The Awful Truth About the Social Security Trust Fund is Beginning to Emerge
Allen W. Smith
I first discovered the Social Security scam more than a decade ago, while doing research for my first Social Security book, The Alleged Budget Surplus, Social Security, and Voodoo Economics. At first I questioned my findings, because it just did not seem credible that the United States government would spend the Social Security contributions of American workers for non-Social Security purposes while at the same time misleading the public into believing that the funds were being invested in regular U.S. Treasury bonds. But it did not take much additional research to realize that the practice had already been going on for more than a decade and that some very high-profile members of Congress had tried to stop it.
On October 13, 1989, Senator Ernest Hollings of South Carolina, spoke the following words during a speech on the Senate floor, “…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund…in the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.”
On October 9, 1990, Senator Harry Reid of Nevada expressed his outrage at the practice during a senate speech. Pointing to a chart displaying a single word in large letters, Senator Reid said, “…On that chart in emblazoned red letters is what has been taking place here, embezzlement. During the period of growth we have had during the past 10 years, the growth has been from two sources. One, a large credit card with no limits on it, and, two, we have been stealing money from the Social Security recipients of this country.”
Senator Reid used both the words, “embezzlement” and “stealing” as he lambasted the raiding of the trust fund. He knows better than anyone that the practices he so denounced twenty years ago have continued to this day and that he has been a party to the embezzlement. Yet, as he seeks still another term, he falsely assures voters that Social Security is solvent for decades.
I have been trying to expose the Social Security scam for more than a decade, now, with little cooperation from the media, until very recently. But the tide is turning. My first big break came when Allan Sloan, Fortune’s Senior Editor at Large, quoted me and referred to my book in his August 10 Washington Post column. I’m sure Allan shocked a lot of people with that column. And he became the first major media person to reveal the dark secret that the government has managed to keep hidden for 25 years.
Below is an excerpt from that column.
Let me show you in two different ways how useless the fund is. The first is a quote from the introduction to the 2009 Social Security trustees report, the second is the graphic by my Fortune colleague Robert Dominguez that accompanies this article. Allen Smith, economics professor emeritus at Eastern Illinois University and author of “The Big Lie: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” spotted the 2009 quote, and it is telling. It says: “Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.
In other words, the trust fund is of no economic value. This sentence wasn’t in the 2010 introduction, released last week. Treasury says that it stands by the statement but that the Social Security trustees decided not to include it this year because it reiterates the obvious.
Once Allan Sloan broke the ice, and reported on a subject that has been taboo for two decades, he was followed by other journalists. Below are excerpts from the Social Security writings of three mainstream journalists who have recently joined the effort to expose the awful truth about the trust fund.
Doesn’t the Social Security trust fund cover that? No, silly. All those years of surplus in Social Security were recorded in a book entry dubbed the “trust fund”, but the non-marketable special Treasury bonds that make up the fund don’t represent any assets that can be cashed in to pay benefits.
— Eric Schurenberg from CBS Money Watch, August 19, 2010
Your payroll taxes go into a bottomless hole. So where did all that FICA money go? Down the drain of federal spending on everything. It’s certainly not sitting in an account waiting to pay your retirement benefits.
— Terry Savage, Chicago Sun-Times, September 6, 2010
For more than 25 years, while working people were told that they were paying extra taxes to ensure their retirement security, that surplus tax revenue was actually being siphoned off to run general government operations…In reality, the trust fund contains government IOUs that taxpayers today and tomorrow will have to redeem probably through paying higher taxes
– Jay Bookman, Atlanta Journal-Constitution, September 7, 2010
In less than 30 days, four major journalists have joined the ranks of those who have been trying for so long to expose the Social Security scam. That scam is the fact that $2.54 trillion of the Social Security surplus revenue has been diverted from the Social Security program and used for whatever unscrupulous politicians chose to spend it on. None of this money was saved, or invested in anything. Money can be spent or saved. If it is saved, it can also be invested, but, if it is all spent, there is nothing left to invest. This $2.54 trillion heist by the United States government may well be the “crime of the century!”
Sept. 10, 2010