Skip to comments.Social Security Scam Now Obvious
Posted on 07/17/2011 6:59:08 PM PDT by stolinsky
Social Security Scam Now Obvious
David C. Stolinsky
July 18, 2011
Socialist governments traditionally do make a financial mess. They always run out of other peoples money.
− Margaret Thatcher
If there is a silver lining to the dark clouds hanging over our economy − and thats a big if − it is highlighting the sad fact that Social Security is an enormous fraud. This fraud goes beyond even the fact that it is a Ponzi scheme − that it depends on enough new workers joining the workforce to pay for older people retiring.
Yes, Social Security is as much a Ponzi scheme as were the machinations of Bernie Madoff, but this is old news to anyone who has been paying attention. What is new is the official admission by President Obama and Senate Majority Leader Harry Reid that if the debt limit is not raised by the August 2 deadline, Social Security payments to 53 million recipients may cease. This threat may be exaggerated, but it is still a threat.
It may be a bluff to intimidate Republicans, or a real threat. But in either case, it is an open admission by high officials that Social Security depends on continuous borrowing. This admission exposes for all to see that Social Security is based on two colossal lies:
Payments are guaranteed.
Over the years, officials − from former Speaker Pelosi to leaders of the AFL-CIO to official statements − declared that Social Security payments are guaranteed. The word occurs repeatedly in descriptions of Social Security as it now exists, especially when contrasting it with proposals to privatize it.
But what does guaranteed mean? Most retirees assume that it means what it says − that the United States government stands behind its promise to pay benefits. But in fact, guaranteed is used here in a very limited sense. Payments are guaranteed, but only so long as (1) enough new workers join the workforce; (2) enough money can be raised by taxes or borrowing to cover the payments; and (3) the president feels it is to his political advantage to make the payments, rather than to withhold them and blame Republicans.
If a bank or other business claimed its investments were guaranteed in this narrow, deceptive sense, it would be closed down, and its officials subject to prosecution for fraud. But the federal government polices itself − which is impossible. So no one will punish the officials who promised that Social Security payments are guaranteed. Few will even point out their false promises.
In part, this is due to the fact that the mainstream media are propaganda outlets for the Democratic Party. But it is also due to the fact that we have become so used to politicians making false promises that we hardly notice. How sad.
Remember how President Bush was called a fear-monger for proposing fixes for Social Security six years ago? Remember how Democrats claimed that the system was sound and payments were guaranteed, so we shouldnt change a thing? But now President Obama threatens that payments may stop in two weeks if something isnt done immediately. So who is the real fear-monger?
In fact, the Supreme Court decided in 1960 that recipients have no right to payments, no matter how many years they have paid into the system. The government can decide to decrease − or stop − the payments at its sole discretion. Hows that for guaranteed?
Money is in the trust fund or lock box.
Obviously, if there were money in the trust fund or lock box, it would be available to cover Social Security payments − surely for at least a month or two, while the current dispute is resolved. If that were the case, the presidents threat would be seen as empty, and his credibility would sink to even lower levels.
But whether the presidents threat is real or a bluff, what does the threat clearly demonstrate? If there is no money on hand to cover even one months payments, there cannot be a trust fund or lock box in any meaningful sense.
Yet we have been told for decades that there is a trust fund. What does it consist of? It consists of U.S. bonds, but of a special type. Most U.S. bonds are negotiable. They can be bought and sold. Otherwise, no one would want them − what good would they be?
But these bonds are non-negotiable. They can be redeemed only by the government, and only at the time they are due. So even if the Social Security Administration has a truckload of these bonds, it cant sell some to cover even one months payments to retirees. It cant do anything with them.
When I wrote about this subject in the past, some readers castigated me as a fool for not understanding that U.S. government bonds are among the safest investments on earth. But were these readers correct? Are the bonds held by the Social Security Administration really safe? Are they really bonds at all?
Suppose I want to borrow $500 from you. Im a reliable fellow, so you go to your sock drawer, take out the money, and lend it to me. In return, I give you an IOU. You put it in your sock drawer. You trust me to repay the loan, so you can count my IOU as an asset. If you were to total up your net worth, you could add that $500.
But now suppose you want $500 for a fun weekend. You go to your sock drawer, take out the money, and leave your own IOU. But you see the difference. You cant count your own IOU as an asset. It isnt really an IOU. It is merely a memo that you took $500 and spent it. You may put $500 back in the sock drawer some day, or you may not. But in any case, the so-called IOU is just a memo to verify that the money is gone.
If I hold a government bond, it is an asset. I know the government will repay the money. Perhaps it will repay in inflated dollars that are worth much less than what I invested in the first place, but at least the debt will be honored to some degree. On the contrary, if the government holds a government bond − especially one that cannot be sold on the market − it is not really a bond. It is merely a memo to verify that the money is gone. The money went into the general fund, and was spent on whatever the government was spending on.
All this was already clear. But now it is so clear that it is impossible to ignore. There is no guarantee. There is no trust fund or lock box. Monthly Social Security payments depend on the government taking in enough money that month in taxes, or the government borrowing enough money that month, to cover the payments.
In short, the U.S. government is no better than Bernie Madoff. And now President Obama and Senator Reid have openly admitted as much. Madoff is in prison for the rest of his life. All we can do is make sure that lying, thieving bullies are voted out of office for the rest of their lives. All we can do is make sure that when our elected officials use the words guaranteed or trust fund, they are not fabricating pleasant fantasies to get reelected.
And we can work hard to be sure that noble words like guarantee, trust, and security mean something again. We can work hard to be sure that when our government makes promises − especially to the elderly, the disabled, and the truly needy − its word is good.
Dr. Stolinsky writes on political and social issues. Contact: email@example.com.
That’s why I call it Social Insecurity.
bob dope (r-kansas) and other rinos helped
the socialist spend the social security surplus.
If they don't pay in cash I'll take a good location in the main lobby of almost any NPS lodge at Grand Canyon National Park.
Thanks for posting this.
Pay up suckers, we will be dead before the checks stop!
Yes, not only did Obama admit that all our Social Security contributions are NOT in a lockbox, he said he couldn’t pay Social Security unless the limit on his credit card was upped!
Then it is not guaranteed is it?
Doesn’t SS go to new immigrants, with less work required for a full payout? Also, can’t an immigrant bring in family members who are elderly, and get coverage?
If we kept to the original plan of an individual worker building up a lockbox fund plus interest, we would not be here. “Someone” turned it into an “entitlement” scam.
Lies, lies, lies . . the ends justify the means . . where have we heard THAT before? This is NOT a socialist state; it is a Constitutional republic.
Raise the retirement age NOW. People are living longer and need to keep on going for a while longer. Things were different when they started SS; people’s life spans were shorter. - If a person CAN pay their own medical bills, let them do it for as long as they are able; the doctor’s offices will give them a self-pay discount. My Medicare card kicks in this month; and I can pay my own.
And then take it a step further and cut ALL entitlements. People gotta grow up; especially lawmakers and those latched onto the government sugar tit.
Well, it couldn't happen to a more deserving President. I hope all the seniors who thought this moron was their savior eat crow, because that's all they will be able to afford.
Because the FDR administration argued that SS was a TAX plain and simple to the Supreme Court when it was challenged. The Democrats have been using the ending of, or modification of, SS against Republicans for as long as I've been alive. They knew all along it was a scam and now they are out in the open with it. But do you think it will make any difference the Democrat voters? Not likely!
When do we the people get sick of the lies and engage in civil disobedience? The government is corrupt as hell. The dems and Rhinos need to be called “LIAR” whenever they spin. Start screaming people.
They stole our money. Now they MUST pay. No more salaries, and put them behind bars.
What a bunch of theives we have fore represetatives. All but 60 must go.
We have paid more into SS than it costs since 1983, to “prepare” for the baby boom generation.
That money was used to buy government bonds.
So, the Federal government took regular tax revenue and spent it; then they spent the SS income over and above costs for whatever they wanted, but that money was “guaranteeed” by a government issued bond.
So instead of keeping the SS over and above money separate from the general tax revenues, the two income streeams were merged and spent.
Now the ogvernemtn can only reddem the SS bonds by doing what? Collecting taxes from the present generation and future generations to pay off the bonds and give the money to SS.
So we paid the SS taxes once for these future benefits, since 1983.
Now, we have be taxed a SECOND time to pay off the bonds, for benefits we already paid for.
So we pay for TWO TIMES for the SAME BENEFIT.
Think about that, and ask why shouldn’t Congress be in jail?
Do you think America will ever figured out they have been looted?
Fingers on or off?
Sadly..screaming at these people has no affect.
After they destroy SS and Medicare I fear they will go after pensions, 401ks and IRAs.
Sorry, the original plan was a scam from the start.
Payments to retirees always depended upon taxes on the earnings of current workers. The idea was that the number of current workers would continue to expand over the years. The post WWII baby boom encouraged the belief that benefit payouts could be periodically increased. The decline in the birth rate makes the scheme untenable. On top of this, Social Security was merged into the total budget a few decades back. This permitted the government to borrow from the Social Security Trust Fund to pay for other expenditures. The recent recession has merely accelerated the inevitable insolvency of the system.
“On top of this, Social Security was merged into the total budget a few decades back.”
That was Clinton “balancing the budget and building a surplus”, iirc.
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