The Little Big Lie
As we wander around in the financial wonderland created by the Obama Administration, it is very easy to get lost. The Democrats have not yet produced a budget for the fiscal year ending 9/30/2010. But, they are spending a lot of money. The CBO projects that Obama’s spending will increase the U.S. public debt to over $12.1 trillion by FYE 9/30/12. As of FYE 9/30/08, the total public debt was $5.8 trillion. Therefore, in just 4 fiscal years, the Obama Administration will have increased the public debt by $6.3 trillion or 109%. Considering it took over 200 years to accumulate the first $5.8 trillion public debt, we are definitely headed for a catastrophe.
In this midst of such a ruinous fiscal policy two luminaries of the Democratic Party, Senators Chuck Schumer and Harry Reid, have spoken out to give us reassurance.
The idea of putting Social Security into play has triggered a firestorm of opposition from several corners of the Democratic party. Senate Majority Leader Harry Reid (D., Nev.) and Sen. Chuck Schumer (D., N.Y.), two of the Senate’s most powerful lawmakers, have said revisions to Social Security shouldn’t be attached to a deficit-reduction plan. They argue the program’s benefits are covered by giant trust funds that have no impact on the deficit.
Are you comforted by their assertion “the program’s benefits are covered by giant trust funds that have no impact on the deficit?” Let’s look at one of these trust funds and see how worthy of our trust they are:
The 2009 Annual Report Of The Board Of Trustees
Of The Federal Old-Age And Survivors Insurance
And Federal Disability Insurance Trust Funds
The Old-Age, Survivors, and Disability Insurance (OASDI) program in the United States makes available a basic level of monthly income upon the attainment of retirement eligibility age, death, or disability by insured workers.
. . .At the end of 2008, almost 51 million people were receiving benefits: 35 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers. During the year, an estimated 162 million people had earnings covered by Social Security and paid payroll taxes. Total benefits paid in 2008 were $615 billion. Total income was $805 billion, and assets held in special issue U.S. Treasury securities grew to $2.4 trillion.
Social Security gets its money for paying benefits from payroll taxes. Today, the Social Security portion of the payroll tax rate is 6.2% for the employee and 6.2% for the employer. In 2008, income from these payroll taxes amounted to $805 billion or 32% of the 2008 total federal revenue of $2.524 trillion. Yes, Social Security taxes represent almost 1/3 of federal revenues collected. Are you surprised it is this large? But, note that the expenditures for “total benefits” in 2008 only amounted to $615 billion or 22% of the total federal budget expenditures of $2.902 trillion.
And finally, we note that “assets held in special issue U.S. Treasury security grew to $2.4 trillion.” The tax receipts of $805 billion exceeded the expenditures on total benefits of $615 billion by $190 billion.
The only conclusion you can come to from this information is that the $190 billion of excess tax receipts was borrowed by the Treasury Department to pay for other obligations of the government. This $190 billion went right out the door as other expenditures of general revenues.
Consequently, all the Trust Fund holds is the government’s promise to repay the $190 billion in the future. And, since this process has been going on for a long time, the total promises to repay are now a staggering $2.4 trillion. The duplicity of their charade is revealed by asking yourself the following question: where is the government going to get this $2.4 trillion? There are only three sources: more payroll taxes, more income taxes or more borrowing. And, borrowing can only be repaid with more payroll taxes or income taxes later with interest added.
So, in spite of Senators Schumer and Reid’s allusion to these trust funds, there are really no assets in the Social Security Trust Fund unless, the government subjects us to a lot more taxes in the future. This is the great fraud of the Social Security system.
Why can’t Senators Schumer and Reid just come forward and tell us the truth about it instead of adding to the confusion by deceitfully implying that Social Security benefits are covered by “giant trust funds that have no impact on the deficit?” This is their little big lie.