this effort, but I was unable to do so.  Who is sponsoring this website, and what is their agenda?  These things don’t just happen by chance. The five negative reviews, alleged by the website to have been submitted on September 22, 2010, are exact duplicates of “customer reviews” from Amazon.com that were posted in 2004 and 2005.

If the intent of this internet campaign was to stomp out the message of my book, now and forever, their actions have backfired on them.  It was in reaction to this campaign that I decided not to allow them to kick a dead book without bringing the book back to life.  When I finally regained the rights to “The Looting of Social Security” in 2008, I vowed to re-publish the book, when the time was right, under an arrangement that would guarantee that the book remained in print for as long as anyone wanted to read it.

The smear campaign on the internet has convinced me that the time is now right for the book to be resurrected.  Therefore, I am pleased to announce that the book has just been published by Ironwood Publications, under the title, The Looting of Social Security, New release of the book they didn’t want you to read.  The new book includes all of the content of the original book, along with a new forward written by Dr. Victor Stoltzfus, President Emeritus, Goshen College, and an afterword written by me that brings the book up to date.  The book was officially released yesterday, November 1, 2010.

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.

I first discovered the Social Security scam more than a decade ago, while doing research for my first Social Security book, The Alleged Budget Surplus, Social Security, and Voodoo Economics.  At first I questioned my findings, because it just did not seem credible that the United States government would spend the Social Security contributions of American workers for non-Social Security purposes while at the same time misleading the public into believing that the funds were being invested in regular U.S. Treasury bonds.  But it did not take much additional research to realize that the practice had already been going on for more than a decade and that some very high-profile members of Congress had tried to stop it. 

On October 13, 1989, Senator Ernest Hollings of South Carolina, spoke the following words during a speech on the Senate floor,   “…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.”  

On October 9, 1990, Senator Harry Reid of Nevada expressed his outrage at the practice during a senate speech.  Pointing to a chart displaying a single word in large letters, Senator Reid said,   “…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 Reid used both the words, “embezzlement” and “stealing” as he lambasted the raiding of the trust fund. He knows better than anyone that the practices he so denounced twenty years ago have continued to this day and that he has been a party to the embezzlement.  Yet, as he seeks still another term, he falsely  assures voters that Social Security is solvent for decades.   

 I have been trying to expose the Social Security scam for more than a decade, now, with little cooperation from the media, until very recently.  But the tide is turning.  My first big break came when Allan Sloan, Fortune’s Senior Editor at Large, quoted me and referred to my book in his August 10 Washington Post column.  I’m sure Allan shocked a lot of people with that column.  And he became the first major media person to reveal the dark secret that the government has managed to keep hidden for 25 years. 

Below is an excerpt from that column.    

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. This sentence wasn’t in the 2010 introduction, released last week. Treasury says that it stands by the statement but that the Social Security trustees decided not to include it this year because it reiterates the obvious.  

Once Allan Sloan broke the ice, and reported  on a subject that has been taboo for two decades, he was followed by other journalists.  Below are excerpts from the Social Security writings of three mainstream journalists who have recently joined the effort to expose the awful truth about the trust fund.   

Doesn’t the Social Security trust fund cover that? No, silly.  All those years of surplus in Social Security were recorded in a book entry dubbed the “trust fund”, but the non-marketable special Treasury bonds that make up the fund don’t represent any assets that can be cashed in to pay benefits.

       — Eric Schurenberg from CBS Money Watch,  August 19, 2010  

Your payroll taxes go into a bottomless hole.  So where did all that FICA money go?  Down the drain of federal spending on everything.  It’s certainly not sitting in an account waiting to pay your retirement benefits.

      — Terry Savage, Chicago Sun-Times, September 6, 2010

For more than 25 years, while working people were told that they were paying extra taxes to ensure their retirement security, that surplus tax revenue was actually being siphoned off to run general government operations…In reality, the trust fund contains government IOUs that taxpayers today and tomorrow will have to redeem probably through paying higher taxes

       – Jay Bookman, Atlanta Journal-Constitution, September 7, 2010

   
In less than 30 days, four major journalists have joined the ranks of those who have been trying for so long to expose the Social Security scam.  That scam is the fact that $2.54 trillion of the Social Security surplus revenue has been diverted from the Social Security program and used for whatever unscrupulous politicians chose to spend it on.  None of this money was saved, or invested in anything.  Money can be spent or saved. If it is saved, it can also be invested, but, if it is all spent, there is nothing left to invest.  This $2.54 trillion heist by the United States government may well be the “crime of the century!”

The surplus revenue generated by the 1983 tax hike was supposed to be saved and invested to build up a large reserve with which to ultimately fund the retirement of the baby boomers more than 25 years down the road. If the intent of the legislation had been followed, Social Security would now have enough money to pay full benefits until at least 2037, and there would be no talk today about the need to cut Social Security benefits. Unfortunately, the plan was not followed. Unscrupulous politicians have been stealing the surplus Social Security revenue and spending it for non-Social Security purposes for the past 25 years.

The first surpluses came in, almost unnoticed, during the second Reagan term. Instead of being saved and invested, the surplus money was deposited into the general revenue fund and used for other government programs. When George H.W. Bush became President, he followed in Reagan’s footsteps with regard to the mishandling of the surplus Social Security revenue. As the surpluses became larger and larger, criticism against Bush became louder and louder. The first significant Social Security surplus came in 1985 in the amount of $9.4 billion. By 1990, the surplus had shot up to $56.6 billion and was projected to grow larger and larger over the next two decades.

This was Social Security money, generated by the regressive payroll tax, and intended to be used exclusively for the payment of future Social Security benefits. For the Bush administration to blatantly violate the intent of the law, and use the Social Security money for other government programs, was nothing short of embezzlement. The whole issue came to a head in 1990 when Senator Daniel Patrick Moynihan of New York introduced legislation that would rescind the 1983 payroll tax increase and return the Social Security program to a pay-as-you-go system.

Moynihan’s position was that, if the government could not keep its hand out of the Social Security cookie jar, then the jar should be emptied so their would no longer be any Social Security surplus to raid. Moynihan’s proposal was supported by the conservative Heritage Foundation, the liberal Institute of Policy Studies, and the U.S. Chamber of Commerce. But it was not popular with the Bush administration. “It is an effort to get me to raise taxes on the American people by the charade of cutting them, or cut benefits,” Bush told reporters. “And I’m not going to do it to the older people of this country.” The real reason that Bush opposed the legislation was that, had it passed, he would have lost his large secret slush fund

During the debate on the Moynihan bill, senator after senator characterized the ongoing raiding of Social Security as “embezzlement,” “thievery,” and “stealing,” and that is exactly what it was. Money paid by working Americans for the purpose of building up a reserve for the baby boomers was instead going into the general fund and being used to offset the lost revenue that resulted from Reagan’s unaffordable income tax cut that benefited mostly the rich.

The American public, and specifically future Social Security recipients, were the big losers when Senator Moynihan failed to end the raiding of Social Security in 1990. Senator Moynihan had supported the 1983 payroll tax hike, and the only reason he was advocating its repeal was to prevent the Bush administration from continuing to pilfer it. A far better solution, for Senator Reid and the public, would have been some arrangement that legally prevented the government from looting the money. But President Bush wanted no part of any kind of arrangement that would have kept him from using the surplus Social Security revenue. So the 1990 opportunity to end the raiding of Social Security was lost.

President Bill Clinton continued the raiding of the Social Security surplus throughout his eight years, but the opportunity to change policy came up again in the 2000 presidential election campaign. Al Gore acknowledged the ongoing looting of Social Security and promised to end it if elected. Gore’s promise to end the practice of using Social Security revenue for non-Social Security purposes became so popular that candidate George W. Bush felt he had to make a similar promise. So it appeared that, no matter who was elected President in 2000, the Social Security surplus revenue would be saved and invested, from that point on, as was the intent of the 1983 Social Security legislation.

George W. Bush became the new president, but he reneged on his promise to protect Social Security, despite ongoing assurances that he would not touch the surplus. During his State of the Union address on February 27, 2001, Bush said, “My budget protects all $2.6 trillion of the Social Security surplus for Social Security, and Social Security alone.” Yet he spent every dollar of the approximately $1.5 trillion in Social Security surplus that came in during his presidency. During his 2005 campaign to partially privatize Social Security, President George W. Bush openly admitted that all of the Social Security surplus was being spent. In a speech in Pennsylvania, on February 10, 2005 Bush candidly admitted the raiding with the following words: “Every dime that goes in from payroll taxes is spent. It’s spent on retirees, and if there’s excess, it’s spent on government programs. The only thing that Social Security has is a pile of IOUs from one part of government to the next.” On April 5, 2005, during a speech in West Virginia, Bush said: “There is no trust fund, just IOUs that I saw firsthand that future generations will pay—will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs.’

President Obama has, so far, not officially changed the practice of his four predecessors. However, this year, for the first time in nearly three decades, there is no Social Security surplus to loot. The severe recession has resulted in a reduction in payroll tax revenue at the very same time that many senior unemployed workers are choosing to retire earlier than they otherwise would have, thus raising the total cost of benefits.

Over the past quarter-century, the United States government has embezzled $2.5 trillion of the Social Security contributions of working Americans and used the money to fund wars and other government programs. Unless that money is fully repaid, with interest, the future of Social Security, as we now know it, is doomed, and some politicians are already making plans to dance at its funeral. The American public must not allow that to happen. They must demand that the first priority of the deficit commission be to make provisions for the orderly repayment of the stolen money. Beginning in 2016, payroll tax revenue will be insufficient to make full Social Security benefit payments. Unless at least some of the money is put back into the fund by then, benefits will have to be cut.

The flaw in this argument is that Social Security has not contributed a dime to the budget deficits or the soaring national debt.  Social Security is funded exclusively by payroll taxes (also known as FICA taxes), paid into the fund by working Americans.  In 1983, the payroll tax was increased substantially in response to the recommendations, the previous year, of the Greenspan Commission on Social Security Reform.  

Prior to 1983, Social Security had operated on a “pay-as-you-go” basis with each generation responsible for paying for the benefits of the generation that preceded them.  The 1983 legislation changed the nature of Social Security funding.  In addition to paying for the benefits of the preceding generation, as was customary, the baby boomers were also required to pay additional taxes to partially pre-fund their own retirement.  The net result is that the baby boomers have paid more into Social Security than any other generation.  Yet they are often made scapegoats and blamed for the Social Security funding problem.  I am not a baby boomer, but I am very sympathetic to them.  They are getting a bum rap.

The intent of the 1983 legislation was to generate large Social Security surpluses for the next 30 years that were supposed to be saved and invested, in order to build up a large reserve in the trust fund that could later be drawn down to pay benefits to the baby boomers.  The 1983 payroll tax hike has generated more than $2.5 trillion that is supposed to be in the trust fund.  If the trust fund actually held this amount in real assets, full Social Security benefits could be paid until at least 2037 without any changes.  Unfortunately, none of the surplus revenue was saved or invested in anything.  It was all spent by the government on wars and other government programs without making any provisions for repaying the money.   

Over the past 25 years, five presidents, and the members of Congress, have participated in the great Social Security scam.  All Social Security contributions made by working Americans, except the amount which was needed to pay current retirement benefits, has been funneled into the general fund  and used for non-Social Security purposes.  Some like to say that the government just “borrowed” the money during the time period when it was not needed to pay benefits. 

But borrowing implies repayment, and no provisions for repayment have been made.  The government did not enact future tax increases that would automatically kick in when the Social Security money was needed.  Neither did they enact legislation that would end other spending programs once the Social Security money was needed so the money could be transferred to the trust fund.  The government spent the Social Security money, pure and simple, without making any provisions for future repayments.  The IOUs in the trust fund are not marketable, and they could not be sold to anyone even for a penny on the dollar.  The Social Security trustees confirmed the worthlessness of the IOUs in the 2009 Social Security Trustees Report with the following words:   

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 order for Social Security to pay full benefits after 2016, it will be necessary for the government to begin repaying the money it has spent on other things.  This will mean increased taxes and/or additional borrowing.  Neither of these is politically popular, and there is no assurance that future politicians will be willing to raise taxes to pay for the irresponsible behavior of  past politicians.  If the money is not repaid in full, with interest, it will have been stolen by the government from working Americans who paid into the fund.   

Since Social Security would be fully funded until at least 2037 if the government had not used the money for other things, the only reason that politicians are advocating cuts in Social Security benefits is the fact that the government does not have the money with which to pay its debt to Social Security.  Given the fact that Section 13301 of the Budget Enforcement Act of 1990 made it a violation of federal law to use Social Security revenue for non-Social Security purposes, it is hard to justify using the word “borrow” to refer to any of the Social Security money spent after 1990, even if it is eventually paid back.

I placed the following quotation from Senator Reid prominently on the back cover of my latest book, The Big Lie: How Our Government Hoodwinked the Public, Emptied the Social Security Trust Fund, and caused The Great Economic Collapse.

…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 (D-NV) Speech on Senate Floor, October 9, 1990

I have sent Senator Reid multiple copies of the book multiple times, and I have called his office multiple times, but the senator refuses to respond to me in any way.  Twenty years ago, Senator Reid, Senator Ernest Hollings of South Carolina, and Senator Daniel Moynihan of New York were vocal champions of Social Security.  They vocally opposed President George H.W. Bush’s ongoing practice of using the surplus revenue, generated by the 1983 payroll tax hike, as a giant slush fund.  In fact, in the very same speech quoted above, Senator Reid said, “Maybe what we should do in conjunction with the president, to really carry this conspiracy to its appropriate end, is rather than having it called the Social Security trust fund, why do we not change it and call it the ‘Social Security slush fund?”

For the past decade I have been trying to expose the great Social Security scam that Senator Reid and others recognized and opposed 20 years ago, but it has been like beating my head against a brick wall.  Every dollar of the $2.5 trillion in surplus Social Security revenue that resulted from the 1983 payroll tax hike has been embezzled by the government and spent on tax cuts, wars, and other government programs.  As a result, beginning in 2016, the government will be unable to pay full Social Security benefits without a large tax increase and/or additional borrowing from the public.  That is why members of the deficit commission are so eager to cut future Social Security benefits.

The baby boomers have paid more Social Security taxes than any previous generation.  They were required by the 1983 Social Security legislation to pay enough taxes to cover the cost of the retirement benefits of the previous generation, which was customary.  In addition, they were required to prepay most of the cost of their own benefits, which was not customary.  How can anyone justify cutting benefits to the baby boomers when they have paid more into the fund than any other generation? 

It is an indisputable fact that, over the past 25 years, Social Security payroll tax revenue exceeded Social Security benefit payments by $2.5 trillion.  If that money had been saved and invested as it was supposed to be, full Social Security benefits could be paid until at least 2037 with no changes whatsoever.  However, when the first surplus revenue from the 1983 tax increase began to flow in during the second Reagan term, politicians developed a bad case of sticky-finger syndrome.    Since it would be 30 years before any of the money would be needed to pay Social Security benefits, they just sort of “borrowed” the surplus money and put it into the general fund.  As the surplus became larger and larger in subsequent years, Congress continued to spend it as if it were general revenue, and that practice continues today.  

We might use the word “borrowed” to refer to the very early raiding of Social Security, but the Budget Enforcement Act of 1990 made it illegal to use Social Security money for non-Social Security purposes.  Money taken from Social Security after enactment of that law was clearly “embezzled’ or “stolen.”  Senator Reid played a key role in getting the 1990 legislation enacted.  In the same October 9, 1990 speech, Reid said,   “The discussion is are we as a country violating a trust by spending Social Security trust fund moneys for some purpose other than for which they were intended.  The obvious answer is yes.”  I commend Senator Reid for recognizing this basic truth.  I also applaud his willingness to say, “We have been stealing money from the Social Security recipients of this country,” because what he said was absolutely true.  What I cannot understand is how Senator Reid could abandon his principles and serve 20 more years in the Senate without continuing to openly oppose the “embezzlement” and “stealing.” 

Senator Reid will not communicate with me, so I urge journalists on the campaign trail to ask Reid about his words from the October 9, 1990 speech that I have quoted on the back cover of my book. He cannot deny he spoke those words because I took them from the Congressional Record.  I want reporters to ask Senator Reid if he believes the government is still “stealing money from the Social Security recipients of this country.”  Senator Reid cannot have it both ways.  If the statements he made 20 years ago were true, and they were, how can he say that Social Security is solvent today when all the surplus Social Security revenue that is supposed to be in the trust fund has been embezzled?

Social Security has not contributed a dime toward the deficits. On the contrary, the government has been embezzling and spending surplus Social Security revenue for the past quarter-century. I have been trying, for more than a decade, to alert the public to the fact that the government has systematically embezzled surplus Social Security revenue. Unfortunately, the biggest opponents to my efforts have been the AARP and the NCPSSM, who apparently do not want the Social Security fraud exposed. I have sought the cooperation of the ARRP and the NCPSSM for the past six years in exposing the ongoing raiding of the trust fund, but they refuse to have anything to do with me. They have continued to insist that the surplus Social Security money has been saved and invested, as it was supposed to be, and that Social Security can pay full benefits for decades without any changes. This is not true. The trust fund contains nothing of value that can be used to pay Social Security benefits.

I have sent copies of my books and sought meetings, telephone conversations, or even email correspondence, with both the AARP and the NCPSSM, but they have refused to communicate with me in any way, despite the fact that I am a member of both organizations. Most troubling to me, is that these organizations have consistently, and falsely, claimed that the trust fund holds enough real, marketable Treasury bonds to pay full benefits until at least 2037. That is blatantly false! The trust fund is empty. It contains no real assets. This was made abundantly clear on January 21, 2005 when the Comptroller General of the GAO, David Walker, 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.” This is a hard and indisputable fact. Yet the senior organizations have continued to claim otherwise.

A third organization, the Alliance for Retired Americans, is now acknowledging that the government has spent the trust fund money and needs to pay it back. ARA president, Barbara J. Easterling, wrote in the Huffington Post on May 28, 2010, “…the government has borrowed $2.6 trillion from the Social Security Trust Fund and will need to pay it back…Social Security can pay beneficiaries in full until 2037 once its loan is paid back.”

This statement represents a major shift in the public stand of the ARA, and I find the wording of Ms. Easterling’s statement a breath of fresh air. If she stands by her words, and if the AARP and the NCPSSM also acknowledge that the trust fund has been raided, and demand that the government repay the looted Social Security money, there is an excellent chance that the plot to cut Social Security can be thwarted.

None of the surplus Social Security revenue, generated by the 1983 payroll tax hike, was saved and invested in anything. It was all looted by the government and used to pay for tax cuts, wars, and other government programs. The IOU’s that have been put in the trust fund, in lieu of real bonds, are worthless pieces of paper that are not marketable, and could not be sold to anyone, even for a penny on the dollar. Since passage of the 1990 Budget Enforcement Act, it has been a violation of federal law to spend Social Security funds for anything other than Social Security benefits. Therefore, it is not accurate to say that the government “borrowed” the money. The government has clearly, “embezzled” or “stolen” all of the money that is supposed to be in the trust fund.

Barbara Easterling appears to acknowledge this fact. She no longer makes an unconditional claim that Social Security can pay full benefits until 2037. She qualifies her statement by saying that full benefits can be paid “once its loan is paid back.” She is now admitting that full benefits cannot be paid unless the government repays the looted Social Security money. I call on the AARP and the NCPSSM to also publicly acknowledge that the approximately $2.5 trillion in Social Security surplus, generated by the 1983 payroll tax hike, has all been spent by the government on other programs. Instead of saving and investing the surplus revenue in public-issue, marketable U.S. Treasury Bonds, as they were supposed to do, the government simply funneled the money through the general fund and spent it as general revenue. The so-called “trust fund bonds” are nothing more than accounting records of how much Social Security money has been spent. They are just IOUs without monetary value, and there is no way the government can use them to raise cash with which to pay Social Security benefits. This was made very clear by a single sentence, buried deeply within the 2009 Social Security Trustees Report. That sentence states,

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

The only way to save Social Security from the budget axe is for all those who truly support Social Security to join together and demand that the government repay the $2.5 trillion it owes to the trust fund. Barbara Easterling, and the ARA, have already taken a step in that direction. If the AARP and the NCPSSM truly want to save Social Security for our children and grandchildren, they will end their false claims that Social Security already has the money to pay benefits for decades to come, and acknowledge that the government will have to repay the $2.5 trillion it owes Social Security in order for the fund to be able to pay full benefits.

Time is running out, and the clock is ticking toward that crucial day in December when the deficit commission will make its deficit-reduction recommendations. Why do the AARP and the NCPSSM continue to mislead the American public about the true status of the Social Security trust fund? They have to know that all of the $2.5 trillion of Social Security money that is supposed to be in the trust fund, has already been spent by the government on other programs. It is a matter of public record. Why are they so reluctant to point this out to their members and to the media? Why don’t the leaders of the AARP and the NCPSSM call a joint news conference during which they explicitly acknowledge that the government has spent the Social Security money for non-Social Security purposes, and publicly demand that the government repay the looted money?

I don’t know what is going on inside the leadership of these organizations. I have been actively seeking to protect the future of Social Security as we now know it and I have been a vocal opponent of privatization. So I do not understand why the AARP and the NCPPSM would consider me a threat and refuse to communicate with me. I have written them, telephoned them, faxed them, and e-mailed them. I have asked for the opportunity to travel to their national headquarters and meet with their leaders in an effort to find out why they want to keep the truth about the Social Security trust fund secret. They do not respond to me in any way.

In 2004, when my book The Looting of Social Security was published by New York publisher Carroll & Graf, I sent multiple copies to both organizations and tried very hard, without success, to find a contact person within each organization who would communicate with me. In desperation, I finally contacted a newly elected AARP board member privately and explained the problems that I was having with the leadership. He seemed dumbfounded by what I was reporting. He apologized for the behavior of other AARP officials. He agreed to read my book and engage in e-mail correspondence with me. I was elated, but my euphoria was short lived. I mailed him a copy of my book, and we did have a brief cordial e-mail correspondence. However, within a matter of weeks, I received a bizarre email message from him. He wrote:

“Dr. Smith, I choose not to have any further contact with you. May life be fair to both of us.”

I couldn’t understand how such a cordial relationship could end so abruptly and so mysteriously. I e-mailed the new director back repeatedly in an effort to get some explanation of what was going on. I even proposed that I travel to his city of residence and that we meet in a restaurant of his choosing so we could privately discuss what had happened that caused him to terminate contact with me without explanation. But he never responded to any of my e-mails, and I never heard from the gracious gentleman again. The only conclusion I could reach was that someone within the organization found out that he was corresponding with me and told him to terminate contact with me. I did not want to cause problems for the man so I just let the bizarre story end at that time. That was six years ago, and this is the first time that I have written publicly about the incident. I have chosen not to reveal the identify of the person, but it seems appropriate to at least reveal the incident at this time. I have had no contact with anyone at the AARP since 2004.

With regard to the NCPSSM, I personally believe that Barbara Kennelly is one of the most dedicated defenders of Social Security and that she wants to do what she thinks is best for the future of the program. That is why she was one of the first people to receive a review copy of my latest book, THE BIG LIE, How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse. I included a lengthy letter in which I tried to convince her that it was extremely important that the truth about the trust fund be made public. I requested that she allow me to come to Washington and meet with her and other leaders so I could personally make my case for exposing the Social Security fraud. I am sorry to report that she did not respond in any way. I sent her numerous e-mails and even tried to fax information to her. But I have heard nothing from her. I can only speculate on her motive for refusing to acknowledge the looting of Social Security. Her strategy for preventing privatization or any other kind of Social Security reform appears to be based on convincing the public that there is nothing wrong with Social Security. She has repeatedly claimed that Social Security was financially sound and that the trust fund contains enough assets to pay full Social Security benefits until 2037 with absolutely no changes. Of course, that is not true, and I think that she knows it is not true, but I can’t be sure. I don’t know how much training she has in the fields of economics and accounting, and it is possible that she still does not accept the notion that the government has spent all the Social Security trust fund money on other government programs.

In summary, I believe that it is crucial that both the AARP and the NCPSSM accept the truth about the trust fund, and report that truth to their members and the media. If leaders of either,or both, of these organizations actually doubt the fact that all the Social Security surplus money has been spent for non-Social Security purposes, then I invite them to debate me on the subject in any public forum of their choosing. I have been deeply immersed in researching Social Security funding for more than a decade, and I have published four books on the subject. I believe that I can convince anyone in a public forum that the government has spent the Social Security money.

Essentially, Reagan switched the federal government from what he critically called, a “tax and spend” policy, to a “borrow and spend” policy, where the government continued its heavy spending, but used borrowed money instead of tax revenue to pay the bills.  The results were catastrophic.  Although it had taken the United States more than 200 years to accumulate the first $1 trillion of national debt, it took only five years under Reagan to add the second one trillion dollars to the debt.  By the end of the 12 years of the Reagan-Bush administrations, the national debt had quadrupled to $4 trillion!

Ronald Reagan and Alan Greenspan pulled off one of the greatest frauds ever perpetrated against the American people in the history of this great nation, and the underlying scam is still alive and well, more than a quarter century later.  It represents the very foundation upon which the economic malpractice that led the nation to the great economic collapse of 2008 was built.  Ronald Reagan was a cunning politician, but he didn’t know much about economics.  Alan Greenspan was an economist, who had no reluctance to work with a politician on a plan that would further the cause of the right-wing goals that both he and President Reagan shared. 

Both Reagan and Greenspan saw big government as an evil, and they saw big business as a virtue.  They both had despised the progressive policies of Roosevelt, Kennedy and Johnson, and they wanted to turn back the pages of time. They came up with the perfect strategy for the redistribution of income and wealth from the working class to the rich. Since we don’t know the nature of the private conversations that took place between Reagan and Greenspan, as well as between their aides, we cannot be sure whether the events that would follow over the next three decades were specifically planned by Reagan and Greenspan, or whether they were just the natural result of the actions the two men played such a big role in.  Either way, both Reagan and Greenspan are revered by most conservatives and hated by most liberals.

If Reagan had campaigned for the presidency by promising big tax cuts for the rich and pledging to make up for the lost revenue by imposing substantial tax increases on the working class, he would probably not have been elected.  But that is exactly what Reagan did, with the help of Alan Greenspan.  Consider the following sequence of events:   

1) President Reagan appointed Greenspan as chairman of the 1982 National Commission on Social Security Reform (aka The Greenspan Commission)

2) The Greenspan Commission recommended a major payroll tax hike to generate Social Security surpluses for the next 30 years, in order to build up a large reserve in the trust fund that could be drawn down during the years after Social Security began running deficits.

3) The 1983 Social Security amendments enacted hefty increases in the payroll tax in order to generate large future surpluses. 

4) As soon as the first surpluses began to role in, in 1985, the money was put into the general revenue fund and spent on other government programs. None of the surplus was saved or invested in anything.  The surplus Social Security revenue, that was paid by working Americans, was used to replace the lost revenue from Reagan’s big income tax cuts that went primarily to the rich.  

5) In 1987, President Reagan nominated Greenspan as the successor to Paul Volker as chairman of the Federal Reserve Board.  Greenspan continued as Fed Chairman until January 31, 2006.  (One can only speculate on whether the coveted Fed Chairmanship represented, at least in part, a payback for Greenspan’s role in initiating the Social Security surplus  revenue.)

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.

The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day.  The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers.  But the trust fund is empty!  It contains no real assets.  As a result, the government will soon be unable to pay full benefits without a tax increase.  Money can be spent or it can be saved.  But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything.  I have been laboring for more than a decade to expose the great Social Security scam.  For more information, please visit my website or contact me.

What it all boils down to is that, in order to pay full benefits this year, Social Security will have to come up with an extra $29 billion to supplement the inadequate payroll tax revenue.  Where will that money come from?  It will have to come from increased taxes or from borrowed money.  “Wait a minute!” some readers will say.  Hasn’t Social Security been receiving surplus revenue ever since the 1983 payroll tax hike?  Isn’t there supposed to be approximately $2.5 trillion in the Social Security trust fund?  The answer to both questions is yes.  But there is a problem.  Every dollar of that surplus Social Security revenue has already been spent by the government.  Much of it went to fund wars in Afghanistan and Iraq.  The rest has been spent on other government programs.

The American people were not supposed to find out about the great Social Security scam for another six years, and the government was hoping to continue to receive surplus money from the Social Security contributions of working Americans for at least that long.  But the inevitable day of reckoning has come, six years sooner than anybody expected, because of the severe recession.  And the government of the United States has been caught with its hand still in the empty Social Security cookie jar.

For more than a decade, I have been trying to expose the Social Security scam just like Harry Markopolos  was trying to expose the Bernie Madoff scam.  But nobody would listen.  If anyone deserves credit for helping the government to keep its dirty secret for so long, that honor should go to the AARP and the NCPSSM.  I have been members of both organizations for years and I have tried very hard to get their cooperation in exposing the fraud.  But they have refused to have anything to do with me.  Instead, they have continued to bombard their members and the public with misinformation.  They have argued that the trust fund is full of “good-as-gold” U.S. Treasury Bonds that could be used to pay full Social Security benefits until at least 2037 without any changes.  In reaction to Olemacher’s AP story, Barbara Kennelly, president of the NCPSSM, responded with the following words, “Good luck to the politician who reneges on that debt.  Those bonds are protected by the full faith and credit of the United States of America.  They’re as solid as what we owe China and Japan.”

I believe Barbara Kennelly to be among the strongest and most honorable defenders of Social Security.  I think she truly wants to save Social Security, as we now know it, which is the same goal that has motivated me to make so much effort for more than a decade.  I have tried to convince Ms. Kennelly that I was trying to save Social Security by exposing the truth about the trust fund, but she wouldn’t even consider the possibility that the government has been looting the trust fund all these years.  I requested the opportunity to discuss this issue with her, either in a face-to-face meeting, or through telephone conversations, in the hope that we could work together toward a common goal.  She ignored my requests and refused to communicate with me in any way. 

It has been clear for quite some time that the trust fund contained no real assets.  David Walker, Comptroller General of the GAO, stated on January 21, 2005, “There are no stocks or bonds or real estate in the trust fund.  It has nothing of real value to draw down.”  On April 5, 2005, President George W. Bush finally acknowledged the empty trust fund by saying, “There is no trust fund, just IOUs that I saw firsthand that future generations will pay—will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs.” 

If there was any doubt remaining, with regard to whether or not the trust fund contains any real assets, that doubt should have been removed by the following words in the 2009 Social Security Trustees Report:

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.

There is nothing ambiguous about the above words.  They make it clear that the government does not receive any cash income from the alleged interest payments on the trust fund IOUs.  The interest payments are made in the form of additional worthless IOUs.  The government cannot sell the IOUs because they are not marketable and have no cash value.  The IOUs simply represent a debt of one branch of the government (the Treasury Department) to another branch of government (Social Security).  They cancel each other out. 

The Social Security surplus revenue should have been saved and invested in public-issue, marketable Treasury bonds.  These bonds are “good as gold” and default-proof.  They are the kind of U.S. Treasury bonds that are owned by China and Japan, Bill Gates, pension funds, and every other serious investor that owns Treasuries.  If the Social Security surplus had been invested in public-issue marketable Treasury bonds, as it could have been, and should have been, Barbara Kennelly would be correct in saying that the Social Security holdings are “as solid as what we owe China and Japan.”  Unfortunately not a single dollar of the surplus Social Security revenue was saved or invested in anything.  It was all spent, and, once money is spent, there is nothing left to invest. 

The government cannot, and will not, ever default on any of its public issue, marketable Treasury bonds because of the panic it would create in world markets and the damage it would do to the nation’s worldwide credibility.  But Congress has the legal authority to default on its debt to Social Security, and, if it should do so, the outside world would probably view it primarily as an internal matter between the United States Government and its citizens. One of the least known facts about Social Security is that, although the government does have a moral obligation to pay Social Security benefits to those who have earned them, the government does not have a legal obligation to do so.  

In a 1960 ruling by the United States Supreme Court, the court ruled that nobody has a “contractual earned right“ to Social Security benefits.  Section 1104 of the 1935 Social Security Act specifically states, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.”  According to the above strong language, Congress could do whatever it wanted to do with regard to changing or even eliminating Social Security. 

Early on, some did not take the language seriously because they thought it was probably unconstitutional.  However, in 1960, in the case of Fleming v. Nestor, the Supreme Court upheld the denial of benefits to Nestor, even though he had contributed to the program for 19 years and was already receiving benefits   In its ruling, the Supreme Court established the principle that entitlement to Social Security benefits “is not a contractual right.”    As a result of the 1960 Supreme Court ruling, the future of Social Security is totally in the hands of Congress and the President.  They have the legal authority to amend any and all parts of the Social Security Act, as well as the authority to either increase or decrease Social Security benefits.

The costs of prolonged high unemployment can be enormous, both in terms of the personal suffering of unemployed individuals and their families, and in terms of lost production for the nation. The human suffering from long-term unemployment is just as real as the suffering that results from a natural disaster such as Hurricane Katrina. But the victims of high unemployment, spread all over the nation, are not nearly as conspicuous as the victims of Katrina. There is no way for the media to bring the plight of the unemployed into our living rooms in the same way that they portrayed the suffering that resulted from Katrina. But prolonged unemployment can contribute to homelessness, hunger, mental depression and even an increased rate of suicides. In economic terms, historians have estimated that the dollar cost of the Great Depression of the 1930s was greater than the cost of World War II. They estimate that the dollar value of the lost production during the 1930s would have been a large enough sum to cover the cost of a new house, and several new cars, for each and every American family during the decade.

The Great Depression was essentially a series of recessions. Before the economy fully recovered from each recession, it would plunge into a new recession. This pattern continued for a full decade. Could we be in for another decade of economic stagnation? We could, if we just sit back and wait for the economy to heal itself. During the first two years of the Great Depression, President Hoover vetoed every piece of legislation enacted by the Congress to speed up economic recovery. Hoover argued that if we would just leave the free market system alone, it would restore balance and bring about economic recovery without any meddling by government. But he was wrong.

Our economy has been severely damaged by the events of the past 18 months, and we must take strong actions to get the economy back on track. Consumer demand, which has been the engine for most economic recoveries in the past, is likely to remain weak indefinitely, and business investment is usually derived from consumer demand. The weak consumer and investment demand must be offset by increased government demand, if the economy is to experience a speedy recovery. There is nothing more wasteful than allowing able-bodied men and women, who want to work, to remain unemployed through no fault of their own. There is much work that needs to be done in America. Our aging infrastructure is in urgent need of updating. How many more bridges will have to collapse before we wake up to the near-crisis state of our roads and bridges? Also, we need to be developing alternative transportation systems and alternative energy sources. There is more than enough work, that urgently needs to be done, to employ everyone who wants a job. I am not talking about government jobs. I am talking about government investment in the future of America that could result in millions of private sector jobs. Bids would be taken from private contractors on the various local projects, and the winning bidders would then hire local workers to do the work.

To those who argue that we cannot afford a major jobs program at this time because of the high budget deficits, my response is that we cannot afford not to tackle the unemployment problem. There is no possible way to make a very big dent in the deficit without a strong economic recovery. As much as I deplore the huge budget deficits and the skyrocketing growth in the national debt, I believe that, at this point in time, we must place a higher priority on ending the recession and restoring the economy to full employment than on deficit reduction. However, the two goals are not mutually exclusive. The high unemployment rate is a major factor in the high budget deficits that the nation is now running. When unemployed workers return to work, income tax revenue increases at the same time that government spending for unemployment compensation goes down. Therefore, reducing unemployment has the effect of also reducing the deficit.

In 1981, the public debt reached $1 trillion for the first time ever. It had taken 200 years, and the combined deficits of all the presidents from George Washington through Jimmy Carter, to accumulate that first $1 trillion. But then, the nation threw caution to the wind and began traveling a course that would eventually lead it to the brink of national bankruptcy. Just during the next 12 years, the debt skyrocketed from the $1 trillion, that took 200 years to accumulate, to an astronomical $4 trillion!

Where were all the critics of big deficits at that time, when they were so badly needed? I was a critic during those years, but I certainly didn’t have much company. In addition to verbally screaming out warnings to anyone who would listen during the 1980s, I began writing a self-syndicated weekly newspaper column, in 1990, called “Economic Alert,” that appeared in 30 papers with a combined circulation of approximately one million readers. In almost every column, I warned readers about the disastrous economic path the nation was following. But nobody likes a messenger with bad news, so I became a target of those who didn’t want the American people to know about the huge deficits and skyrocketing national debt that were resulting from the practice of Reaganomics.

I got many hostile letters from Reagan-Bush supporters. I was labeled a “Bush basher,” and I was called “un-American,” a “Marxist,” and numerous other choice names. Letters to the editor of newspapers that carried my column urged the newspapers to stop running the column, and some did. I was amazed at the hostility that came my way simply because I was pointing out the flaws of Reaganomics and warning that a day of reckoning would eventually come, if we didn’t change course.

When Bill Clinton became president, he pushed a deficit-reduction package through Congress, that included both higher taxes and cuts in government spending. The deficits gradually diminished during Clinton’s first six years, and, during the last two Clinton years, the nation experienced small budget surpluses, after 38 consecutive years of deficits. But not all of Clinton’s actions were positive. He misled the public into believing that there would be large budget surpluses for at least a decade, thus creating the dangerous budget-surplus myth. Both Al Gore and George W. Bush participated in this big lie, and both promised tax cuts.

President George W. Bush pushed through Congress huge tax cuts under the guise that the government had large amounts of surplus money. Bush led the government back into deficit territory during his first year in office, and the deficits just got bigger and bigger throughout the rest of his presidency. When Bush turned over the reins of power to President Obama in January 2009, the national debt, which had been $1 trillion in 1981, and $5.7 trillion when Bush took office in January 2001, was more than $10.6 trillion.

For years, I warned my students, and anyone else who would listen, that the growing debt was reducing the government’s flexibility to deal with crises. I explained that if the government were, at some point in the future, suddenly forced to spend large amounts of unanticipated additional money, because of a war, or some other kind of crisis, the huge accumulated public debt would greatly handicap the government’s action.

In 2008 the unthinkable happened. At a time when the nation was already spending massive amounts of borrowed money on two wars, the nation’s banking system and the economy went into free fall. We came much closer to a 1930s-style depression than most Americans realize. The financial system had to be bailed out, and the economy had to receive a large stimulus in order to keep the nation from plunging into another great depression. This action has contributed enormously to the large deficits and the growth in the public debt in the short term.

We, as a nation, must acknowledge the reckless financial and economic policies of the past and resolve to make a major change in course as soon as the economy recovers enough to minimize the risk that stringent new fiscal polices might throw the economy back into a recession, or worse yet, a depression. But let us not forget that more than 90 percent of the $10.6 trillion national debt that Obama inherited was accumulated during the years between the beginning of Ronald Reagan’s presidency and the end of the George W. Bush presidency.

The American people wanted Clinton’s mythical surplus to be real, and cunning politicians began building schemes to further mislead the people into believing that surplus money was available for new programs and/or for cutting taxes. Both Al Gore and George W. Bush added fuel to the fire by making promises that they could not possibly keep. Clinton, Gore, and Bush led the public to believe that the government had somehow stumbled onto such a windfall of surplus money that government spending could be increased, taxes could be cut, and the budget could be balanced, all at the same time. But it was all a big lie. Unfortunately, there was no “real” budget surplus in any meaningful sense of the term.

There was a tiny $1.9 billion surplus in the operating budget in 1999, and a more substantial $86.4 billion surplus in 2000, at the peak of the business cycle. But these two modest surpluses were preceded by 38 consecutive years of budget deficits, and they were followed by all-time record deficits. The 1999 and 2000 budget surpluses were the only two annual surpluses in the government’s operating budget in the past 50 years. Furthermore, Clinton had run more than $1 trillion in deficits during the preceding six years, and ran an average annual deficit of more than $125 billion per year during his entire eight years as president.

The surpluses that everyone was talking about during the 2000 presidential election campaign were “projected” surpluses. They were figments of President Bill Clinton’s imagination. Except for 1999 and 2000, the only government surplus that existed was the planned Social Security surplus that was off budget and earmarked for funding the baby boomers’ retirement. Both Bush and Gore made it clear that they were not talking about the Social Security surplus, and both promised not to spend a single dollar of Social Security revenue for non-Social Security purposes.

President Bill Clinton and candidates Al Gore and George W. Bush played American voters for fools during the 2000 campaign. Both Gore and Bush promised to cut taxes, increase government spending, and pay off the national debt within a few years. Bush promised to pay down $2 trillion in debt within 10 years, and to protect “all $2.6 trillion of the Social Security surplus for Social Security, and for Social Security alone.” Gore promised to eliminate the national debt by 2012 while at the same time putting all Social Security surplus revenue in an “iron-clad lockbox.” The national debt was $5.6 trillion in 2000, when these promises were made. Today, it is more than $12 trillion.

When George W. Bush became president, the public was very receptive to his proposal to use the alleged budget surplus to fund tax cuts. By that time, almost everyone seemed to believe that the government actually had large surpluses in the operating budget that would continue for at least 10 years. During his first State of the Union address on February 27, 2001, President Bush declared, “The growing surplus exists because taxes are too high and government is charging more that it needs. The people of America have been overcharged and, on their behalf, I am here asking for a refund.” President Bush, who was asking for the trust and support of the American people, deliberately deceived them during his very first State of the Union address. He did so in order to pass a massive tax cut that he had to know was not in the best interest of the nation or the economy.

Despite Bush’s continuing claims that there was plenty of non-Social Security surplus to fund his tax cut, and despite his pledge not to use any of the Social Security surplus for anything but Social Security, when the numbers were in for fiscal 2001, the government ran a $32.4 billion deficit. The modest surpluses during the last two years of the Clinton presidency would be the last surpluses for a very long time, if not forever. The 2002 deficit was $317.4 billion, and the 2003 deficit was a whopping $538.4 billion. So what happened to the alleged budget surplus that was supposed to continue for years? It never existed. It was all a big lie.

In 1981, the national debt reached the $1 trillion mark for the first time in history. This one trillion dollars of national debt represented the cumulative deficit spending of all the presidents from George Washington through Jimmy Carter, and much of it was the result of the heavy spending on World War II. A debt of one trillion dollars, accumulated during a 200-year period, was no big deal. Back in the 1970s, I regularly told students in my college economics classes that the national debt was not a major problem for the United States, and it was not at that time. Most of the debt was owed to American citizens so, whenever interest payments were made, the money flowed right back into the American economy.

I could not have imagined, at the time, that government leaders were about to launch our nation on a financial suicide mission that would inflict enormous injury upon the nation and the American people. But that is exactly what happened. The national debt that had taken 200 years to reach the first $1 trillion, doubled to $2 trillion in just five years, and quadrupled to $4 trillion in twelve years. Today, the national debt is above $12 trillion and growing so rapidly that we will add a lot more to the debt in just one year than we did during the first 200 years of our history. It is true that, if we adjust for inflation, the growth in the debt is somewhat smaller, but it is still astronomical.

As the national debt soared, we soon reached a point where the amount of money that Americans were willing to invest in United States Treasury Bonds was not nearly enough to satisfy the government’s out-of-control appetite for borrowed funds, so we began borrowing massive amounts of money from foreign nations. As of March 2009, approximately 28 percent of the total debt, and nearly 45 percent of the publicly held debt, was owed to foreign investors. Our biggest foreign creditor is China, to whom the American government owes approximately $1 trillion. Even worse, the United States government is counting on China to lend us a lot more money to help us get out of the financial pinch we have gotten ourselves into. One of the first nations visited by Secretary of State, Hillary Clinton, was China, and her primary mission was to reassure the Chinese government about United States finances and to encourage China to keep the money coming. Japan is America’s second largest foreign creditor. In addition, since the government borrows money by offering United States Treasuries at auction in the open market, we owe at least some debt to many other foreign countries, including Russia, The United Kingdom, Brazil, Germany, Switzerland, Mexico, India, Norway, and France.

The total interest cost on the national debt for 2008 was $451 billion. At least $125 billion of that was paid to foreign investors, and thus flowed out of the American economy. Imagine how much that $451 billion could have bought in the form of education, health care, road construction, or even tax relief. Interest rates are very low today, by historical standards, but they will not always be low. When interest rates rise, the interest cost on the same amount of debt will be higher. If current interest rates were to double, over a period of time, the $451 billion interest cost would double to $902 billion. The United States government has dug itself into a very deep hole over the past 28 years. We are in so deep that we can barely see the dim light at the top of the hole. Unfortunately, instead of filling the hole in, our government is digging it deeper and deeper!

By increasing taxes in 1983, to generate annual Social Security surpluses for the next quarter-century, the tax burden would be manageable, if the surplus revenue was saved and invested as it was supposed to be. When the cost of Social Security benefits began to exceed payroll tax revenue, in about 2016, the Social Security trustees could dip into the reserve to make up the difference between benefit costs and payroll tax revenue. It was a good plan, and the payroll tax hike has generated approximately $2.5 trillion in surplus revenue that would have been enough to pay full benefits until at least 2037. Unfortunately, none of the surplus revenue was saved and invested. Dishonest politicians from both political parties used the surplus as a giant slush fund and spent every dollar of it on other government programs.

Some people just assume that, since the Social Security surplus was “borrowed” or “stolen,” during the period when it was not needed to pay Social Security benefits, the government will automatically repay the looted money when it is needed. It is not at all certain that this will happen. Where will the government get the money with which to repay the Social Security debt? Since the national debt has soared from $1 trillion in 1981 to more than $12 trillion today, and continues to rise at an alarming rate, the government will probably not be able to borrow money from the public to repay Social Security. This means that the only way the government can repay the Social Security money is by raising taxes.

Taxes have never been popular in this country, but they are probably more hated today than ever before. The large tax cuts under both President Ronald Reagan and President George W. Bush, and the rhetoric used to justify those cuts, have convinced many Americans that tax increases are just about the greatest of all evils and that tax cuts are almost always virtuous. Therefore, it is hard for me to believe that either the Congress or the American people would support a large tax increase for the explicit purpose of replacing tax revenue that has been misspent by the government. The government cannot just increase taxes when there is a need for more revenue. There is a very difficult political process that any tax increase must go through in order to be enacted into law, and I don’t think the public is in the mood today to support a large tax increase. If the government cannot borrow the money, or raise it through higher taxes, it will be unable to repay the looted Social Security money. If that happens, Social Security benefits will have to be cut.

The notion that the government might arbitrarily choose to cut Social Security benefits at some point in the future is unacceptable to most Americans who believe that, once they have paid into Social Security, they are guaranteed retirement benefits. Some say “BY LAW, the government has to pay me full benefits because of the FICA taxes that I have paid.” But they are wrong.

One of the least known facts about Social Security is that, although the government does have a moral obligation to pay Social Security benefits to those who have earned them, the government does not have a legal obligation to do so. In a 1960 ruling by the United States Supreme Court, the court ruled that nobody has a “contractual earned right” to Social Security benefits. Section 1104 of the 1935 Social Security Act specifically states, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” According to the above strong language, Congress could do whatever it wanted to do with regard to changing or even eliminating Social Security. Some did not take the language seriously because they thought it was probably unconstitutional. However, in 1960, in the case of Fleming v. Nestor, the Supreme Court upheld the denial of benefits to Nestor, even though he had contributed to the program for 19 years and was already receiving benefits In its ruling, the Supreme Court established the principle that entitlement to Social Security benefits “is not a contractual right.”

As a result of the 1960 Supreme Court ruling, the future of Social Security is totally in the hands of Congress and the President. They have the legal authority to amend any and all parts of the Social Security Act, as well as the authority to either increase or decrease Social Security benefits.

The previous raiding of the trust fund by Presidents George H.W. Bush and Bill Clinton was despicable. However, at that time, the issue had never been subjected to a public debate where the American people could speak out on it. That all changed as a result of the 2000 campaign and election. Every American who cast a vote for either Bush or Gore had a right to expect that the era of raiding the Social Security trust fund was over. They had entered into a new covenant with the would-be future President of the United States, in which it was mutually agreed that all future surplus Social Security revenue would be untouchable for any purpose other than the payment of Social Security benefits.

Bush continued to sing the same tune once he became President. He continued to insist that Social Security revenue would be used only for Social Security. In his first State of the Union address on February 3, 2001, Bush said, “To make sure the retirement savings of America’s seniors are not diverted in any other program, my budget protects all $2.6 trillion of the Social Security surplus for Social Security, and for Social Security alone.” Four days later, Bush said, “We’re going to keep the promise of Social Security and keep the government from raiding the Social Security surplus.”

Because of all the rhetoric and news coverage of the Social Security trust fund issue during the campaign, and in the early months of the George W. Bush presidency, the American people came to believe that the Social Security trust fund was no longer being raided. But nothing changed with the inauguration of George W. Bush. Despite his pledge to protect the Social Security money, Bush spent every dime of Social Security surplus revenue that came in during his presidency. He used it to fund his big tax cuts for the rich, and much of it was spent on wars.

The news media had given extensive coverage to the Social Security debate in the 2000 election campaign, and to President Bush’s early promises to not raid the trust fund. However, Bush’s failure to honor his promises, with regard to Social Security, just never seemed to get much news coverage, leaving most Americans to believe that the raiding of the trust fund ended after George W. Bush took office. On the contrary, Bush raided and spent a total of $1.37 trillion of Social Security surplus during his eight years as president. In his last year, he spent $192.2 billion, which averages out to more than $526 million per day.

During a speech on April 5, 2005 in Parkersburg, West Virginia, Bush openly admitted to the fact that all of the Social Security surplus revenue had been spent. He said, “There is no trust fund, just IOUs that I saw firsthand that future generations will pay—will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs.” Bush’s words in this speech bore little resemblance to what he had said about Social Security during the 2000 campaign. But his motives were difference in 2005. He was trying to sell his privatization plan, and he thought that by spilling the truth he might further his effort to privatize Social Security.

There would be no Social Security funding problem for at least the next 25 years, if the government had not raided the trust fund. If the trust fund held the $2.5 trillion of surplus Social Security revenue, in the form of real marketable bonds, as it should, it could continue to pay full Social Security benefits until at least 2037. So the obvious solution is for the government to make arrangements to repay the $2.5 trillion it owes to the trust fund.

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

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

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

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

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

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

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

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

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