The Associated Press 9/27/09 announced: Early retirements strain Social Security system
An excerpt (highlighting added) noted:
“Social Security is projected to start generating surpluses again in 2012 before permanently returning to deficits in 2016 unless Congress acts again to shore up the program. Without a new fix, the $2.5 trillion in Social Security's trust funds will be exhausted in 2037. Those funds have actually been spent over the years on other government programs. They are now represented by government bonds, or IOUs, that will have to be repaid as Social Security draws down its trust fund.
President Barack Obama has said he would like to tackle Social Security next year. “
If you feel comfortable in the knowledge that your Social Security payments are backed by $2.5 trillion in trust funds and you don’t have to worry unless you think you will live past 2037, you should start worrying, because (refer to highlights):
-1- “Those funds have…been spent...”
-2- “They (funds) are… represented by government bonds…”
Take pause here. A bond is a debt instrument. It is a promise to pay – a fancier name than IOU, which is what it is.
What this means is clarified by David John in a 2005 treatise, excerpted and quoted as follows, with added highlights:
How Today's Social Security Works
by David C. John
(David C. John is Research Fellow in Social Security and Financial Institutions in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.)
“Many people tend to think of their Social Security benefits as coming from an actual account, in their name, which contains cash or investments. People who believe this often point to the existence of the Social Security trust funds to justify their belief. However, this belief is fallacious for two reasons. First, Social Security has no individual accounts at all, other than a bookkeeping record of an individual’s yearly earnings and payroll taxes.
Second, the program’s trust funds do not contain cash or saleable assets. They only represent the amount of Social Security taxes collected beyond what the program needs to pay current benefits.
In reality, the Social Security trust funds contain nothing more than IOUs that have no value beyond a promise to impose higher taxes on future workers. The annual surpluses that many thought were being used to build up a reserve for baby boomers have been spent to fund other government programs or to reduce the government debt.”
What this means is if more FICA is collected than is needed the surplus isn’t accumulated to pay for future Social Security payments. It is used for other purposes.
If you get a Social Security check, where did the money come from? It came from those who are presently paying into the Social Security system. Their money isn’t being reserved for them. It is paying your Social Security benefits in the same manner in which future workers will pay theirs.
This is the legacy of past democratic Congresses.
Ponzi was a con man who solicited money from investors. Then he used money solicited from subsequent investors to pay handsome profits to earlier investors. Of course it eventually blew up when he could no longer attract enough new funds, and this kind of fraud became known as a “Ponzi scheme.” Bernie Madoff recently went to prison for his Ponzi scheme..
Clearly, a Ponzi scheme involves the collection of present-day monies to pay obligations to investors that have come due.
Equally clearly, the Social Security system involves the collection of present-day monies to pay obligations to American retirees that have come due.
The United States Government has rights, such as the right to print money, which its citizens do not have. Another right appears to be to run a Ponzi scheme with money collected from the public, under force of law, for our Social Security benefits.
This fiscal irresponsibility by the United States Government is hypocritical given that the Government is enacting increasingly more regulations in economic sectors to enforce responsibility on them. The latest is that the Government is going to tell banks how much risk they are allowed to take. The overwhelming lie in this is that it was the Government that forced the financial sector to incur too much risk via the Community Reinvestment Act which blatantly ruined the free enterprise system of identifying credit-worthy home buyers. The delayed reaction of this was a major cause of today’s economic crisis.
The Government is adroitly shifting blame from themselves to the financial sector.
This is a prime example of Government saying to America: “Don’t do as I do. Do as I say.” This attitude is pervasive in the present administration. One needs look no further than energy consumption issues to recognize that.
Set aside, for the moment, Government’s ineptitude at running a simple business, such as the Post Office, even when backed by taxpayer dollars. Before UPS and Federal Express the Post Office was in a pre-emptive marketing position and could have provided such a high level of economical service that competition would have been discouraged instead of flourishing.
Set aside that Barack Obama blames Medicare for being wasteful, which could be said about many government-run programs. Assuming he was being truthful, why didn’t Government fix it?
The question that our elected representatives must answer to the satisfaction of American citizens is: Given the Government’s fiscal irresponsibility with Social Security, why should the American people trust Government to run a program on which their lives will literally depend?
If socialized medicine is handled the same way as Social Security Americans will end up dependent on future generations to fund their health care.
The AP report further stated:
“President Barack Obama has said he would like to tackle Social Security next year. “
This year Obama’s big push is for socialized medicine. It could be suspected that he needs estimates of the senior citizen survival rates from that program before he can budget for Social Security.