Pres. Bush’s words to the Department of Commerce (via Josh Marshall):
Some in our country think that Social Security is a trust fund -- in otherwords, there's a pile of money being accumulated. That's just simply not true. The money -- payroll taxes going into the Social Security are spent. They're spent on benefits and they're spent on government programs. There is no trust. We're on the ultimate pay-as-you-go system -- what goes in comes out.
Once again, we must ask, “Is the President lying or is he incompetent?” In 1983, a Social Security Reform commission, headed by Alan Greenspan, anticipated the same funding shortfall then that we are hearing about now. Namely, around the year 2018, there will be more SS benefits to be paid than SS payroll tax to be received. To address this issue, the Greenspan Commission suggested raising payroll taxes such that the amount collected each year between 1983 and 2018 would be in excess of the amount of benefits paid. The excess would be used to purchase US Treasury Bonds. The plan was, that when the balance tipped in the other direction, the bonds could be redeemed to pay for benefits exceeding tax revenue. Congress passed and President Regan signed the amendments into law. Today there is over 1.5 trillion dollars in the Social Security Trust Fund. The Social Security Trustees tell us, for the next decade and a half we’ll continue to add to this trust fund. By 2018 only the interest on the bonds in the Trust Fund will be needed to cover funding shortfalls, and the principle won’t need to be touched until ten years later.
Kevin Drum, at The Washington Monthly, warned of this deceptive tactic. He’s a pro, and thus his account is infinitely more reliable and comprehensible than mine. He even adds a little class warfare twist in showing how the rich are skipping out on a debt owed to the poor and middle class.
Payroll taxes are paid mostly by the middle class and the poor. Income taxes are paid mostly by the well off.
So: for 35 years the middle class and the poor pay excess payroll taxes and the well off get a break on their income taxes. However, for the following 24 years the middle class and the poor get a break on their payroll taxes and the well off finance it by paying higher income taxes.
Now, this may sound like a dumb idea to you, but that was the deal. The bottom 80% take it on the chin for a few decades, followed by a couple of decades in which the well off get socked.
But suppose — as conservatives are laying the groundwork for — that Bush decides the trust fund is a mirage, just a giant IOU from one part of the government to the other. And as part of his "reform" plan he proposes a complex scheme that, when stripped to its essentials, entails doing away with the flim flam of that illusionary trust fund and the higher income taxes it will require when 2018 finally rolls around. What would that mean?
It would mean that the middle class and the poor got suckered into overpaying their taxes for three decades, and then when the bill came due the well off ducked out of their end of the bargain.
So, what is the question we should be asking Pres. Bush when he babbles that the Trust Fund doesn’t exist? Josh Marshall, of Talking Points Memo, suggests this:
US Treasury bonds are owned by Americans, foreigners, individuals, pension funds, everybody under the sun. Most of the president's personal wealth appears to be tied up in them. They're universally considered to be the safest investment in the world. George W. Bush is the President of the United States. So the question is to him. Are the Treasury notes in the Social Security Trust Fund backed by the full faith and credit of the United States every bit as much as the bonds everyone else owns? (emphasis added)
Oh, by the way, Pres. Bush personally owns T-bills valued between 4.50 million and 9.25 million dollars. Does he consider these worthless IOU’s?
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