The Social Security Crisis Was Made In Washington

The author says that there is nothing wrong with Social Security per se, but the money in the trust fund has been spent by politicians on both sides, rendering the program insolvent.

Social Security is neither a Ponzi scheme, as Rick Perry claims, nor a fraud, as Mitt Romney claims.  Social Security is a sound and popular program that would have no short-term economic problems today IF the government had not stolen $2.6 trillion from the Social Security trust fund over the past 25 years and spent it on wars, tax cuts, and other government programs.  But that is exactly what the government did. On March 16, 2011, Senator Tom Coburn (R-OK) uttered the following words 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.”

This wasn’t the first time the American people had been warned by a United States Senator that the government was stealing Social Security money. Way back on October 13, 1989, Senator Ernest Hollings (D-SC) issued the following warning:

“The most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust funding 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.”

Nearly a year later, on October 9, 1990, Senator Harry Reid (D-NV) 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.”

I first learned of the looting in 1999, while doing research for my first Social Security book, The Alleged Budget Surplus, Social Security, and Voodoo Economics.  On September 27, 2000, I appeared on CNN TODAY to discuss the new book. 

I tried my best to convince anchor Lou Waters that Social Security money was, at that time, being spent for non-Social Security purposes, but he wouldn’t even consider the possibility that what I was saying could possibly be true.  He finally asked me, “Are you a voice crying in the Wilderness?” As things turned out, I was a voice crying in the wilderness in 2000, and I continued to be such a voice for nearly a decade, but the truth about the great Social Security theft is now beginning to emerge.

Unfortunately, politicians are today trying to twist the truth in an effort to make the public believe that Social Security is inherently flawed and unsustainable in its present form. That is a big lie. 

Social Security has been extraordinarily successful for the past 75 years and it can easily be made successful for another 75 years and beyond.  If the $2.6 trillion had not been spent on other things, or if it is repaid, Social Security would have no problems for the next 25 years, and it could be made solvent for decades beyond 2036 by simply removing the earnings cap on the payroll tax so that everyone pays tax on all of their income.

There is nothing basically wrong with Social Security per se. The problem is that crooked politicians, from both parties, have stolen and spent $2.6 trillion of the money that is supposed to be in the trust fund.

About the Author

Allen W. Smith was a professor of economics at Eastern Illinois University for 30 years.