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  • Americans Have Every Reason to Doubt Social Security Solvency

    A recent poll by Rasmussen shows that 58 percent of Americans lack confidence that they will receive their promised Social Security benefits in their entirety.  The poll showed just 13 percent feel very confident they will receive their benefits.

    As usual, the sense of the American people is spot-on.  As the population ages, the cost to the federal government of running the Social Security program, which Americans workers pay into their whole lives, will skyrocket.  This trend is made crystal clear in Heritage’s recently published 2010 Budget Chart Book.  Social Security experienced red ink in 2009, and is on course to do so again in 2010—Heritage’s David John writes that “If there is a strong economic recovery — which is questionable at best — the program could briefly return to surpluses. But by 2016, deficits will return and continue permanently.”

    This is in addition to the record deficits Congress has been racking up in recent years, the trillions in unfunded obligations that exist due to the other two giant entitlement programs, Medicare and Medicaid, and the cost of running the rest of the federal government.  In short, the United States has set itself up for a fiscal crisis which, if left unaddressed, could lead to draconian measures for programs like Social Security.

    Earlier this year, President Obama created the National Commission on Fiscal Responsibility and Reform to address the pending crisis which will result from massive entitlement spending.  The commission will offer suggestions to Congress on how to reduce deficit spending— this commission must come up with a viable strategy to reform these entitlement programs.  However, as many fear, it may instead try to focus on  minor spending tweaks and a massive tax increase like a VAT, which would have severe effects on economic growth.

    Moreover, Rasmussen reports that “[53] percent…of voters believe any changes to Medicare or Social Security should be approved by a vote of the American people”.   Under the President’s commission, this will not be the case: this commission must present its suggestions to Congress by the end of 2010, and Congress will vote on them soon thereafter.  Thus, even if voters express their will at the polls in November, the current Congress, not the newly-elected one, will vote on the commission’s deficit reduction strategy.

    Congress must get serious about Social Security reform—hiding behind a weak commission is inadequate and unacceptable.  Rasmussen shows that the American people support reform that would promote individual responsibility in retirement planning: 45 percent, a plurality, support the idea of allowing workers to opt out of Social Security, planning for retirement themselves.  Lawmakers should explore options that would reduce government-owed benefits and encourage increased retirement savings in order to save the program for generations to come, because, as David John puts it, “Social Security’s future has arrived early.”

    Posted in Economics [slideshow_deploy]

    12 Responses to Americans Have Every Reason to Doubt Social Security Solvency

    1. Allen W. Smith, Ph.D says:

      The most serious problem that Social Security faces is that the government has “embezzled” every dollar of the $2.5 trillion in surplus Social Security revenue that is supposed to be in the trust fund and spent it.

      I have been researching and writing about Social Security for more than a decade, and I have published four books on the subject. The hard fact is that every dime of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been spent on wars and other government programs. Every month, for the past 25 years, the total receipts from the payroll tax have been split two ways. First, benefits for current retirees are paid from the Social Security revenue. Then, all remaining Social Security revenue, not needed to pay that month’s benefits, are deposited into the general fund and become indistinguishable from other general fund revenue.

      Most workers think that at least some of the FICA taxes deducted from their paychecks will be saved and used to pay future Social Security benefits. But it doesn’t work that way. Not a single dime of payroll tax revenue has ever been saved and earmarked for the payment of future benefits. To put it bluntly, the government has “borrowed,” “embezzled,” or “stolen” every penny of the $2.5 trillion of surplus revenue that was supposed to be saved and invested. I consider this to be the greatest fraud ever perpetrated on the American people by their government. I have been trying to expose this awful truth for more than a decade, and some courageous people were trying to expose it even before I stumbled onto the scam in 1999.

      On October 13, 1989, Senator Ernest Hollings of South Carolina 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.”

      On January 21, 2005, David Walker, the Comptroller General of the GAO, tried to make it clear to everyone that the trust fund contained no real assets. He said:

      “There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”

      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.”

      I urge everyone who cares about the future of Social Security to please visit my website at http://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: http://www.thebiglie.net
      Email: ironwoodas@aol.com

      Phone: 1-800-840-6812

    2. Joshua A. Schaeffer says:

      The easiest way out of this is to raise the minimum retirement age to ~70. Like George Will said, this program was never intended to subsidize a third of a person's lifetime.

    3. Justin says:

      Im not confident in social security, but my theory is that the BBoomers will not have the dramatic affect most are expecting. Here why, after the birth of the boomers we enbarked on a largely pro-abortion way of life. Any 'boom' in the population has been eliminated through abortion and birth control addiction.

    4. Justin says:

      and another thing, why isnt the life issue one of the "hot topics" listed? Abortion is not only socially damning but also economically, for the reasons I explained earlier. America needs to stop obsessing over fiscal "money" issues. How can society progress when we cant even get basic human rights correct??? This country will NOT succeed while simultaneously killing unborn children.

    5. Disinterested Specta says:

      The conservatives, I suspect, envision with glee the following scenario: Some day, in the not too distant future, an employee from the Social Security Administration will try to cash one of the Social Security bonds at the Treasury Department. A nervous clerk, turning slightly pale, will explain that the bonds are just worthless IOUs. "I am very sorry, sir," he will say with a tremor in his voice, "but we cannot cash this bond."

      In reality, every single one of the bonds in the trust fund will be cashed without any problem whatsoever. The redemption will consist of a bookkeeping entry representing the exchange of pieces of paper with an ink design on them (the bonds) for other pieces of paper with a different ink design on them (dollars). Such redemption will require neither presidential approval nor congression action, for it is already provided for by law.

      The hysteria with which the Social Security bonds are discussed stands in amusing contrast with the matter of fact manner in which they will eventually be cashed.

    6. Pingback: CAAR E-Clippings No. 2571–April 21, 2010 « CAAR E-Clippings

    7. Justin says:

      you cant post my comment because I spoke of abortions effect on SS?

    8. Billie says:

      for someone so Disinterested, you sure are full of it. The only ones who trust anything about government and their extortion of hard earned money for (fabricated) intentions of doing good while watching it fail and then the pretend rescuers of, while continuing to interfere in other areas of dictate, is obviously a government favorite, suckling upon the breast… government listening with content, to every cry of your every day need.

      Shh shh, don't cry. Government won't let you do anything you can for yourself. Government will take control of you so you won't have to. So sad to know your weakness, even sadder to see it.

      Now, rest your thoughtless mind. Daddy government told you to so your mind won't have to. Eat your broccoli like daddy government tells you to, so your mind won't have to. Don't smoke just because daddy government does. Listen to what your told by daddy government not to do, so your mind won't have to. And you won't get a real bad punishment from daddy government and his governlings.

    9. Stan Winston, Kansas says:

      I'm not sure what all of the Daddy government talk is about or what it has to do with Social Security payouts. The age of full retirement is gradually going up and I believe that will continue. The impact of not paying 5 years worth of benefits to millions of retirees is enormous. The cap on social security income contributions has also gone up substantially over the years. This also has a huge effect. I believe you will see benefits reduced or eliminated to upper income retirees. Everyone seems to hate them even though they have paid in the most and often own businesses which have matched their employees contributions. Last but not least, we will see an increase in the Social Security contribution percentage.

      Of course the government has used these funds to operate but knows exactly what needs to be paid back. For this to not happen would require a complete collapse of the US Government which seems to be the tone of these postings. We have had enormous deficits before and have somehow reduced spending, closed tax loopholes and raised taxes to get through it.

      The book written in1999 doesn't seem to be too accurate because we are nearly half way through 2010 and everyone still receives their Social Security checks on time. I do understand the paper shuffle. Banks also have only a small amount of their deposits on hand.

      Also remember the last 10 years have seen an expensive and ongoing war, the collapse of the financial sector, the collapse of our auto industry and unemployment and underemployment at alarming rates. We also have illegal immigrants who work here but pay nothing into the system. Maybe our new healthcare bill will deliver the huge savings as promised.

      I believe we will receive our retirement benefits as promised. I remember my grandfather living in fear that the Republicans were going to take all his money. That was in 1981 or 82 when interest rates were about 18%. Our economy was in real problems but the 80's ended up being a great decade.

      Writing about negative topics is easy. Our academic community has never had a real job but can tell everyone how to do theirs. The US is still the greatest country in the world. I challenge them to write just 1 book with confidence and optimism in our country, our future and the ability of our elected officials to see this through.

    10. Mark ell Nj says:

      What no mention of George Bush looting social security to pay for his failed tax cuts?

    11. Wallace, Idaho says:

      If the American people were put on the preffured list and immigrants and the illegals were removed from the preffured list and not allowed to receive soc bennys of $1,800.00 per month per person we would all be better of

    12. Pingback: Broken? Depends Who You Ask

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