Social Security: How you are being conned

Yes, you are being conned, and the following article from the May 10, 2019 issue of The Week magazine unintentionally tells you how.

Social Security will be insolvent in only 16 years, said Eric Boehm in Reason​.com. That’s the finding of a new report by the program’s trustees, which says Social Security’s costs will exceed its income in 2020.

To put this as gently as possible, you are being fed 100% bovine excrement, with some equus poop tossed in.

It is absolutely impossible for any agency of the U.S. government to become insolvent unless the government wants it to become insolvent. Period.

Unlike our state and local governments, our federal government uniquely is Monetarily Sovereign, meaning it cannot run short of its own sovereign currency, the U.S. dollar.

In the beginning, the federal government created an arbitrary number of the original U.S. dollars from thin air.

It continues to do so. (See: “Does the U.S. Treasury really destroy your tax dollars?“)

It also gave those original dollars an arbitrary value, and it continues to do that, too. (See here.)

Even if total FICA collections, which you have been told (erroneously) fund Social Security, were $0, the U.S. government could continue paying SS benefits, without limit.

In fact, even if all federal tax collections were $0, the federal government could continue spending forever, and still not borrow.

To cover benefits, the program will have to start dipping into its $3 trillion trust fund.

“If nothing changes,” those reserves will be exhausted by 2035 and recipients will receive only about three-quarters of their expected benefits.

The so-called “trust fund” is a bookkeeping fiction, designed to make you think federal finances are like personal finances.

There is no trust fund. There merely is a bookkeeping account, over which the federal government has total control.

If the government (i.e. Congress and the President) wished, that fictional “trust fund” could show a balance of $100 trillion. Or $0.

Those dollars do not “come from” anywhere. The government owns the balance sheets and puts any entries it wishes into them. (See: Monopoly)

“That may sound like a long way off, but 51-year-old workers today will just be hitting retirement age when the cuts kick in.”

Americans have long known this shortfall is coming, said Noah Rothman in CommentaryMagazine​.com, “and they do not care.”

More bovine scat being fed to you. Americans do care, but they have been conned into believing that the only solution is higher taxes or reduced benefits.

In 2005, President George W. Bush unveiled a major effort to reform Social Security. It failed.

In 2012, GOP presidential nominee Mitt Romney and his running mate Paul Ryan outlined ways to trim the program’s costs.

“They were defeated.” Then in 2016, Donald Trump “explicitly ran against conservative efforts to rein in entitlement spending.” He won.

Americans have voted themselves into an entitlement crisis.

The politicians lie when they tell you that “reforming” Social Security requires benefit cuts or increased taxes. The real reform would be to eliminate FICA taxes and to increase benefits.

There is not a single financial reason why this cannot be done.

Congress could restore the program to health by letting the government invest some “of the Social Security trust fund in the stock market,” said Brett Arends in Barron’s

A truly dopey idea. Not only is the stock market a high-risk investment, inappropriate for an annuity-like account, but the investment is completely unnecessary. The federal government has the unlimited ability to fund Social Security, and with no deductibles.

Further, the notion of the federal government investing in publicly-traded corporate stock is the ultimate of the socialism (i.e. federal ownership and control) that conservatives love to decry.

Federal law says the fund can invest only in low-yielding securities backed by the U.S. Treasury.

That’s why Social Security has earned a “dismal” return of 17 percent on its investments over the past five years.

U.S. stocks over the same period: 49 percent. “Stock returns are more volatile from year to year, to be sure.” But Canada, Australia, and New Zealand invest their national pension funds in stocks and other assets, “and the results have been amazing.”

The “invest in stocks” idea has only two purposes:

1. To further brainwash you into believing that the Social Security “trust fund” is a real trust fund that is running short of dollars, and
2. To enrich wealthy shareholders, stockbrokers, and bankers.

Such radical free-market solutions aren’t needed, said Michael Hiltzik in the Los Angeles Times.

There are low-risk ways to shore up the program. Right now, the payroll tax that largely funds Social Security only covers wage income up to $132,900.

Two Democratic bills in Congress would remove that cap over time and increase “the payroll tax on the wealthy, who get away with paying an unwarranted low tax rate.”

Wrong. The Social Security program could be “shored up” by completely eliminating FICA, and by ending the pretense that FICA funds Social Security benefits.

But hiking taxes won’t address the key reason Social Security has a cash-flow problem: our rapidly graying society, said Robert Samuelson in The Washington Post.

Wrong, again. The “cash-flow problem” is an invention of the rich, who do not want the non-rich to receive money. (See: “The Gap Psychology con job“)

An American who reaches age 65 can now expect to live for about another 20 years, up from 15 in 1950. That means retirees are claiming more from Social Security than the program’s creators ever intended.

But seniors today are far healthier than in previous generations. “We could be working longer—and should be.” Politicians could stabilize Social Security by gradually lifting its eligibility age to 70.

But our leaders won’t even propose this change “because it is not a vote getter. They should be ashamed.”

Speaking of the program’s intentions, here they are:

Luther Gulick recalling why President Franklin Roosevelt Social Security seeminly was based on payroll contributions, 1941:

“I raised the question of the ultimate abandonment the payroll taxes in connection with old age security and unemployment relief in the event of another period of depression.

“I suggested that it had been a mistake to levy these taxes in the 1930’s when the social security program was originally adopted.

“FDR said, ‘I guess you’re right on the economics. They are politics all the way through.

“‘We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits.

“‘With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.‘

“FDR also mentioned the psychological effect of contributions in destroying the ‘relief attitude.'”

In short, President Franklin D. Roosevelt, the creator of Social Security, did not intend that taxes fund Social Security. They only served as an excuse not to eliminate Social Security.

Roosevelt knew that taxes only give the illusion of funding Social Security, but he believed that illusion would protect the program from the “damn politicians.”

Unfortunately, the dishonesty of politicians has proven too great, for they now have turned Roosevelt’s plan inside out; they use FICA as a false excuse for cutting benefits.

The fake FICA/Social Security relationship is a con that is far greater than anything Bernie Madoff ever thought of.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY