For many baby boomers, it’s comforting to believe that part of the 12.4 percent Social Security payroll tax they (or they and their employer) have been paying is going into a $2.7 trillion Social Security Trust Fund designed specifically to ensure the tidal wave of boomers now retiring will be assured their benefits.
For those already on Social Security, the taxes they pay on a portion of their benefits has also been earmarked for the fund since 1983.
Economist and former professor Allen W. Smith, however, says there is no trust fund – and a number of elected officials, including former President George W. Bush, have acknowledged that.
“To make a long story very short, we are supposed to have $2.7 trillion in Social Security surplus, all earmarked for the baby boomers’ retirement, due to money generated by amendments approved in 1983,” says Smith, who has researched the topic for 15 years and is author of several books, including “The Looting of Social Security” and “Ronald Reagan and the Great Social Security Heist.”
“But there’s no money in the fund.”
Where did it go? Four administrations, from Reagan to George W. Bush, spent it on myriad non-Social Security efforts.
“Obama didn’t have a chance to use it – it was gone,” Smith says.
The 1983 amendments approved under Reagan generated revenue by accelerating Social Security payroll tax increases, allowing a portion of benefits to be taxed, and delaying cost-of-living adjustments from June to December.
According to the Social Security Administration website: “The surpluses are invested in (and the trust fund holds) special-issue Treasury bonds.”
But what’s actually sitting in the Trust Fund is non-marketable government IOUs – worthless, Smith says.
The fact has been publicly acknowledged by a 2009 Social Security trustees report; Sen. Tom Coburn; and President George W. Bush, who in 2005 said, “There is no trust fund, just IOUs that I saw firsthand … future generations will pay – pay for either in higher taxes or reduced benefits or cuts to other critical government programs.”
Recently, Speaker of the House John Boehner offered a sobering statement on ABC’s “This Week,” on Oct. 6, 2013: “…Ten thousand baby boomers like me (are) retiring every single day – 70,000 this week; 3.5 million this year. And, it’s not like there’s money in Social Security or Medicare. The government, over the last 30 years, have spent it all.”
Smith examines what needs to happen starting today.
· Get the secret out. The total cost of paying full benefits in 2010 exceeded Social Security tax revenue by $49 billion, and the gap between revenue and costs will become larger in the coming years. “On Sept. 27, 2000, I appeared on CNN Today to discuss my book, ‘The Alleged Budget Surplus, Social Security, and Voodoo Economics;’ the host did not take me seriously and asked me if I was ‘a voice crying in the wilderness,’ ” Smith says. “I’d quickly realized that he was right, with the exception of multiple statements by politicians and officials.”
· Get the AARP, NCPSSM and the media involved. The only way the government was able to pay full benefits in 2010 was to borrow billions from China, among other creditors. The public is repeatedly being told by government officials and leaders from the AARP and the National Committee to Preserve Social Security and Medicare that the trust fund has enough money pay full benefits until 2033. “I have tried engaging the leaders of these organizations with my research, but my attempts have been unsuccessful,” Smith says.
· Get the baby boomers engaged in protesting once again. Boomers are no strangers to taking to the streets to express their outrage. However, “I’m beginning to think that it’s going to take missed checks before the public gets raises their voices. Unfortunately, you just don’t know what you have until it’s gone.”