The government has embezzled all surplus Social Security revenue, generated by the 1983 payroll tax hike, and spent the money on wars and other government programs. None of the money was saved or invested in anything.
Social Security is not broken, but at the moment, it is broke. The cost of paying full benefits in 2010 was $49 billion more than Social Security tax revenue for the year. So the government had to borrow $49 billion (probably from China) in order to pay full benefits. And the gap between the cost of benefits and Social Security tax revenue will get bigger and bigger in the years ahead.
The only reason the government has been able to keep the public from finding out about “the great Social Security theft,” for all these years, is because the AARP and the National Committee to Preserve Social Security and Medicare (NCPSSM) have cooperated with the Social Security Administration in their official talking points about Social Security. The AARP has the following statement posted on its website: —“Social Security will be able to pay 100 percent of benefits for the next 20 years.” The NCPSSM has this statement on its website: “Social Security is projected to deliver full guaranteed benefits until at least 2033.”
But these statements are not even close to being true, and the leadership of these organizations know that they are deliberately misleading their members, and the public, with these false statements. Social Security doesn’t even have enough money to pay this year’s benefits without borrowing.
The government IOUs in the trust fund are not like the marketable U.S. Treasury bonds held by China and America’s other creditors. Those marketable bonds can be converted into cash at any time by selling them in the open market. The IOUs in the trust fund are like a handwritten note that a bank robber might leave behind in the empty vault, stating how much money he has stolen. The note tells the bank how much money is missing, but it won’t help the bank get the money back. Similarly, the IOUs in the trust fund are a record of how much Social Security money was taken and spent on other programs. But the IOUs are not marketable, and they cannot be converted into cash. And the interest income, that the SSA claims the government is paying, is not cash interest. It is in the form of more of the same worthless IOUs that the trust fund already holds.
The harsh fact is that Social Security does not have any cash reserves. That is why President Obama said that he couldn’t guarantee that Social Security checks would go out on time without a budget agreement, because “There might not be enough money in the coffers to cover them.” The government owes Social Security $2.7 trillion, but the government is both unable and unwilling to repay the stolen money, at least in the short run.
The good news is that the Social Security System is not broken. It works well and has done so for the past 78 years. The problem is that the United States federal government is badly broken, and no “fix” is upon the horizon. The only problem is that, Social Security does not have enough revenue to pay full benefits, and the government has stolen the cash reserves it is supposed to have in the trust fund. If the government would enact legislation requiring the repayment of the stolen money, perhaps in installments over the next 30 years, Social Security’s short-term problems would be fixed.
Forget about that old propaganda statement the enemies of Social Security have been repeating, over and over, since Social Security was first created. It goes like this: Social Security, in its present form, is unsustainable over the long run. That is just a big lie that the enemies use as a weapon in their war against Social Security. There is nothing basically wrong with the Social Security System, and it would not even be in the news today if crooked politicians hadn’t stolen $2.7 trillion of its money.
© 2014 Allen W. Smith. This article may not be reproduced without express written consent from Allen W. Smith.