The recession has had victims across generations, from retired Americans who have lost value on homes and stock investments and need to go back to work, to those planning to retire soon, who now find they can't, to recent graduates, who are looking for jobs, but find there are no openings. The President and some members of Congress are sounding alarm bells about the deficit, and targeting Social Security for cuts. But cutting Social Security will not solve any of the above problems.
Social Security is not in crisis, despite the alarmist rhetoric. Don't be fooled. The Social Security surplus, often referred to as the Trust Fund, is $2.4 trillion dollars. It's enough to continue to pay out benefits through 2037, without a single change, and the funding was planned this way because we knew the boomers would create a bubble when they began to retire, requiring a surplus. In the recent past, the federal government has borrowed from the surplus, which is counted as part of the national debt. It's been used to pay for wars, bank bailouts, and Bush-era tax cuts. But we can't reduce the debt by defaulting on those notes. It's our money, we paid in, and the government owes it back to us.
It's the recession, stupid. Some are trying to use recent Congressional Budget Office numbers to heighten overreaction. It's true that this year, Social Security is paying out in benefits more than it is taking in (it's a tiny amount - 0.012% of the surplus). This isn't because of poor planning, it's because of the recession. We all know many people have been laid off or had hours cut. Fewer people working means fewer paychecks from which to make Social Security contributions. Some people who were planning to retire now are finding they can't afford to - with 401(k)s having lost so much value, homes having lost value, and banks being out of the business of lending, the funds people planned to use in retirement aren't there now. Others who planned to retire in a few years found themselves forced into early retirement or unemployed. Those forced into early retirement are drawing from Social Security earlier than planned, which contributes to this year's imbalance between contributions and payouts. This isn't because the formula is bad, or the program is underfunded, but because of the recession. As the economy recovers, this problem will resolve itself.
Because of the recession, those who are still employed are finding they cannot retire as planned. The money just isn't there, and Social Security payments averaging $13,800 per year - about $11,000 for women - just aren't enough for many people to survive on. So Americans who would have retired aren't. That results in fewer jobs being available to the next generation of workers. They can't get in, especially in a market with fewer jobs to begin with, if older workers don't retire, letting others move up, and creating new openings at the entry level.
Two birds with one stone: We can strengthen Social Security and reduce unemployment in one go; by lowering the retirement age and modestly increasing benefits, older workers who were hoping to retire will be able to, and this will open up job opportunities for recent graduates desperate to enter the labor market. We can pay for all of this by eliminating the Social Security income tax cap, which would only impact the 6% of individuals (not households) with over $106,800 in annual income. Lower unemployment. A secure retirement with more money going into Social Security. Steps toward ending the recession. This plan addresses all the problems identified at the start.
Younger Americans want to work. Many older Americans want to retire. We can strengthen Social Security and reduce unemployment by making the above changes, and ultimately, these steps will help reduce the deficit as well.
Check out SocialSecurityMatters.org for more info.
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How about we let the Bush tax cuts expire and see how that impacts the deficit?
I simply wrote off the AARP as a lost cause with regard to my new book, “The Big Lie,” but I still had hopes that I could get the support of the NCPSSM. One of the first people to receive review copies of “The Big Lie,” was Barbara Kennelly, president of the NCPSSM. I sent her a long letter explaining that I wanted her to have a copy of the book before it was released to the public. I asked her to please read the book and then give me the opportunity to discuss the issue with her, either in a face to face meeting, or at least by phone. I was so naïve that I actually thought Ms. Kennelly might invite me to her Washington office and openly discuss the empty trust fund issue with me.
Months have passed, and I have sent follow-up emails to her, as well as faxes. I have heard nothing from her. From her public statements, it appears that Barbara Kennelly truly believes that the $2.5 trillion of surplus Social Security revenue, generated by the 1983 payroll tax hike, was actually saved and invested in real Treasury bonds, as it was supposed to be. But, none of the surplus money was saved or invested in anything. As a dues-paying member who is desperately trying to save Social Security, I think the NCPSSM owes me and its other members at least a hearing.
www.thebiglie.net
Part of your problem is that you state your case a bit badly. Of course the Trust Fund money "has been spent." That's what happens to money "in the bank." The bank gives it to someone else who spends it. Of course they need to pay it back.
The problem may be that there is no legal way to force the Congress to pay back the money in a timely manner. But there are elections. And if the people understood that there is no crisis in Social Security, and that Social Security is not a cause of the deficit, and never will be, public pressure might be enough to keep Congress and the President from crippling Social Security in the name of deficit reduction.
But you are up against extremely powerful forces. NAACP and NCPSSM don't seem to have much imagination either. Educating the public is the only hope, and they are rather passive about it.
But again, your "the Trust Fund has been stolen" plays into the bad guys hand. It has not been stolen. It is about to be stolen. But the fact is that it doesn't matter. They could steal it and the workers could replace it with a slightly higher payroll tax and end up far, far better off than they will be letting the President and Congress "fix" Social Security. They don't want to fix it. They want to destroy it.
The AARP and the NCPSSM have been two of the biggest obstacles to exposing the Social Security scam that has resulted in an empty trust fund. When my book, “THE LOOTING OF SOCIAL SECURITY: How The Government is Draining America’s Retirement Account,” was released by New York publisher Carroll & Graf in 2004, multiple review copies were sent to both organizations by the publisher. I followed this up with letters and emails to staff members, requesting the opportunity to meet with officials, or at least the opportunity to discuss the issue by phone. Officials from both organizations refused to have any contact with me. My book and I were like an untouchable leper.
I share the same goal as the AARP and the NCPSSM of saving Social Security as we now know it, and I have been a member of both organizations for years. I have spent the past decade trying to expose the mismanagement of the trust fund and the misuse of surplus Social Security revenue. The AARP and the NCPSSM continue to assert that Social Security is solvent for decades to come. Barbara Kennelly, president of the NCPSSM recently asserted that the IOUs in the trust fund are just as solid as the debt we owe to China and Japan. This is not even close to being true. China and Japan own public issue, marketable, “good-as-gold” U. S. Treasury bonds. The trust fund IOUs are non-marketable and have no monetary value.
On October 13, 1989, Senator Ernest Hollings (D-SC) issued the following warning in 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.”
A year later, on October 9, 1990 Senator Harry Reid (D-NV) made a similar warning in a Senate speech. He 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.”
Allen W. Smith, Ph.D.
www.thebiglie.net
Any doubts about whether or not the trust fund holds any real assets should be removed by the following statement from 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.”
I urge everyone who cares about the future of Social Security to please visit my website at www.thebiglie.net to learn more about Social Security and my efforts to expose the scam. Excerpts from my latest book, “THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” are posted on the site. Please feel free to download them.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
Website: www.thebiglie.net
Of the two, I wonder which proposal would be the most politically palatable?
The contributions cap (as with the Estate Tax) has become neo con holy ground. Further, to admit that it was past administrations' 'bookkeeping' that hid (or at least, blurred) the reality of all those "loans" they used to give us an apparent surplus would be to admit just how much money was wasted.
Besides, the "financial services industry" benefits greatly when we, the people, are scared into believing that our only hope is to sock away our earnings in 401(k) and IRA plans. They don't want us to know that when the last of the "boomers" (I'm now 51) are ready to retire and start cashing out our plans, the dip it causes on Wall Street just might equal the damage done in the past two years.
But I hope people will start to realize what's in store if we don't force Washington to forcefully regulate and control the blood-suckers.