We the People: U.S. Congress has emptied the Social Security Fund
By Clark Hopper
As Americans, we can no longer stand by and ignore the fact that Congress continues to attack Social Security, inaccurately identifying it as an entitlement. An entitlement is defined as a government program targeting a particular section of the population to receive a specific social benefit.
In the United States, Social Security refers to the Old Age, Survivors and Disability Insurance (OASDI) federal program. The original Social Security Act (1935) and the current version of the act as amended, encompass social welfare and social insurance programs. Social Security is primarily funded through dedicated payroll taxes called Federal Insurance Contributions Act tax (FDIC). Tax deposits are formally entrusted to the OASDI Trust Fund, the Federal Disability Insurance Trust Fund, the Federal Hospital Insurance, or the Federal Supplementary Medical Insurance Trust Fund, which comprise the Social Security Trust Fund.
Our Social Security is an insurance program we paid into all of our working lives, not an entitlement.
Social Security taxes are paid into the Social Security Trust Fund, technically the OASDI Trust Fund, as established by 42 U.S.C. 401(a), (http://www.law.cornell.edu/uscode/42/401.htmla). Current year taxes are paid from current Social Security tax revenues. When revenues exceed expenditures, as they did between 1983 and 2009, the excess is invested in special series, non-marketable U.S. government bonds. The Social Security Trust Fund indirectly finances the government’s general-purpose deficit spending. In 2007, the cumulative excess of Social Security taxes and interest received over benefits paid stood at $2.2 trillion.The Social Security Administration’s authority to make benefit payments as granted by Congress extends only to its current revenues and existing Trust Fund Balance. An example is the redemption of its holdings of Treasury securities. Therefore, Social Security’s ability to make full payments once annual benefits exceed revenues depends in part on the federal government’s ability to make good on the bonds it has issued to the Social Security trust fund. As with any federal obligation, the federal government’s ability to repay Social Security is based on its power to tax and borrow and the commitment of Congress to meet its obligations.
At the end of 2011, the U.S. government owed the Trust Fund $ 2.7 trillion, up from $69 billion in 2010. The fund is required by law to be invested in non-marketable securities issued and guaranteed by the “full faith and credit” of the federal government. The Trust Fund represents a legal obligation to Social Security program recipients and is considered “intra-governmental” debt, a component of the “public or national debt.” As of April 2012, the intergovernmental debt was $4.8 trillion of the $15.7 trillion national debt.
Translated into simple language, the U.S. government has changed all excess revenue paid to Social Security by taxpayers into non-negotiable bonds and spent the money on unfunded wars, bailing out banks and God knows what else. Remember these U.S Treasury bonds and U.S. securities are supposed to be backed by the full faith and credit of the U.S. government. These Trust Fund balances are supposed to be available for present and future Social Security benefit payments and expenditures, but only in a bookkeeping sense. They do not consist of real economic assets that can be drawn on in the future to fund benefits. Instead, they are claims on the Treasury when if redeemed will have to be financed by raising taxes, borrowing from “We the People” or reducing benefits and other expenditures.
The existence of large trust fund balances does not by itself have any impact on the government’s ability to pay benefits (from FY 2000 Budget, Analytical Perspectives, p. 337). In reality, Congress spent Americans Social Security Trust Funds, replacing it with worthless paper (IOUs) saying "trust us." Then Congress has the audacity to try and deceive “We the People” by saying Social Security is going bankrupt and adding their spending of the Social Security Trust Funds to the “national debt” and increasing the taxes to replace the depleted trust funds. That would be double taxation plain and simple. Congress, not the people, has taken from the cookie jar for decades and must now pay the piper, not just add trust fund depletion to the national debt.
To escape paying either principle or interest on the “special” bonds held by the trust funds, the U.S. government would have to default on these obligations. This cannot be done by executive order or by the Social Security Administration. Congress would have to pass legislation to repudiate (refuse to pay the debt or default) on the bonds. At a Senate hearing in 2001, Federal Reserve Chairman Alan Greenspan was asked whether the trust fund investments are “real” or merely an accounting device. He responded, “The crucial question is: Are they ultimate claims on real resources? And the answer is "yes.” Wrong; the “real question” is can Americans trust our Congress and how is Congress going to make it right?
All of this information can be confirmed by going to a search engine on your computer and looking up Social Security Trust Fund, The OASDI federal program and United States Public Debt
Clark Hopper is a resident of Saline County. His column appears each Saturday in the Saline Courier.