Social Security Trust Funds

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"The Social Security Trust Funds are the Old-Age and Survivors Insurance (OASI) and the Disability Insurance (DI) Trust Funds. These funds are accounts maintained by the Department of the Treasury. They serve two purposes: (1) they provide a mechanism for keeping track of all income to and disbursements from the trust funds, and (2) the assets of the funds provide automatic spending authority. To clarify the second point, no legislation is needed to spend a portion of trust fund assets on benefits or administrative costs (the Social Security Act limits expenditures to benefits and administrative costs).

"Benefits to retired workers and their families, and to families of deceased workers, are paid from the OASI Trust Fund. Benefits to disabled workers and their families are paid from the DI Trust Fund.

"A Board of Trustees oversees the financial operations of the trust funds. The Board reports annually to the Congress on the financial and actuarial status of the trust funds."

"By law, all income to the trust funds that is not immediately needed to pay expenses is invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. ... Data on trust fund investments provide a breakdown by interest rate and trust fund for any month after 1989." -- Social Security Administration Trust Fund FAQs.

"If Social Security has any problems in its current form, they won't become apparent for decades, and if they do, they could easily be dealt with. Conceding anything on this point only strengthens the hands of the privatizers, who are using fear of bankruptcy to promote an ugly and dangerous agenda." --Doug Henwood, Left Business Observer, March 2005. [1]

Raiding the Trust Funds

"Anticipating the strains that would be put on Social Security, lawmakers raised the payroll tax in the 1980's (a disproportionate amount of which is paid by the lower and middle classes) and created a Trust Fund into which surpluses would be placed and saved in order to keep the system solvent during the lean years of the baby boomer retirements. In order to sink Social Security, conservatives would need to plunder the surplus and break the bank of the trust fund. ...

"Of course Bush lied or flip-flopped, or whatever you want to call it. He began raiding the trust fund and the surpluses in his first months in office, and hasn't stopped since. According to the Historical Budget Data put out by the Congressional Office of Management and Budget in early 2004, to cover the cost of his tax cuts, Bush will have to spend the entire projected Social Security surplus of $2.4 trillion from 2005 through 2014. The lockbox will be completely looted, just as an avalanche of baby boomers are set to retire. While the Trust Fund is looted, and the baby boomers' retirement looms in the distance, the national budget shows little capacity to make up the difference, or reinforce the effort. This of course, was part of the plan.

"The Bush administration has succeeded in greatly diminishing the revenue stream through far reaching and, if they get their way, permanent tax cuts which many economists have described as making the deficit recovery proof because of the breaks given on the taxation of passive income. He accomplished this while encumbering the government with the enormous spending obligations required to fight the wars in Iraq and Afghanistan. There is a reason that no government in the history of the United States, or the world for that matter, has cut taxes while at war. The deficits become unmanageable, and the resources of the government scarce. But Bush didn't stop there. He also passed the staggeringly expensive prescription drug benefit, even though he had to conceal the true cost from Congress and threaten to fire Richard Foster, the Medicare actuary, if he revealed the real estimates. This was a two-fold success in that he further drove up the deficit, while at the same time making Medicare even more expensive and ultimately unwieldly, an argument that will be used in the future to justify its 'unfortunate' demise.

"Which takes us up to the present. We are on the verge of the baby boomer retirement rush which would have put a strain on Social Security and Medicare had the surpluses been left intact inside a 'lockbox.' Instead they have been plundered, and if Bush's tax cuts are made permanent, they will remain bankrupt in perpetuity. The budget is hamstrung with intransigent obligations that are exceeding the paltry revenue trickling in as a result of widespread tax cuts that, according to the non-partisan Congressional Budget Office, overwhelmingly favor the wealthiest Americans, with millionaires receiving $72 to every non-millionaires' $1. There is no room in the budget to bail out Social Security and Medicare, but a crisis is looming."

Bush: "There is no 'trust fund' ..."

On April 5, 2005, after visiting the Bureau of Public Debt in Parkersburg, West Virginia, President Bush said:

"I have just come from the Bureau of Public Debt. ... I went there because I'm trying to make a point about the Social Security trust. You see, a lot of people in America think there's a trust, in this sense -- that we take your money through payroll taxes and then we hold it for you, and then when you retire, we give it back to you. But that's not the way it works.
"There is no 'trust fund,' just IOUs that I saw firsthand, that future generations will pay -- will pay for either in higher taxes, or reduced benefits, or cuts to other critical government programs." [2]

Paper, Not Gold ... Just Promises

  • Although the Social Security Trust Fund "does contain bonds that represent cash owed to the Social Security system, ... cashing those bonds to pay for benefits will cost the federal government more than $5 trillion in the not-too-distant future," according to a February 2005 Cato Institute op-ed. [3]
  • "And indeed, the trust fund is a pile of paper, not a pile of gold. But those papers -- just like other government securities -- represent promises backed by the 'full faith and credit' of the United States. ... So was Bush really suggesting that those promises might not be kept? That American workers have somehow been defrauded?" --Dan Froomkin, Washington Post, April 6, 2005. [4]
  • "That is an amazing, and probably unprecedented, statement. It is unlikely that any prior U.S. president ever called the integrity of government bonds into question. ... President Bush could not honestly have expected to find vast stores of gold or silver hoarded in the trust fund." --Economist Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), April 6, 2005. [5]

Violating the Constitution

  • "Defaulting on our debts is a direct violation of the United States Constitution, the document that Bush, all of Congress, all of our Judiciary, and every member of our military have all sworn to uphold... where is the outrage?" --lestatdelc, Daily Kos, April 6, 2005. [6]
  • According to the U.S. Constitution, Amendment XIV, section 4 says that "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

U.S. Social Security privatization

Paul Krugman wrote in the March 15, 2005, New York Times that the "argument over Social Security privatization isn't about rival views on how to secure the program's future - even the administration admits that private accounts would do nothing to help the system's finances. It's a debate about what kind of society America should be.

"And it's a debate Republicans appear to be losing, because the public doesn't share their view that it's a good idea to expose middle-class families, whose lives have become steadily riskier over the past few decades, to even more risk. As soon as voters started to realize that private accounts would replace traditional Social Security benefits, not add to them, support for privatization collapsed." [7]

External links

Documentation

Websites

Quotes

Taxed twice [8] "Tax on Social Security Income"

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