The Bogus Social Security Scare

Class Warfare Heats Up Against the Average American

by Wayne Spencer - August 21, 2004
Audio Version

According to Michael Tanner, Director of the Project on Social Security Choice at the Cato Institute, a political front group for multinational corporations disguised as a libertarian organization, the Social Security System will begin running a deficit by 2018, according to the last report of Social Security trustees. He states that the “so-called” Social Security Trust Fund which is supposed to help pay benefits until 2042, in reality contains “only government bonds,” essentially an IOU.

Well, isn’t that interesting? “Only government bonds.” He speaks of government bonds as essentially IOU’s and instills doubts that these “IOU’s” will ever be repaid. If these government bonds are essentially worthless why do Wall Street investors have such a great deal of faith in these same bonds. As a matter of fact all of the bond-rating institutions that I know of consider these U.S. Treasury Bonds to be the most secure investment in the world. Ask your own financial expert what the bank would consider better collateral: U.S. Treasury Bonds or IBM Stock? I’m betting the answer is U.S. Treasury Bonds. Yet, these multinational corporatists are trying to tell us that Social Security would be in much better shape if its trust funds were in stock rather than in U.S. Treasury Bonds. Incidentally, Federal Reserve Notes are also backed by Treasury Bonds and we call these notes CASH!

Now, if Michael Tanner is correct and U.S. Treasury Bonds are essentially worthless than we have a great deal more to worry about than just Social Security. Is he saying that the whole U.S. economy is on the verge of total collapse? I think this is typical of the scare tactics being used by forces who have been opposed to any social programs that this country has ever instituted.. with the possible exception of corporate welfare.

Mr. Tanner further overstates the issue with the statement: “..Social Security now faces unfunded liabilities in excess of $26 trillion.” Unfunded? Mr. Tanner has taken the total Social Security payments projected out to heaven only knows how many years without subtracting the FICA taxes from the pay outs or including any new sources of revenue which might be employed in the future. The U.S. Treasury report on Social Security puts the unfunded amount between the years 2035 and 2077 as around $7 Trillion or about $100 Billion per year. Seems like a good argument for rescinding the tax cuts, cutting the huge military budget and adding common sense financial management.

If the critics of Social Security want to have a real scare, consider the very negative macro-economic impact on the U.S. economy if there were no Social Security.

Actually, if all net income were taxed at the same rate as the present FICA tax with the same projected cut offs, the Social Security tax (FICA) rate could actually be reduced and at the same time eliminate any shortfall in the deficit.

How did we get to this point where it is possible to scare future Social Security recipients? I submit that the problem started in the 1960’s when President Lyndon Johnson included Social Security in the National Budget. Before that time, the Social Security numbers were kept separate from the National Budget. What this did was to include the huge Social Security surpluses into the National Budget to make it appear that the budget deficit was much smaller than it was so to hide the true enormous financial cost of the Vietnam war in particular and the military expenditures in general. Interestingly enough, the same people who are now promoting Social Security scare tactics were at the time in favor of including Social Security in the National Budget to help fund their corporate interests. So in actuality most of the $26 trillion deficit that Mr. Tanner refers to is actually the accumulated debt arising from the fact that we were over spending on the military industrial complex and at the same time under taxing Americans and hiding in within the Social Security surplus.

So in effect, now that the U.S. Government has over spent on the military and under taxed those best able to pay taxes for a number of decades, Mr. Tanner and the Cato institute now proposes that American retires pay for these past hidden deficits. How nice for the wealthy not to have to worry about such pesky things like taxes or financial security.

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Copyright © 2004 by Wayne Spencer - This article may be freely distributed with this copyright notice attached.