ENGLISH FOR CONGRESS POSITION PAPER (Revised April 2014)
Federal Social Security Program has been the most outstanding
surviving legacy of the reforms implemented by Franklin
Roosevelt's Administration as the consequence of the national
economic and financial collapse following the stock market crash
of 1929. Other significant reforms such as the
Glass-Steagall Act to erect secure firewalls between the
banking, insurance, and stock markets have been negated by the
so-called financial deregulation (i.e .oversight abdication)
legislation enacted in the late 1990s. These oversight
hazards have been exacerbated by the rapid increase in the
number and impact of hedge funds which operate in concert with
the advent of widespread speculation in derivatives by many
financial institutions, including those chartered and insured by
the Federal government. Fortunately, the former Bush
Administration was unsuccessful in its attempt to raid the cash
contributions of workers flowing into the Social Security
program and divert them into financial markets under the guise
of privatization and individual management of pensions.
When the Social Security System was established, it was funded on a pay-as-you-go basis. Estimates of the cash needs to pay beneficiaries in the near future were used to set and periodically adjust the shared percentage of payrolls withheld from both employees and their employers to provide funding for current benefit outlays. Occasionally, these estimates were affected by recessions that caused shortfalls in payroll contributions needed to pay benefits and the Congress was then suddenly obliged to provided stop-gap funding from General Revenue receipts. The Reagan Administration implemented a so-called program to "save Social Security" by mandating a 15% surcharge on payroll tax receipts beyond that needed to pay current benefits with the surplus amount "saved" then deposited into a fraudulent "Trust Fund" that would "be there to pay estimated benefits through the year 2030". The flaw in this trust fund concept is that the surplus cash from payroll taxes was then given to the Treasury to fund Reagan's tax cuts and his arms race for "Star Wars" and other weapons systems used to intimidate the Soviet Union. Special bonds (i.e. IOU's) earning a lower rate than market rate of interest were then printed in exchange for the surplus cash and deposited into the so-called "Trust Fund". The fallacy of this funding gimmick was that the Federal government ended up lending money to itself that would have to be repaid from future budget surpluses when cash from the trust funds would be needed at that time to pay benefits.
That time is now rapidly approaching and when the present surplus in payroll tax receipts will turn negative and the trust fund will need to be tapped to obtain cash to continue benefit payments. But, alas, thanks to the profligacy of the Bush Administration and ongoing economic policy failures, no budget surpluses are forecast anytime in the future and either payroll taxes will have to be increased or benefits reduced if Social Security checks are not then returned marked "insufficient funds"! What isn't mentioned is that over $3 Trillion of workers’ pension contributions into the trust fund has been spent for other purposes such as tax cuts for the already wealthy and replaced with low-interest bonds (IOU's). No doubt, future Congresses will desperately try to avoid paying off these bonds because to do so would have necessitated deliberately running ever larger budget surpluses every year after 2007 to provide cash for bond redemption until they were all paid off in 2017. For their part, the Democrats in Congress are still in denial over the fact that they were "rolled by Reagan" and keep spreading the fiscal fiction that the trust fund is still "there to guarantee future benefit payments"! Of course, future Congresses could obtain the needed funds for honoring benefit obligations by simply continuing to increase the National Debt limit by a Trillion Dollars or more every year ( i.e., the way the previous Congress did to fund the wars in Iraq and Afghanistan, aka "Cheneynomics").
The short term solution to the onrushing Social Security funding crisis is to rescind the extended Bush Administration tax breaks for the wealthy, cut the defense budget in half by ending the ongoing foreign wars and withdrawing all U. S forces to U. S. territory (please read the Military Restructuring Issue paper), and to replace the widely avoided and evaded corporate income tax with a Federal corporate Gross Receipts Tax (also please read the Budget, Deficit, and Taxation Issue paper). Budget deficits must be eliminated to create a budget surplus sufficient to redeem Social Security trust fund bonds when additional cash is needed to pay future benefits. In the longer term, the Social Security program's funding must be taken out of the unified budget and separately managed the same way it existed before Johnson combined it into a unified fund so he could to steal its cash surpluses to pay for the Vietnam War. Future trust fund surpluses should be invested solely into specially established self-liquidating VA and FHA guaranteed mortgage programs for first time low income home buyers. Why shouldn't low income workers whose payroll taxes are kept in the trust fund also not benefit as homeowners from the fund's investment management policy during their working years before reaching retirement age? Singapore allows its citizens to use their social security fund balances as down payment for their apartments.
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