Tell Your Representative to Leave Social Security Alone

Ok, here is the dumbest headline the NYTimes has run in recent days:

Social Security Payouts to Exceed Revenue This Year

The system is expected to pay out more in benefits this year than it receives in payroll taxes, a tipping point toward insolvency.

Social Security is a federal government program. Government pays Social Security benefits by crediting bank accounts. It can continue to do this even if payroll taxes fall to zero. The payment is an entry on the balance sheet of the Social Security recipient’s bank. Please write your representative and tell her or him to stop this nonsense right now.

Just as Wall Street went after healthcare, you can be sure that it is now going after Social Security. They hype is just starting. It comes in waves—whenever Wall Street loses a bundle, it looks to government bail-outs. What happened after the bust? Wall Street got President Bush to talk about an ownership society, proposing to dismantle Social Security to give households “ownership” over their own personal retirement accounts. The nonsense was obvious at the time: Wall Street had a big hole to fill, so it wanted households to “invest” payroll tax receipts in Wall Street managed accounts. That way, the same bozos who had just wiped out private savings by inducing gullible households to invest in would be able to wipe out retirements investing in other Wall Street schemes. Wall Street lost that round.

But now it is back. Wall Street’s latest excesses managed to destroy the economy. Those who lost their jobs or who had to take paycuts are paying less in FICA taxes. Hence, Social Security’s “revenues” are lower. That is a big boon to Wall Street—which will now whip up hysteria about Social Security’s looming bankruptcy. This is to direct attention away from the true insolvencies—which is all of the major private banks. It is also designed to scare the population about Social Security: will I ever get my Social Security pension?

Make no mistake about this. Unless voters tell their representatives to keep their dirty hands off Social Security, the Democrats and Republicans will work out a “compromise” to turn it over to Wall Street—just as they did with health insurance “reform” in the HIBOB (health insurer’s bail out bill). This is priority number one for Wall Street now, since it has lost trillions of dollars and is massively insolvent. It needs more government bail-out and it wants your Social Security.

About L. Randall Wray 64 Articles

Affiliation: University of Missouri

L. Randall Wray, Ph.D. is Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute.

His research expertise is in: financial instability, macroeconomics, and full employment policy.

Visit: L. Randall Wray's Page

2 Comments on Tell Your Representative to Leave Social Security Alone

  1. Now that coverage of health care reform is fading from the news, it is being replaced with increased coverage of Social Security. That is appropriate, but most of the articles, currently being published totally ignore the most urgent problem facing Social Security. That problem is the fact that, every dollar of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike has already been spent by the government. The trust fund contains no real assets. It is empty!

    Most of the articles are written by well-intentioned people, who just amplify the misinformation that the AARP and the NCPSSM have been bombarding their members, and the public, with for years. The general message is that Social Security has $2.5 trillion in, good as gold, Treasury bonds stashed away in the trust fund that will make possible the payment of full Social Security benefits for decades to come without any action. The message may be comforting to those who believe it, but it is not true.

    I have been researching and writing about Social Security for more than a decade, and I have published four books on the subject. The hard fact is that every dime of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been spent on wars and other government programs. Every month, for the past 25 years, the total receipts from the payroll tax have been split two ways. First, benefits for current retirees are paid from the Social Security revenue. Then, all remaining Social Security revenue, not needed to pay that month’s benefits, are deposited into the general fund and become indistinguishable from other general fund revenue.

    Most workers think that at least some of the FICA taxes deducted from their paychecks will be saved and used to pay future Social Security benefits. But it doesn’t work that way. Not a single dime of payroll tax revenue has ever been saved and earmarked for the payment of future benefits. To put it bluntly, the government has “borrowed,” “embezzled,” or “stolen” every penny of the $2.5 trillion of surplus revenue that was supposed to be saved and invested. I consider this to be the greatest fraud ever perpetrated on the American people by their government. I have been trying to expose this awful truth for more than a decade, and some courageous people were trying to expose it even before I stumbled onto the scam in 1999.

    On October 13, 1989, Senator Ernest Hollings (D-SC) issued the following warning in a speech on the Senate floor.

    “…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.”

    A year later, on October 9, 1990 Senator Harry Reid (D-NV) made a similar warning in a Senate speech. He said:

    “…on that chart in emblazoned red letters is what has been taking place here, embezzlement. During the period of growth we have had during the past 10 years, the growth has been from two sources. One, a large credit card with no limits on it, and, two, we have been stealing money from the Social Security recipients of this country.”

    On January 21, 2005, David Walker, the Comptroller General of the GAO, tried to make it clear to everyone that the trust fund contained no real assets. He said:

    “There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”

    If anyone has any remaining doubts about whether or not the trust fund contains real assets, those doubts should be removed by the following statement from the 2009 Social Security Trustees Report:

    “Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”

    I urge everyone who cares about the future of Social Security to please visit my website at to learn more about Social Security and my efforts to expose the scam. Excerpts from my latest book, “THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” are posted on the site. Please feel free to download them.

    Allen W. Smith, Ph.D.
    Professor of Economics Emeritus
    Eastern Illinois University

  2. Dear Sir,
    Thank you.

    After paying into the insurance program for almost a half century it is now popular to relegate me to an inconvenient WELFARE recipient.

    You are one of the very few commentators that defend social security. I am so relieved to hear someone else saying what I have been thinking for several years now.

    The United States government has indeed stolen from the people. I just hope that us old folks can still muster enough political clout to protect ourselves.

    One other thought you might find usefull.

    I believe that Social Security was in large part created to prevent communism in this nation. ELECTED communism was a real threat at the time of the creation of the program.

    Social Security having now served its purpose, communism having for the most part failed as an ideology, the government now wants to abandon the principle of providing for the security of the old. Is it possible that this new posture toward abandoning the old and infirm could give rise to a new sentiment or movement back to communism? Maybe the government should think about that.

    Remember the old arguments? Why should a poor man’s child go hungry while a rich man’s cat drinks milk? We defeated communism not just by force of arms but by adopting programs like social security to prove that capitalistic democracy could provide not just profit but social justice as well.


    Please feel free to use any of these thoughts either paraphrased or exactly without attribution or claim of plagerism. I give them to you for your use, in hopes that you may more eloquently and effectively promote them if you choose.

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