Social Security has more than $2.5 trillion[F[Since the early 1980s, we’ve been paying extra to build up a surplus that will have over $3.5 trillion by 2012 and more in its peak year of 2022. In 2018, the trust must withdraw the first dollar to help pay benefits. But the privatizers say not to count on it (See quotes from the Trustee’s report, 2003).]F] in the “bank” for when Social Security first needs to withdraw funds.[F[Baby boomers. Social Security is partly a pay-as-you-go and partly a save-for-the-future trust. As the baby-boomers retire, pay-as-you-go alone won’t work because there will be fewer workers to pay in per retiree collecting.]F] But the privatizers say that’s when the trouble starts.
The CBO [under Bush] said the “bank” notes (really T-Bonds) might be “merely bookkeeping entries“[F[Are the T-bonds just ‘paper’? The government has told generations that “promises made can and will be kept.” But there’s plenty of thinking about how to avoid it. The trust surplus has been lent to the government in exchange for T-bonds (IOUs) and spent. Some point to the T-bonds and say we can treat them as “merely bookkeeping entries,” or “paper transactions” with no real meaning.]F] and the OMB says government trusts[F[Is there a trust? Others point to the trust and say it’s not really a trust that the government protects for Social Security. It’s just the government’s money – and the government can do what it wants with it. the OMB has to say about trust funds.]F] aren’t like private ones–they can change the rules on you.
Why would CBO and OMB be saying these things? Does someone want to stiff all of us who have been paying extra FICA tax for the past 20+ years?
It sounds like it,[F[ • There is no trust fund, just IOUs that I saw firsthand, that future generations will pay. –Bush, April 5, 2005
• We take your payroll taxes; we pay out the benefits to the current retirees; and with the money left over, we pay — pay for other programs. And there’s nothing left but file cabinets with IOUs. –Bush, April 26, 2005
• I went to West Virginia the other day to look at the filing cabinets, to make sure the IOUs were there — paper. And it’s there. … not a very encouraging sight. –Bush, April 18, 2005
• Now, about $1.7 trillion of that is in the so-called trust fund; that is, money — that’s money that’s been collected that’s not there as cash at this point. –Cheney, March 22, 2005]F] but would they renege[F[If the debt were re-paid. With the trust surplus, Social Security can continue to pay full benefits until 2042 (Page 2, The 2003 Annual Report of the Social Security Trustees).]F] on Treasury bonds? No Republican president would dare, and no Democrat would want to. But they’re talking about cutting benefits,[F[In 2018, to pay 100% of promised benefits, the trust will need to cash in some T-bonds. If the government is short on funds, it can (1) renege on the T-bonds, or (2) cut benefits just enough so that the T-bonds aren’t needed. Both methods have the same impact on Social Security checks. Method (1) is political suicide, so the plan is method (2), cutting benefits.]F] and that works just as well.
See how the National Debt relates to Social Security.
Heritage Foundation’s justification for raiding the Trust
On November 10, 2004, privatizers at the neoconservative Heritage Foundation confirmed the fears documented above in early 2004. The privatizers are counting on Congress and the President stealing the Trust Fund. In fact, that’s just what they want.
“Some assert that the program’s trust fund will make up the shortfall, and therefore delay any tax increases or benefit cuts, until 2042. That is simply wrong. There is a trust fund, but it has no money in it — and it never did. No money has ever been saved for future retirees. This means that the common myth that Congress and the president are raiding the trust fund is wrong also. As inventive as politicians are, even they can’t steal money that was never there in the first place.”
—Brian Riedl and David John, Privatizers for the Heritage Fundation, in “Social Security’s Fictitious Trust Fund”, November 10, 2004.
Consider What The Heritage Privatizers Said:
“money that was never there in the first place.”
Our money certainly was “there in the first place.” It came out of our pay checks and went to the SSA. They loaned it to the Feds and were given T-bonds in return. Just as if you bought a corporate bond.
“No money has ever been saved”
When you buy a corperate bond, what does the company do with that money? Save it? Never. The whole point of selling bonds is to spend the money. That’s what corporations do!
“The trust fund will make up the shortfall … That is simply wrong.”
This means the government will, in effect, default on the T-bonds! Does Heritage think the government will default on the T-bonds sold to private investors? No. Do companies default on their bonds just because they spend the money? No. They either sell more bonds, earn some money, or sell stocks. But they have to pay it back.
Has the government ever paid back the Trust Fund before?
Yes. In many years before 1980 it did. Clinton, and all president from Truman through Carter reduced the National Debt compared to America’s income, which makes it easy for the government to borrow again if it needed to in order to pay back Social Security.
So what’s the big problem?
The problem is that under Reagan, Bush I, and Bush II, the government has been borrowing so fast that it knows it would be hard to borrow even more to pay back Social Security. The real cause of the problem is the Bush tax cuts, most of which went to the rich.