Friday, February 25, 2011
Congress Robbed Social Security And Doesn't Want To Pay It Back
Last year, for the first time since its creation in 1935, Social Security received less money through payroll taxes than it paid out in benefits.
And this year, the Congressional Budget Office (CBO) projects that Social Security will collect $45 billion less in payroll taxes than it pays out in retirement, disability and survivor benefits.
Most disturbingly, the CBO says that Social Security is now officially cash negative.
However, during the intervening 75 years, Social Security collected about $2.5 trillion more than it paid out. Those surplus funds were used to buy special bonds from the U.S. Treasury, creating the so-called Social Security Trust Fund.
That surplus amounted to a loan from the people to the government.
But the government spent all that money on various other budget items — every penny of it. And now that the Baby Boomers (a quarter of the population) have begun retiring, that debt will have to be paid back by the federal government from its general expenditures — the annual budget.
While the idea of slashing Social Security is now being discussed in Washington, the politicians should remember that American workers have already paid an excess of $2.5 trillion into that system. To meet the anticipated higher retirement costs of the baby boom, workers and their employers contributed more than was needed over the past few decades to meet current costs.
That money is now owed to them. They expect to be paid back. The problem is that the money is gone. It's all been spent.
All that's left is the "full faith and credit of the United States," whatever that's worth at this point. Nothing remains but a giant pile of IOUs.
The reality is that, to this point, Social Security has not contributed one penny to the debt. Instead, Social Security ran up a $2.5 trillion surplus, which the government looted and spent.
The problems in the system are only poised to worsen. The payroll tax — a 6.2 percent tax paid by both workers and employers that funds Social Security — was cut by Congress and the president late last year, even as Social Security revenues had already been reduced by chronically high unemployment.
The lost revenue is supposed to be repaid to Social Security from general revenue funds, meaning it will add to the growing national debt. Such behavior just continued our government's decades-long trend of making promises that it cannot keep.
There are fewer workers paying into the system today, and millions more who have taken pay cuts or who can only find part-time jobs, which is also trimming revenues.
According to the CBO, Social Security will post nearly $600 billion in deficits over the next decade as the economy struggles to recover and millions of Baby Boomers enter retirement.
At present, more than 54 million people receive retirement, disability or survivor benefits from Social Security. Monthly payments average $1,076. But the number of retirees will swell over the next two decades due to the demographic bubble known as the Baby Boomers.
What many Republicans, and perhaps even some Democrats, are now proposing is that the government shouldn't have to pay back all of the $2.5 trillion in surplus Social Security funds that it essentially stole from the American people.
With that $2.5 trillion surplus, Social Security would remain fully solvent until 2037. Thereafter, it would still be able to pay out 78% of benefits owed.
Due to government recklessness, some combination of tax hikes, benefit cuts, or an increased retirement age is coming. The present retirement age is 66, and it is already slated to move to 67 for those born after 1960.
But such measures wouldn't have to be enacted any time soon if not for the absolutely epic case of grand larceny committed against the American people by their own government, which has robbed them blind.
And to now hear politicians complaining that the American people actually expect to be repaid is beyond the pale. It is simply outrageous.
Yet, it's reasonable to ask where a government so deeply in debt — to the tune of more than $14 trillion, and counting — will ever find that money.
The federal budget deficit will surge to a record $1.5 trillion this year. Unemployment remains high, as do associated benefit costs. A record number of Americans — 1 in 7 — are on food stamps. And the Bush-era tax cuts were extended, even as government revenues were already in decline.
The nation is also still fighting two wars, which President Obama — unlike his predecessor — actually lists in his budget. Those war costs will be with us for decades to come, long after the wars have finally ended.
As it stands, the government is already borrowing 40 cents of every dollar it spends. The bipartisan legislation passed in December that extended Bush-era tax cuts, provided unemployment benefits for the long-term jobless, and a 2 percent payroll tax cut this year, will add almost $400 billion to this year's deficit, according to the CBO.
The government will soon face a funding crisis. Major budget cuts need to be soon initiated.
But before politicians even think about touching Social Security they need to significantly cut the single largest budget item or expenditure — defense and Homeland Security. Taken together, the two added up to $706.4 billion in the fiscal 2010 budget.
Yet, money for the Energy Department to work on the nation’s nuclear arsenal, the Selective Service, healthcare for war veterans, and other defense-related spending pushes the total far higher.
In fact, about 58 percent of all discretionary funding is defense related, according to Donald M. Snow, Professor Emeritus at the University of Alabama.
The defense and security budget needs to be cut in half. We would still spend more than any other nation, and still maintain the world's most powerful military. But we need to recall most of the 500,000 military personnel, stationed on over 700 military bases, in more than 150 nations around the world.
Our military footprint is far too big. We're bleeding ourselves to death.
Additionally, research shows that military spending is robbing jobs from the private sector. Years of persistently bloated defense spending is draining resources from the productive economy.
In real dollars defense spending today is 13 percent higher than during the Korean War, 33 percent higher than during the Vietnam War, and 23 percent higher than under President Reagan.
There is indeed fat to be cut from the federal budget, but it isn't found in Social Security. The program should have the benefit of a $2.5 trillion surplus that the politicians looted from the system. Asking the American people to now accept cuts to that program — to accept this blatant theft — is unacceptable and should not be tolerated.
As Americans for Tax Reform noted, "Department of Defense spending, in particular, has been provided protected status that has isolated it from serious scrutiny."
While defense spending has long been viewed as sacrosanct, that is no longer so. There is now a large chorus of deficit fighters, antiwar activists, Tea Partiers, and libertarians who all want to shrink the Pentagon budget.
Try finding large groups of Americans similarly in favor of cutting Social Security, arguably the most popular government program in American history.