Is the new speaker of the house just dumb or being deceptive?
How can they fix Social Security when they don’t even seem to understand the problem? Sometimes it seems as though they don’t even understand their own finance system.
Last week we had the new Speaker of the House, Dennis Hastert (R-Illinois), talking about finishing the budget. Here’s what he said:
“When I first became speaker, it was the consensus of our conference that we not dip into the Social Security trust fund. The good news: We had a surplus in Social Security. Bad news: We had a surplus…Certainly, if we were just going to dip into the Social Security trust fund like every other Congress, we would have gotten our appropriations done a long time ago…The way to control the message is to say,
Mr. President, you insist on breaking into the Social Security trust fund. We don’t want to do that, but if you insist, that may have to happen.”
Sounds like we need to have Alan Greenspan drop in on Congress and teach members how a general fund works and what federal trust funds are, provided he can tell them in language they can understand. No federal trust fund has ever held any cash. So, what’s to dip into?
The last time Congress “dipped into” Social Security’s trust fund was 1982. At that time, some of the fund’s nonmarketable bonds had to be cashed-in because, due to high unemployment, Social Security did not take in quite enough to meet its obligations to the retired and the disabled. Didn’t places like Rockford, IL have about 23 percent unemployment at that time? Where was Mr. Hastert? Does going back to 1982 sound like “every other Congress” that has preceeded Mr. Hastert?
Hastert off track………
The general fund Treasury holds all the cash and it stays there until it’s spent. Social Security tells the Treasury who and how much to pay the retired and disabled every month. The excess, which is currently more than six billion a month, stays in the general fund until Congress spends it. They have always spent it. They do it every month of every year, with every entitlement excess. And they all do it, despite the fact that like a fart in an elevator they try to make you believe that the other party did it.
The same thing happens with many other entitlements that are producing an excess. So far, Congress and the Administration have swindled almost two trillion ($1.9 trillion) from entitlements, 34 percent of the national debt, Social Security just happens to be their largest source to plunder. It’s their biggest slush fund, but there are many others. Do you hear anyone talking about the other trust funds?
The Treasury then deposits “certificates of indebtedness” in trust funds, and at the end of the year these are rolled over into “special obligation nonmarketable bonds.” Federal trust funds have never held anything but these nonmarketable promissory notes. If and when it is necessary to draw upon or cash-in any of these bonds, actual cash is taken from the general fund, your tax money. The result is double taxation, plain and simple—a gigantic rip-off of the American people, the beneficiaries of the so-called trust. The taxpayers that paid the initial excess pay again, a second time, for the same service. And the public does without something like education, agriculture, defense, etc., that the money, the second payment, might have provided that year. Or Congress does without some of the pork-barrel projects they wanted to give their buddies that year. The latter is what really upsets them and makes them start accusing Social Security or Medicare of “going broke.” And the press eats it up. Can you believe it? An organization that turned a pure profit of $67 billion this year, fiscal 1999, is considered “in trouble.” Medicare, with an accumulated excess of $206 billion (all translated into future tax promissory notes, of course) at the end of fiscal ’98 is thought to be ailing and in need of repair.
What’s more, the House of Representatives and the Senate each have budget and finance committees that begin pondering new budgets and expected revenue at least a year in advance. The same is true of the Administration that has the Government Accounting Office (GAO) working on the subject. Congress has the Congressional Budget Office (CBO) that specializes in Gross Domestic Product for just this purpose. The only valid use of the GDP is to predict tax revenue. There is really little excuse to start a new fiscal year without an agreed upon budget, but it seems to happen almost every year.
Congress has always anticipated how much of what they call “off budget” revenue would be available to steal from entitlements like Social Security, Medicare, gas taxes, airports and so forth. They knew almost precisely how much excess entitlements like Social Security, Medicare, Highways, and so forth would have at least a year in advance. They knew Social Security was going to produce an excess of $67 billion in the ’99 fiscal year, $55 billion in fiscal ’98, $44 billion the year before that—all the way back to 1983. And they know Social Security will take in an extra $75 billion in fiscal 2000. Acting surprised is exactly that—acting.
Since 1983, Social Security has always produced more money than it needed to meet its obligations. This profit or excess is what Mr. Hastert and others call a “surplus.” Since 1983, when the Greenspan Commission recommended raising FICA taxes to 12.4 percent for workers and 15 percent for the self-employed, there has always been a substantial excess to rob, a literal slush fund to plunder. But do not forget, there are many other entitlements being robbed with equal abandon.
Perhaps worst of all is the bald-faced fact that the federal government could make almost any entitlement into just as much of a slush fund as Social Security. They could do it with Medicare, gas taxes or even a new Kosovo repair or tobacco trust fund. All they would need to do is push the tax rate into excess the way the Greenspan Commission did in 1983 under the Reagan administration; i.e., collect far more than is needed to run the operation so they have something to steal.
Instead of working for you as any money you put into a real trust fund would, the pirates of federal government took your excess payments and blew them. There is no way to get it back. For awhile, they told you that trust funds held IOUs as though they were going to come up with the money to replace it themselves. Heck, they still act like Social Security has enough socked away to last until 2034. In reality, there’s nowhere for real cash to come from except from you, the same people who paid in the first place. The nonmarketable bonds in trust are not IOUs—they’re UOUs. You’ve been robbed.
The State of Illinois also operates on the general fund system. Our State Treasurer, Judy Baar Topinka wants to set up “a trust fund” to handle “surplus” from cigarette taxes now coming in far in excess of medical expenses. The State imposed this heavy tax because, supposedly, cigarettes were causing undue medical expenses. But the money does not seem to go for that purpose. Now, they have a huge excess of money collected and apparently not needed for medical expenses or research. Now, they wonder what to do with this excess. Does the State have nonmarketable bonds? Is Judy learning from the feds?
Clinton wants to put a new federal tax on cigarettes too. He calls it “raising money.” Soon he’ll have a Tobacco Trust Fund so everyone can eventually repay the tax that smokers already paid once. Aren’t you glad the tobacco industry is being punished, while smokers pay $33 a cartoon unless they plan a week ahead and buy from out-of-state Indian mail-order houses operating under the search words “discount cigarettes” on the Internet?