Who ruined Social Security?

[Alcibiades]

We fixed Social Security back in 1983. Remember? The 1983 Social Security Amendments were supposed to fix the problem that are now being addressed by the President's Deficit Commission. At the time, the Amendments instituted a hike in FICA taxes, but these were not put in any sort of "lockbox": instead, they were used as a slush fund for massive defense spending.

For sure, this has the fingerprints of Greenspan and Reagan all over it. I'll let the economist Allen Smith explain how the scam worked:

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 roll 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.

(See more at http://dissidentvoice.org/2010/04/how-ronald-reagan-and-alan-greenspan-pulled-off-the-greatest-fraud-ever-perpetrated-against-the-american-people/ )

Obviously, this scam passed Congress. A no prize to whoever can guess which Co-Chair of the Deficit Commission voted for this scam.



So the fix Alan Simpson voted for in 1983 has apparently not worked: moreover, he now endorses benefit cuts for retirees that would effectively mean reneging on the obligations the government started to issue to the trust fund under the Amendments, obligations that were passed under the premise that they would be sacrosanct.


Also worth noting that Max Baucus, another Commission member, was among the Yeas, along with the current Vice President.

Is it a conspiracy yet?

[AngryAmish]

1. C. Everett Koop

anti-smoking campaigns increased life expectancy.

[LiberalEsto]

2. Bush looted it to pay for the Iraq war

That's why our "greediest generation" is getting screwed.

[Alcibiades]

3. Simpson was clearly wrong

He endorsed a fix in 1983. It didn't work. On what basis is anything he has to say on the subject today credible?

[Warren Stupidity]

11. The looting has been bipartisan for 30 years.

1983 marked the start of The Great And General Screwage. It was when the Plutocracy decided that really, the boomers were no threat, and that that whole vietnam mess was behind us and they could do as they pleased. Yuppie!

[texastoast]

4. ...

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=227&topic_id=460

http://pol.moveon.org/ssmyths/

[Alcibiades]

6. Absolutely

Should have put "ruined" in quotes: the idea that there is this huge problem is part of the scam.

One thing that is a little different from what's being proposed and the points made by moveon is that, yes, the bonds held by the trust fund are obligations backed by the full faith and credit of the US, part of Simpson's plan is to effectively renege on these by cutting benefits. That's the new-and truly awful-wrinkle here.

[lumberjack_jeff]

5. It's not broken. n/t

[Alcibiades]

7. It will be

That's part of the plan. The current "problems" instituted by the 1983 "fix" (i.e. borrowing against the trust fund in the form of non-marketable securities) will be paid for by future beneficiaries.

[tavalon]

8. Nobody has broken it yet. This is a false premise argument.

That said, the Catfood Commission wants to not only break it but destroy it.

[Warren Stupidity]

12. 30 years of huge surpluses: mountains of debt.

yes they have

[Alcibiades]

20. Agreed

"Ruined" should have been in quotes.

[laughingliberal]

9. Thieves. Every one who has gone along with our higher FICA taxes who endorses this is a thief. nt

[JackRiddler]

10. Very good. I would quibble with the language on point 4...

"As soon as the first surpluses began to roll in, in 1985, the money was put into the general revenue fund and spent on other government programs."

Sure, but it's truer to say, was spent on maintaining a gargantuan War Department that could and did wage many wars for empire, and paying the interest on the resulting deficits. Because that's what most of the "other government programs" actually are.

Also:

"None of the surplus was saved or invested in anything."

It's in United States Treasury bills held by the Social Security trust, and payable on schedule as with other government bonds. Notwithstanding that Bush called these T-bills "meaningless IOUs," thus directly attacking the faith and credibility of his own government and its currency, these are still owed to the Social Security fund as needed to cover future benefits payments. Something we must insist upon, since this is really where the attack on Social Security is aimed: to free the government from its "intra-governmental debt obligations" and move as much of the pension cash (accumulated and incoming) as possible into Wall Street, which is the only Ponzi Scheme in the big picture.

[BeFree]

14. Write on

This debt owed to SS trust fund is on paper, and being that it is on paper, the debt is, they hope, easily removed.

IOW, they can just write off $2 Trillion overnight.

The debt would go from $14 Trillion to $12 Trillion with the stroke of a pen.

[Alcibiades]

17. It's time to take it back off budget

The fed could conjure up money out of nowhere and buy all these non-marketable treasuries in the wink of an eye, just like they did for the banksters.

[JackRiddler]

22. Yes, the Fed could have done a lot of things!

Like back in 2008, let the zombie banks fail, conjure up the same bailouts for all the states, and have every state found its own banks to replace the zombies.

But now they've shot their wad, most likely.

[pipi_k]

13. Baby Boomers, of course....

it's all our fault for being born and living to retirement age...


They'd probably be happy to set us all afloat on ice floes to die at sea if they could find any...

[dgibby]

15. Looks like you found the only "up" side to global warming! n/t

[Alcibiades]

18. Obviously not

The biggest changes for this group, and mine, will be cuts in the COLAs. The worst parts will affect people who are too young to vote today.

For all their talk about "burdening future generations," this proposal seeks to, well, burden future generations.

The only part I like is the increased progressivity of the plan:

[SoCalDem]

16. Sadly, It was Lyndon Johnson

His admin moved SS into the "general fund", and made it fair game to be looted..which happened ever since.


Once congress had all the "boomer excess money", they could NOT resist, and used it like a big ole credit card with an unlimited credit line.

We have been scammed out of our retirement money which we PREPAID ( and shored up the retirements of our grandparents/parents.. They GOT theirs, but now we are considered "greedy" because congress "forgot" that someday we would expect to retire too?

[Alcibiades]

19. That's actually a myth

Or so it would seem, one promulgated by right-wingers in the 2004 election cycle:

http://www.snopes.com/politics/socialsecurity/changes.asp

The biggest theft occurred when FICA taxes were raised and looted in 1983, thanks to Alan Greenspan.

[JackRiddler]

23. Combo.

I believe the SS trust fund has always been savings in the form of t-bills. In other words, FICA surpluses (and FICA has always produced some surplus) have always financed deficits of the discretionary budget. But the fund is thus invested in government bonds that pay interest and are rolled over on schedule like any other bonds. Long as the t-bills are honored, the SS trust fund still exists, but as an obligation rather than cash on hand.

Johnson pulled a top-level accounting trick of combining SS into a consolidated federal budget, for the purpose of hiding deficits caused by the US invasion and occupation of Vietnam. This didn't change anything except the spin of how federal budget numbers are presented.

Then came the 1983 rise in FICA, which produced far larger SS surpluses, which continue to go into t-bills (now worth $2.6 trillion I believe), which help finance the enormous deficits, which are still in the main caused by maintaining an insane war machine.

[Alcibiades]

25. agreed

The difference between what Johnson did and what happened in 1983 was that Johnson was using an accounting trick to make the budget look balanced. The scam perpetrated by Greenspan you mention went much further, shoveling, as you rightly note, hundreds of millions into the maw of the war machine.

[Hannah Bell]

24. myth.

[ProgressiveProfessor]

21. The politicians who did not listen to the actuaries

No private system would be allowed to do what Social Security and at least the CA public retirement system has done in terms of growth assumptions etc,