The Truth about Social Security

Everyone knows that Social Security is a Ponzi scheme, correct? The system takes in current FICA ("Federal Insurance Contribution Act") taxes from workers and their employers and uses those proceeds to make the current pension payments to retirees. When those who are paying in FICA tax eventually retire, they will be paid their pensions only if there continues to be enough FICA income at that time from people then working. If the FICA income in the future is insufficient, the Government's only alternatives will be to (a) borrow the shortfall in the private market; (b) raise the FICA tax on all workers, and/or raise the retirement age at which pensions will begin, in order to make the FICA money go farther; (c) print the money and risk inflation, which would make the pensions worthless; or (d) simply default, and pay retirees only a certain fraction of what they are owed, such as thirty cents on the dollar.

Although in the back of our minds we all know these facts, we tend to ignore them, as they are inconvenient facts we would rather not deal with right now. The system -- for now, at least -- is functioning, right? Social Security is taking in more than what it has to pay out, and is investing the difference in government bonds (IOUs), so what could go wrong? Well, the fact is that since last year (2010), the system has been paying out more than it takes in.

How is it able to do this? Please read Dean Kalahar's brutally frank and honest description of the Social Security system for the straight scoop. Here is an excerpt:
When the bonds mature, they are rolled over into new bonds that include both the original value and any interest due. In short, the government confiscates the public's hard earned money, writes an IOU from one branch of government to another, then - and this is important - pays off worthless IOU's that have interest attached with newer worthless IOU's so as to make it appear as if the trust fund is solvent. It's accounting magic!

The real wealth earned from hard working Americans, exchanged for worthless bonds, goes into the general fund of the Treasury where it is spent as fast as it is confiscated by politicians. Sadly, as everyone knows, you cannot spend and save the same money.

In fact, the Social Security trust fund is actually a white metal file cabinet at the Parkersburg offices of the Treasury Department's Bureau of the Public Debt in Martinsburg, WV. When the federal government takes the cash coming into Social Security, it writes the trust fund a bond on a laser printer located at the bureau. It is then stored in a three-ring binder and locked in the bottom drawer of a fireproof filing cabinet.

The entire retirement future of America is in that drawer. One bond is for $15.1 billion and another is just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds sitting in the binder. . .
Now do you see what is happening? Starting this year, in 2011, the SSA is taking some of those bonds out of its binder in the fireproof filing cabinet, and presenting them to the United States Treasury for redemption in dollars of the realm, in order to send them out as checks to retirees. And where will the Treasury come up with those dollars? Well, to start with, it will sell more of its own bonds in the private market, giving its IOUs to investors in exchange for their dollars, which it will use to redeem the SSA's bonds.

The demands for SSA payouts, however, will grow larger and larger as more and more of the Baby Boomer generation reaches retirement age. Eventually, they will overwhelm the ability of the Treasury to redeem the SSA's bonds. But even if the Treasury somehow manages to redeem all of SSA's bonds in that filing cabinet, what will happen when the filing cabinet is empty, and the SSA has run out of bonds to redeem?

At that point, the Ponzi scheme will be over, having ended in the same way that all such schemes do. The demands on it for payment will exceed the scheme's ability to take in revenues with which to pay out what is required to keep the scheme going.

So the question is: why do we put up with this masquerade, this huckster show, this flimflam operation? Because the politicians have for all these years denied the fact that Social Security is a Ponzi scheme, and now they are cowards to admit that they have all along been lying to us. Our current politicians are like rats on a sinking ship -- while the ship is now full of holes and taking on water, the rats keep gnawing away, pretending that nothing has changed, and that their gnawing has not really affected anything -- after all, the ship hasn't sunk yet.

It is time to demand of every candidate for national office that they come clean, and say exactly what they will do if elected to fix the Ponzi scheme of Social Security. In 2012, it will not be too late -- the Social Security trustees have suggested a number of changes that would allow the system to function properly, at least for the foreseeable future, and there are many other alternative suggestions out there as well.

The one choice we cannot make is to do nothing. If the current candidates for office refuse to give you a straight answer that is satisfactory, then refuse them your vote. It's that simple.

[UPDATE 09/07/2011: Here is a perfect example of the way that traditional politicians -- in this case, former Gov. Romney of Massachusetts -- try to belittle and demean those who dare to suggest that Social Security needs fixing, and to make them look like wild-eyed radicals who want to see retired folk all starve for want of sacred Government-sourced benefits which are their perpetual "right". It is this sort of attitude toward anyone who tries to bring up the subject for discussion and debate that will guarantee that Social Security goes bankrupt within our lifetimes. But if enough Americans will resist this kind of demagoguery, we can take the courageous steps necessary to phase out Social Security for all future workers, while still letting those who have vested expectations live out their dreams, and at the same time making it possible for those who come after to take charge of their own destinies without depending on the fickleness of politicians.]

No comments:

Post a Comment