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The Truth about Social Security
(No equity, no assets in trust funds, no trust - Plenty of Debt)
The "Social Security Act of 1935", was created to provide an equity based, retirement safety net for low-wage earners and for other purposes. Old-age and Survivors Insurance (OASI) has evolved into a scheme that penalizes workers by exacting two income taxes on wages. The revenue confiscated by two income taxes, Federal Income Tax (FIT) and Federal Insurance Compensation Act (FICA), is immediately distributed like confetti, with little regard for the rights and needs of workers or beneficiaries. The former role, as a primary safety net for low-wage workers has been largely displaced by welfare programs such as Supplementary Security Income (SSI), Medicaid, and others.
OASI is now largely a "pay-as-you-go" system with today's taxpayers paying for the benefits of today's retirees. The Social Security Administration (SSA) reports that, presently, Social Security collects more in taxes than it pays in benefits. Money not needed to pay today's benefits is invested in special-issue Treasury bonds.
There is no valid reason that the Social Security retirement program cannot be converted to an equity-based entitlement program whereby participants are insured to get a safe return on their investment, an asset that may be passed on to heirs. To do that, the phony Old Age & Survivors Insurance (OASI) Trust Fund, loaded with IOU’s would need to be replaced with a real Trust Fund, with real assets one that comprises sound economic principles of compounding asset value instead of compounding government debt.
Currently, the Social Security retirement program provides virtually free benefits to many spouses and survivors that paid little or no Federal Insurance Contributions Act (FICA) income taxes. Millions of beneficiaries are unaware that their free or subsidized benefits are being confiscated from their own children and grand children, or someone else’s. They are also unaware that the words: “Old-age Insurance” and “ Insurance Contribution” were deliberately chosen to conceal from the public the fact that FICA is nothing more than a second income tax on wages. The US Constitutional authority for two direct income taxes on wages is questionable, to say the least. see Social Security Freeloaders and The Truth about Social Security at Debtism.com (my other website) and The Ugly Truth about Social Security
Examinations of the law and dubious government accounting practices that are embedded in the program reveal significant conflict between purpose and result. A review of the basic legal structure contradicts many of the public myths and exposes defects in funding, accounting, determination of benefits -and- government mishandling of entrusted funds that have resulted from abuses of the political process. To make the Social Security retirement program solvent, two laws must be changed.
First: OASI surpluses must be invested in real appreciating assets, instead of bankrolling other government programs with FICA cash and continuing to be a depository for a monumental amount of government IOUs.
Second: The Internal Revenue Service rule that provide employers with a “business expense wage deduction”, that includes ALL FIT & FICA taxes removed from employee paychecks must be changed to disallow the deduction of employee FIT & FICA income taxes as Business Wage Expenses.
The government accounting office (GAO) reports the Old-Age & Survivors, and Disability Insurance (OASDI) trust funds owes $13.4 trillion more than projected benefits exceed projected revenue. “Social Security is officially solvent so long as the trust fund balance is positive.”
"Social Security can be made permanently solvent only by reducing the present value of scheduled benefits and/or increasing the present value of scheduled tax revenues. Other changes to the program might be desirable, but only these changes can restore solvency permanently."
http://www.mindfully.org/Reform/2007/Social-Security-Problem24sep07.htm
The public is repeatedly told by the Social Security Administration (SSA) that the OASI Trust Fund of $1.8 trillion (2007), invested in non-marketable, special government debt instruments is projected to grow until 2017. Further, SSA projects the OASI trust fund assets will not be exhausted until 2042.
The public should gain little comfort in knowing the OASI Trust Fund will be growing for another ten years; when they learn the Trust Fund is a ledger of DEBT instead of a respository of ASSETS, they should become outraged!
2006 Old-Age and Survivors Insurance Trust Fund
In 2006, the Social Security Administration (SSA) reported gross "Old-Age and Survivors Insurance (OASI)I trust fund revenues of $642.2 billion, expenses of $460.9 billion and a surplus of $181.3 billion. The OASI trust fund reportedly grew from $1663 billion in 2005 to $1844.3 billion in 2006. Starting in 2017, Social Security will pay out more than it takes in from tax revenues. The fund is projected to become exhausted in 2042." The OASI trust fund is invested in non-marketable, special government debt instruments.
The Social Security Administration's claim that the Old-Age and Survivors Insurance (OASI) trust fund (currently $1.9 trillion) are invested in assets that will continue to grow until 2017 is nonsense.The so-called OASI trust fund is not a real trust fund. It is a ledger of debt consisting of non-marketable US Treasury IOUs, which can only be redeemed by higher taxes or more borrowing.
The 2006 gross OASI revenues of does not reflect $176.9 billion of Business Wage FICA/OASI Expense Deductions nor the $41 billion the US Treasury refunds to low-wage employees through Earned Income Tax Credits. It also counts $91.8 billion of interest income (IOUs) that is offset dollar for dollar by Treasury intra-governmental debt. Include those items and the rosy scenario becomes a fiscal nightmare!
From a cash flow perspective, the Social Security Administration gross surplus of $181.3 billion is grossly overstated. The actual cash FICA (OASI) revenue to the US Treasury and the OASI trust fund was only $332.5 billion. Cash OASI expenses of $460.9 billion exceed net revenues by $128.4 billion.
What kind of accounting magic can convert an estimated $128.4 billion deficit into a $181.3 billion surplus? That’s a $309.7 billion dollar "Question"
The annual interest of approximately $95 billion (2007) on the OASI Ledger of Debt will be paid with more non-marketable IOUs. If defective policies are not quickly corrected; retirees a few years from now will have to make the choice of keeping a pet or eating its food.
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