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WaPo Whopper on Trumka, Social Security and Taxes
Here’s a great way to save some Social Security money. Let more folks die before they can get a check. Cold? Maybe. But pretty darn effective according to Washington Post columnist Ruth Marcus.
Marcus seems to have taken offense at AFL-CIO President Richard Trumka’s objection to raising the retirement age and his call for the better-off among us to pay the Social Security tax on all their income, just like the rest of us do.
Trumka recently meet with the Post’s editorial board, including Marcus, and also testified last week before the federal budget deficit commission. In her WaPo column today, Marcus writes that Trumka “erupts” during the editorial board meeting when asked about raising the Social Security retirement age. She says he tells the board that would have been be a “death sentence” for workers like his late coal mining father whose 44 years in the mines left him with a case of black lung, but also a union pension check and Social Security.
Marcus writes that maybe there’s room for a little sympathy for coal miners, but then holds up the example of the “middle age assembly” sitting around with her at the “gleaming conference table,” as great evidence that boosting Social Security’s retirement age wouldn’t be so tragic.
Well, not all of us go to work around “gleaming conference tables” or enjoy what are probably pretty darn decent health benefits and not-too-shabby paychecks as do Marcus and her colleagues. And good for them. They’ve no doubt worked hard to get there.
But they probably are not counting on that Social Security check as a major element of their retirement security as are tens of millions of workers beyond the Beltway—heck, here within the Beltway, too.
BTW, those grocery clerks, truck drivers, teachers, road crews, nurses, factory workers and other regular folk are paying a big part of Social Security’s bill. Yet Trumka’s call to even out the fairness of the Social Security payroll tax doesn’t sit too well with Marcus.
Currently all workers pay the Social Security payroll tax on the first $106,000 of their earnings. Earnings above $106,000 are exempt from the Social Security payroll tax. A nice tax cut for those on the top side of $106,000. But that 6.2 percent tax takes a good chunk out of the salary of most workers.
Trumka, and many economists, say that raising or eliminating that cap not only would be more fair, but would also be a hefty boon for the Social Security Trust Fund that deficit hysterics are making such a big fuss over. Marcus however, calls it Trumka’s “one-sided, tax-the-rich reflex” solution to all economic problems. Let Dean Baker at the Center for Economic and Policy Research (CEPR) explain.
Marcus also implies that Trumka believes that the country’s fiscal problems can be solved exclusively by taxing the rich. This is not true. Trumka and the AFL-CIO have consistently been strong proponents of measures that would make the U.S. health care system more efficient, such as a public health insurance option and negotiated prices for prescription drugs.
If per person health care costs in the United States were the same as in any other wealthy country, the United States would be looking at huge long-term budget surpluses rather than deficits.
It is important also to note that measures that reduce the trend toward growing inequality, such as improved corporate governance that reins in CEO pay or a trade policy that is not designed to increase inequality, would also have beneficial budgetary impact. As more income goes to those at the middle and bottom, there would be less need for various government transfer programs. It would be useful if Post columnists would try to directly address the agenda of the unions, rather than caricature it in order to discredit it.
Well said.
One last thing to set the record straight. As Trumka told the budget deficit commission, Social Security is not related to nor the cause of the nation’s budget deficit. We need to solve the nation’s pressing short term problem of creating jobs, that will go a long way to solving the long term debt problem.
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Like so many others, this article does not address the most serious and urgent problem–the fact that the government has “borrowed” or “stolen” every dollar of the $2.5 trillion generated by the 1983 payroll tax hike.
Social Security is funded exclusively by FICA taxes. Not a single dollar has ever been taken from the general revenue fund to pay Social Security benefits. Thus, Social Security has not contributed a dime to the budget deficit or the soaring national debt. The 1982 Greenspan Commission on Social Security reform foresaw a problem when the baby boomers retired, beginning in about 2010, unless corrective action was taken. The commission recommended a hefty hike in payroll taxes that would require the baby boomers to prepay most of the cost of their own benefits, in addition to the customary practice of paying for the benefits of the generation that preceded them. The recommendations of the commission were enacted into law as part of the Social Security Amendments of 1983.
Thus Social Security was fixed in 1983. That fix would last until at least 2037, with no action, IF the intent of the 1983 legislation had been followed. In addition to the short-term deficit in this year’s Social Security budget (which was caused primarily by the severe recession), Social Security payroll tax revenue will fall short of benefit costs annually, beginning in 2016. This was all planned for in the 1983 legislation. The payroll tax hike has generated $2.5 trillion in surplus revenue that was supposed to be saved and invested in real marketable Treasury bonds to build up a large reserve in the trust fund with which to pay benefits to the baby boomers. If the plan had been followed, Social Security would now have $2.5 trillion in “good-as-gold” marketable Treasury bonds in the trust fund which the Social Security trustees could resell as necessary to raise the needed money to pay full benefits until 2037.
The REAL Social Security problem is that politicians developed a severe case of “sticky-finger” syndrome when the first surpluses began to show up in the second Reagan term. Since the money would not be needed by Social Security for another 30 years, these politicians just decided to put the money in the general fund and use if for other programs. That illegal practice has been continued to this very day. Every dime of the Social Security surplus has been spent and replaced with non-marketable IOU’s, which are akin to a note that a bank robber might leave behind in the empty bank vault, stating how much money he has stolen.
I first discovered the great Social Security scam more than ten years ago while doing research for my book, “The Alleged Budget Surplus, Social Security, and Voodoo Economics.” I have been waging a relentless campaign to expose the scam ever since against much organized resistance by groups that do not want the people to discover the truth about Social Security. I have been warning about the Social Security fraud for longer than Harry Markopolis tried to warn the SEC about the Madoff fraud, with the same lack of success. I need help from conscientious citizens who care about the future of Social Security. Please visit my website at http://www.thebiglie.net to learn more.
Allen W. Smith, Ph.D.
Professor of Economics, Emeritus
Eastern Illinois University
In order to provide more information than I was able to include in my first post, I am posting a recent article of mine.
Was the Social Security Money “Borrowed” or “Stolen”?
In December, the Obama deficit-reduction commission will make recommendations for budget cuts that will then be voted on, with an up or down vote, by the lame-duck Congress. Already, there is much speculation that Social Security will be one of the big targets. The rationale for cutting Social Security seems to be that, during such difficult economic times, everything should be a candidate for the chopping block, and that the public should support such cuts out of a sense of patriotism.
The flaw in this argument is the fact that Social Security has not contributed a dime to the budget deficits or the soaring national debt. Social Security is funded exclusively by payroll taxes (also known as FICA taxes), paid into the fund by working Americans. In 1983, the payroll tax was increased substantially in response to the recommendations, the previous year, of the Greenspan Commission on Social Security Reform. Prior to 1983, Social Security had operated on a “pay-as-you-go” basis with each generation responsible for paying for the benefits of the generation that preceded it. The 1983 legislation changed the nature of Social Security funding. In addition to paying for the benefits of the preceding generation, as was customary, the baby boomers were also required to pay additional taxes to partially pre-fund their own retirement. The net result is that the baby boomers have paid more into Social Security than any other generation. Yet, they are often made scapegoats and blamed for the Social Security funding problem. I am not a baby boomer, but I am very sympathetic to them. They are getting a bum rap.
The intent of the 1983 legislation was to generate large Social Security surpluses for the next 30 years that were supposed to be saved and invested, in order to build up a large reserve in the trust fund that could later be drawn down to pay benefits to the baby boomers. The 1983 payroll tax hike has generated more than $2.5 trillion that is supposed to be in the trust fund. If the trust fund actually held this amount in real assets, full Social Security benefits could be paid until at least 2037 without any changes. Unfortunately, none of the surplus revenue was saved or invested in anything. It was all spent, by the government, on wars and other government programs without making any provisions for repaying the money.
Over the past 25 years, five presidents, and the members of Congress, have participated in the great Social Security scam. All Social Security contributions made by working Americans, except the amount which was needed to pay current retirement benefits, has been funneled into the general fund and used for non-Social Security purposes. Some like to say that the government just “borrowed” the money during the time period when it was not needed to pay benefits. But borrowing implies repayment, and no provisions for repayment have been made. The government did not enact future tax increases that would automatically kick in when the Social Security money was needed. Neither did they enact legislation that would end other spending programs once the Social Security money was needed so the money could be transferred to the trust fund. The government spent the Social Security money, pure and simple, without making any provisions for future repayments. The IOUs in the trust fund are not marketable, and they could not be sold to anyone even for a penny on the dollar. The Social Security trustees confirmed the worthlessness of the IOUs in the 2009 Social Security Trustees Report with the following words:
“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.”
In order for Social Security to pay full benefits after 2016, it will be necessary for the government to begin repaying the money it has spent on other things. This will mean increased taxes and/or additional borrowing. Neither of these is politically popular, and there is no assurance that future politicians will be willing to raise taxes to pay for the irresponsible behavior of past politicians. If the money is not repaid in full, with interest, it will have been stolen by the government from working Americans who paid into the fund.
Since Social Security would be fully funded until at least 2037 if the government had not used the money for other things, the only reason that politicians are advocating cuts in Social Security benefits is the fact that the government does not have the money with which to pay its debt to Social Security. Given the fact that Section 13301 of the Budget Enforcement Act of 1990 made it a violation of federal law to use Social Security revenue for non-Social Security purposes, it is hard to justify using the word “borrow” to refer to any of the Social Security money spent after 1990, even if it is eventually repaid.
Allen W. Smith, Professor of Economics, Emeritus, Eastern Illinois University, has been battling economic illiteracy and government economic malpractice for the past 30 years. For the past decade, he has been engaged in a relentless effort to alert the public to the fact that the government was raiding the Social Security trust fund and using the money to pay for wars and other government programs. The author of seven books, Dr. Smith has appeared on CNN, CNNfn, CNBC, and more than 170 radio talk shows. He holds a Ph.D. degree in economics from Indiana University.
The trust fund contains US treasury securities, and I would be happy to accept and propperly dispose of any of those “Unmarketable, worthless IOUs” you hear about, issued by the US treasury that you happen to have laying around. (LOL!) Otherwise, this is a spectacular article and the comments are mostly factually correct as far as they go. The fact is that in this depressed economy we would be crazy not to borrow and spend. Far from being unmarketable, United States government debt is actually at zero to negative interest rates after expected inflation, meaning we could sell a lot more of it if we need to. Of course if more austerity measures are put in place, we will have deflation and not inflation, leading to a downward spiral ending in world wide economic collapse.
I believe it is time for the American people to rise up , and demand that our Social Security money be put back it the trust fund where it belongs. We worked long and hard paying into Social security , as well as the people who are working and paying into it now. That money was not supposed to be used for any other purpose. It belongs to the people who paid in , and are paying in now.
We hear all this talk about cutting Social Security benefits and raising the retirement age to 70. They have taken our money and don’t want to pay it back , and want us to take cuts and work many years more . That is absolutely immoral to do that to American citizens. We worked , and are workin, and playing by the rules, but the US government doesn’t play by the rules.
I think we need to get a national movement to restore Social Security funds with interest.We should do it now , before the fall elections and ask our Congressmen and senators , whether they will support restoring Social Security funds, and not support cuts in Social Security and raise the retirement age.
I know I could never have continued to do my job until I was 70. I worked hard everyday in smoke fumes dirt, dust, and it was always very hot , or very colddepending on the season and where we were performing maintenance.
We have read where people can work until 70 and beyond. That may be true if you work on a computer in an air conditioned and heated office all your life. But the vast majority of people don’t work like that . They work in mines and metal smelters power plants , construction driving trucks and other equipment,garbage collectors Policemen , firemen ,nurses teachers The vast majority of people still have to do the dirty back breaking labor,and stressful jobs. How do they think this country keeps running. People actually have to do the work.
Icertainly hope that unions , AARP, churches , and other organizations will organize and demand our government pay back OUR Social Security. Iou’s are not worth anything , if you can’t use them to pay Social Security benefits. When they tell you that you have to take cuts and work until 70, Iou’s don’t cut it. What good is an Iou , if you can’t collect it and spend it.
I think the government used voodoo economics , using our S.S funds and saying th government was in fine financial shape,so they wouldn’t have to raise taxes.
To Jimdeblasio:
Your statement, “The trust fund contains U.S. Treasury securities” is the conventional wisdom, and most people believe it because it is the “official line” of the Social Security Administration, the AARP, the NCPSSM and many others. There is only one problem with it. It is not true! The source of the title of my book, “THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the Social Security Trust Fund, and caused The Great Economic Collapse,” is based on the fact that the American people are being told a big lie about the Social Security trust fund.
I first discovered the great Social Security scam more than ten years ago, while doing research for my book, “The Alleged Budget Surplus, Social Security, and Voodoo Economics.” I was shocked and outraged. I wanted to tell the whole world so they would be outraged too. But nobody wanted to listen. On September 27, 2000, I made my first major attempt to expose the scam when I appeared on CNN to discuss my new book. I desperately tried to convince anchor Lou Waters that the government was spending all of the Social Security surplus revenue on non-Social Security programs. He seemed amused, and 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 continue to be such a voice a decade later.
I tried hard to make the raiding of Social Security a major political issue in the 2000 presidential campaign. I sent copies of my book and many letters to Al Gore, urging him to break ranks with Bill Clinton, acknowledge that the trust fund was being raided, and promise to end the practice if elected president. I can’t prove, or be absolutely certain, that I was the source of Gore’s Social Security “Lockbox” proposal, but I believe that I was. The important point is that it became such a big issue that George W. Bush was forced to also promise that he would end the raiding. There was no doubt that the trust fund was being looted during the campaign. Both candidates talked about it and the news media reported it regularly. That looting has continued unchanged, to this very day. Bush raided and spent every dollar of the approximately $1.5 trillion in surplus revenue that came in during his eight years as president, but a funny thing happened after George W. Bush became president. The news media stopped reporting news about the raiding of the trust fund. It was as if they believed Bush kept his promise about Social Security, although he did not, and they never bothered to check it out.
I have waged a relentless campaign to expose the Social Security fraud for even longer than Harry Markopolis tried to expose Bernie Madoff’s Ponzi scheme, but it has become a taboo subject. The same media, who regularly reported the raiding of the Social Security trust fund during the 2000 presidential campaign, will not touch the subject with a ten-foot pole today. Someone, or some group, apparently did not want the public to read my 2004 book, “The Looting of Social Security,” which spelled out all the details. The book mysteriously disappeared from bookstores across the country and was listed as “unavailable” by Amazon.com. It took me three years to get the rights to the book back so I could publish “THE BIG LIE,” which also reports the awful truth about the Social Security trust fund, but the media show no interest in reporting my findings. An economist who is a former employee of the New York Federal Reserve Bank told me that the media had been bought out and that I did not stand a chance of getting my message out. When I asked him who had bought the media out, he said, “Ben Bernanke, Tim Geithner and other government officials. He said that top officials usually have a contact person in most of the major media outlets who will refrain from reporting things that these officials do not want the public to know about. I don’t know whether or not what he told me is true, but he assured me he had experienced it when he worked at the Fed.
The hard and indisputable fact is that all of the $2.5 trillion in surplus Social Security revenue, that is supposed to be in the trust fund, has been spent on wars and other government programs, leaving the trust fund with no real assets. The surplus revenue was supposed to be saved and invested in public-issue marketable Treasury bonds purchased in the open market. If that had been done, the trust fund would today hold this much in “good-as-gold” real marketable Treasury bonds that the trustees could resell in the open market to raise funds with which to pay benefits to the baby boomers, who have paid more into Social Security than any other generation. However, instead of saving and investing the surplus revenue, the government funneled it into the general fund so it could be spent on anything and everything. Money can be saved and invested or it can be spent. But you can’t do both. Once money is spent, there is nothing left to invest. The IOUs in the trust fund are akin to a note that a bank robber might leave behind in the empty bank vault, stating how much money he has stolen. They are not marketable, and they could not be sold to anyone even for a penny on the dollar. I have known this for ten years. Others discovered it before I did. Consider the following quotations:
“…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.”—Senator Ernest Hollings (SC) speech on Senate floor, October 13, 1989
“There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”—David Walker, Comptroller General of the GAO, January 21, 2005
If anyone has any remaining doubts about whether or not the trust fund contains real assets, those doubts 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.”
The American people have a right to know the truth about the Social Security trust fund. I welcome the help of anyone who wants to help me get that truth out. Please visit my website to learn more. Thank you.
Allen W. Smith, Ph.D.
Email: ironwoodas@aol.com
Phone: 863-635-0408
Website: http://www.thebiglie.net
What Marcus and her buddies at the WaPo do not address is that there is a huge amount of age discrimination in the US as older workers – 50+ – get pushed out in favor of younger ones, some of them H-1b’s. The US is now full of 50+ former workers who lost their jobs in the recession and will never hold another decent job again.
There has been a huge jump in people taking SS at 62 and applying for disability as a mean of simply surviving as their unemployment checks run out. Whenever you hear about raising the SS retirement age, bring this inconvenient fact up.
http://www.nytimes.com/2010/07/09/opinion/09krugman.html?_r=2&hp
Krugman points out that lowering taxes on large corporations and the really wealthy tend to depress economic activity. We need more sales not lower taxes to help businesses grow.
We have under-used capacity in almost every sector of the economy because consumers do not have enough income to buy the goods and services that businesses offer. It is a lack of “effective demand” not a lack of investment money dragging our economy down.
We need higher wages, better benefits with less co-pays and taxes on imports to start turning things around…. along with higher taxes for those making really large incomes.
@Stephen Crockett, Free Guy Md., D Flinchum: Your absolutely right.
As for social security, one of the few things Al Gore actually had right was one of the things he was made fun of the most lockbox-lockbox-lockbox. Social security is supposed to be secure. It should be used for the thing it was intended for, only.
And these wall street/k-street pussbags are clinically insane if they think they can keep contributing way less than their share and at the same time make up some kind of complete corn fed bull s*** that are standard of living has gone up. and that entitlements are some kind of silly thing from the past. To that I can only say F the hell off. First of all everyone’s standard of livng has gone to complete crap since reagan’s worthless ass, and almost everyone lives only well temporarly in debt slavery. Secondly in 1971 less than 11% of employees had a defined contribution “pension” plan, and everyone else had a Defined Benefit Pension plan (real pension) one that they could actually live off of. Now a real pension is almost unheard of. And by the way apparently these idiots missed many reports like: most children now are going to have a shorter life than the parents proceeding them do to geneticaly/nutritionaly striped food, Alzheimer’s is on a steep incline and many many other geriatric ailments. Leave social security alone and at the 65 year age limit were it belongs.