The Ongoing Social Security “crisis”
10/15/2007
Here's an article http://www.counterpunch.org/rhames10132007.html from Counterpunch on how the financial elites are again starting to beat the drums on Social Security "reform".To solve the Social Security "crisis" we need to understand two dates. The first is pretty much agreed to be 2016 give or take a year or two. That's the year the Social Security Trust Fund will stop growing and will instead need to redeem some of the "special issue" Treasury bonds it has in its possession. At that point, the Trust Fund will not be insolvent or depleted. On the contrary, it will have in its possession well over $2 trillion in "special issue" Treasury bonds backed by the "full faith and credit" of the US Treasury. The Trust Fund will be no more bankrupt at that time than you are when you withdraw money from your bank savings account. The second date is the year in which the SS Trust Fund will truly become depleted. There are many different estimates for this, depending on various economic assumptions. The Social Security Administration says the most likely year is 2041. The Congressional Budget Office says 2052 http://zfacts.com/p/784.htm>. That's 34-45 years from now, very nearly a working lifetime. With very minor benefit adjustments, we could extend this to 75 years, considered to be actuarially equivalent to forever. So the first thing we need to understand is this: There is no Social Security crisis. If there is a crisis, it's with the total aggregate Treasury debt, not with Social Security. If Social Security benefits are significantly reduced in the future, it will be because Congress http://zfacts.com/p/336.html chooses to do so, not because the Trust Fund is bankrupt.
We could go a long way toward permanently solving the ongoing Social Security dispute and removing it from political discourse through legislation replacing all "special issue" (non-negotiable) Treasury bonds held by the Trust Fund with fully negotiable Treasury bonds indistinguishable from the bonds auctioned to the public. The current arrangement makes it theoretically possible for the Treasury to default on the "special issue" bonds held by the Trust Fund without defaulting on Treasury bonds held in the private sector. This should not be possible. Foreign creditors, including the Chinese government, must not be given priority over the retirement benefits of working poor and middle class Americans, who have bought and paid for those benefits through decades of regressive FICA taxes. A second necessary step is legislation mandating total payouts by the Social Security Trust Fund in any given year be sufficient to liquidate the Trust Fund actuarially in
75 years (from the current year). This would prevent a future Congress from arbitrarily reducing benefits to the point where the Trust Fund grows indefinitely beyond what is required to fund the program, in effect becoming a sink-hole for the national debt. This step could be made irreversible by spinning Social Security off from government entirely, making it a private, non-profit, mutual insurance corporation regulated and audited by government to guard against fraud and discrimination but otherwise subject to the democratic governance its contributors, with $1 contributed through FICA = 1 vote.
For 20 years, since the enactment of the Greespan Commission's recommended "reforms", working poor and middle class Americans have been financing the Federal deficit through the Social Security Trust Fund. The interest on this debt has been kept artificially low by requiring the Trust Fund to invest only in US Treasury bonds. The Trustees can not seek a higher rate elsewhere, and are also stuck with bonds denominated in a declining currency. Through this financing, it has been possible to reduce taxes on economic elites to a point where those elites have a marginal tax rate lower than the effective overall tax rate on our middle class. In effect, our economic elites have borrowed billions upon billions of dollars from our lower and middle class FICA taxpayers in order to pay for war and armaments purchases that benefit those elites far more than they do our lower and middle class. Now comes Greenspan and other elites whining about the fact that this debt is coming due in 2016 and the Federal government will have to raise taxes in order to pay the Treasury's debt to the Trust Fund. The elites borrowed the money; they don't want to pay it back.
Alan Greenspan is allegedly a brilliant man, a trained economist. How is it he was unable to see the entirely predictable 2016 "crisis" back in 1983? I'm not going to slander one individual; perhaps Greenspan just isn't quite as brilliant as his reputation. However, I'm quite certain there were members of our political and economic elites who were well aware of this looming problem by the mid-1990s. They were certainly well-aware by the time of the Bush tax cuts of 2001. They just weren't and aren't being honest about its true nature. Indeed, there's some evidence this was all part of a calculated fraud
- Bill Rood, Rochester, MN