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Who Stole Your Social Security and Why?

May 28th, 2009 · No Comments · Economics

Social Security is not an abstract concept. It is not a series of numbers on a chart. It is life and death to one out of five senior citizens over 65. For all the retired it represents about 40% of their income and for current, about-to-retire seniors, it may well be more than half their livelihood. It’s not a game. It’s not amusing or irrelevant.

For some people retiring now and in the next few years, Social Security may represent the vast majority of their income. And yet, Social Security, which has been running a surplus…surplus…since 1984 is said to be running out of funds. How is that possible? Someone took the money and spent it. If I come into your house and take your money and spend it, that is called “theft.” I stole your money. The governments under Reagan, Bush, Clinton, and enormously under the recent Bush stole your money.

In 1980, Ronald Reagan came into office promising three consecutive tax cuts of ten percent, plus a cut in unemployment and a balanced budget. Of course it was impossible, “voodoo economics” and he never balanced a budget nor did he decrease, but did increase, unemployment. In fact the average unemployment rate for Reagan’s entire presidency was 7.5%, a point-and-a-half higher than U.S. unemployment last year.

By 1983, it was clear that the slight shortfall in the Social Security system would need adjustment because by 2010 the baby boomers would retire and that would create huge deficits in the system. So the Democrats and Reagan agreed to a plan that would actually create surpluses. By 1984, the Social Security surplus was already $300 million, up from a minus of about $8 billion in 1982. It then quickly went up to $9.4 billion, $16 billion, $20 billion and in 1988, the year George H.W. Bush was elected, it was $39 billion. Eventually, surpluses would average well over $100 billion a year. So what’s the problem? By 2003, we had already set aside–or so we thought–$1.5 trillion and growing for the security of the system when the Baby Boomers retired and beyond. The problem was Democratic political anxiety and Conservative Republican greed. Reagan actually started it off by pretending to be a President while he was merely playing one on television. The People, entranced by the picture of a man who could apparently walk on water, bought his line completely. And we have paid a terrible price ever since.

By 1985, the Social Security surpluses were building up, but the government deficits, because of huge tax cuts that were supposed to increase productivity, were growing exponentially. Under Reagan, the deficits for 1982, 1983, 1984 and 1985 were, respectively, $120 billion, $208 billion, $185 billion, and $221 billion. Even with high unemployment, with double digit interest rates or with inflation at its worst rate in our history, deficits under either Ford or Carter never passed $75 billion. And even that was considered a dangerous situation.

So what did Reagan and his boys do? The gang-that-couldn’t-count-straight decided that here was a pile of money they could steal to make themselves look better. And so they did. They took $84.5 billion from Social Security surpluses and spent it. They spent all of it in order to cut the size of the public debt. In 1988, for example, the national debt was $194 billion dollars. But by spending our Social Security funds, the Reagan Administration reported a deficit of only $155.2 billion. They took $38.8 billion of our Social Security funds to spend presumably on tax cuts and missiles for Iran. (Iran-gate.)

Fast forward to George H.W. Bush. He had deficits between 1989 and 1992 of $205 billion, $277 billion, $321 billion, and $340 billion. During that same period he stole from us $52 billion, $57 billion, $52 billion and $50 billion to make those numbers smaller when reported to the public.

Next came Clinton, who tried to do something about the deficits, which is about all that can be said for him. In 1993, he still had a deficit of $300 billion and although they went down every year ($258 b, $226 b, $174 b, $103 b, $30 b, and then went positive…$1.9 b and $87 b, he continued to spend our Social Security. For example, in 1998, when the deficit was $30 billion, the announced government surplus was $69.2 billion. But that was by using $99.2 billion of the Social Security surplus.

Then came George W. Bush, considered by most Americans at this point the worst President in the history of the country. He may not have been the worst President. He may not even have been President. But he looted us as well or better than the rest of them.

In 2001, despite knowing that the surpluses were mostly coming from the increased taxes being paid to insure the solvency of Social Security, Bush announced more tax cuts, this time a reduction in federal revenues of more than $1.25 trillion. To pay for tax cuts, one of the things he did was tap into the Social Security surplus, just like Reagan, Bush, and Clinton.

In 8 years, the Bush Jr. Administration spent every single penny of the Social Security surplus, using it like a piggy bank to give huge tax breaks to individuals and to corporations, to start wars, to give lucrative government contracts…far beyond their value…to friends and associates. During that time, the Bush Administration drained $1.4 trillion dollars, the entire surplus and used it to write down their additional national debt, which turned out to be…without the Social Security funds…a grand total of $3.4 trillion.

In addition, the Bush Administration’s lax and incompetent management of the financial community added another $750 billion in a late 2008 bailout to keep the financial community from completely dissolving. To keep the recession that came as a result of the partial collapse of the financial and housing markets from becoming a huge depression, has added $1.2 trillion more. So the funds from personal tax deductions paid by workers–the amount of money we call Social Security–has been completely looted.  And, by the way, we currently have additional debt from the last 8 years of $5.3 trillion dollars.

So does it mean that we have no money to pay Social Security benefits? No it does not. It means that we must either find a way to repay the “trust fund” and restore the amounts that will be needed or we must reduce benefits. Economists differ as to when the real crunch will come but most think that it will be sometime around the middle of the century, perhaps as soon as 2040. At that point, as far as we know today, we would be able to pay only about 75% of anticipated benefits. Some economists recommend we have a “means test” solution in which those who do not need Social Security will not receive it, even though they have paid in all their lives, and those who need Social Security will receive it according to their needs but with some caps on benefits as we have them today.

But no one really knows what will happen. Who knew that a succession of Presidents of both parties would forfeit the trust and faith of the American People for political gain?  Simply to make a budget deficit seem smaller in order to win an election, these cruel and cynical politicians spent the retirement savings of the elderly as surely as if Bernie Madoff had conned them into one of his schemes. Bernie Madoff is going to jail. What should we do with these equally guilty tin-horn, felonious politicians?

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