This first happened in 1983 when President Ronald Reagan and the Democrats, who controlled Congress, did the same thing. The most significant cut, at that time, was in the subsidy paid to a worker’s surviving children in their pursuit of a college education. This was actually a tax increase for the middle class who, in the same year, also suffered additional increases in their income taxes when most of their tax deductions were cut as part of the Reagan "tax reform". Wealthier Americans were compensated by having their tax rates cut and having to pay FICA taxes on only a small part of their higher incomes. This had the effect of increasing revenues into the U.S. Treasuryalong withthe surplus of Social Security taxes, presumably, paid intoa Social Security Trust Fund - a carefully and well crafted political fiction. This was not one of Ronald Reagan’s finer moments, though I have always liked him for serving as a strong, positive, adult male role model for both myself (born: 1946) and then for my son (born: 1980).
The White House and the U.S. Congress, since 1935, have been telling all working Americans that all surplus FICA revenues are placed into and then, invested by, the Social Security Trust Fund for the purpose of funding future benefits. This means that all working Americans have been led to believe they are paying for their retirement and other benefits, in advance of receiving them. The truth is quite different. All annual surpluses have always been taken and used to reduce the federal budget deficit. This is the only time when the U.S. Government "borrows" money, the deficit is reduced and the national debt does not increase, as a result.
For example, the 1999 Clinton $150 billion budget surplus was created entirely by the $300 billion taken from the 1999 surplus of Social Security revenues. This means that, in 1999, the U. S. Government actually had a $150 billionbudget deficit. The 2000 budget surplus of $450 billion was also subsidized by another $300 billion from the 2000 surplus of Social Security revenues. Every U.S. President, starting with FDR, has perpetuated this myth about Social Security.
In 1983, Ronald Reagan was the 1st, with the help of the Democrats in Congress, to ever cut benefits paid for in advance by those expecting to receive them. Historytriedtorepeat itself in 2005 whenGeorge W. Bushwanted to "privatize" the surplus into individual retirement accounts.
If the annual Social Security surplus has been a constant $300 billion, then in any 10 year period $3 trillion would have to be in the Trust Fund, if not either taken or invested. If invested at a 6% annual rate of return, the Trust Fund would be worth about $4 trillion for just that 10 years. But Social Security has been operating for nearly 70 years with a surplus produced and taken every year. Democratic Party spokesman and commentator, Pat Caddell, said the Social Security Trust Fund should be worth about $1 trillion. This is yet another instance of the Democratic Party, their federally funded think-tanks and spokespersons misleading the unsuspecting minds of most Americans. The truth is: There is no Social Security Trust Fund, worthy of the name, and even if it did exist, it would be empty. This situation, when more fully understood, disgraces the memory of all elected to federal office since 1935 when the Social Security Act was 1st enacted.
The savings & loan scandal, between 1986 and 1992, resulted in the loss of $800+ billion or1/3rd of allavailable working capital and came in the aftermath of the Reagan Administration’s"reform" of federal regulations applied to the nation’s banking industry. This, in turn,helped to cause the recession of the late 1980's and early 1990's and pales in comparison to the wealth lost by the taking of Social Securitysurplus monies.
Interestingly, Alan Greenspanthen wanted to increase FICA taxes and cut future benefits, yet again, as a means to safeguard the continued growth in the nation’s economy. What about safeguarding the Social Security system itself? By now, monies in the Social Security Trust Fund should be $10s of trillions and could be used to drive our expanding economy rather than having to cite it as a hindrance. If nothing else, there would be more Social Security recipients with more money to spend and to invest with the result of stimulating economic growth and providing themselves with a middle class standard of living instead of being "squeezed out" to become part of America’s new and growing class of working poor.
Boomers (born 1946-1964) have paid into Social Security their entire working lives with the assurance that their future benefits were being self-funded, in advance. Now we are being told something entirely different. What Alan Greenspanreally suggested wasthat the working middle and lower classes must nowget yetanother tax increase to subsidize the excessive tax cuts recently provided to wealthy Americans. FICA revenues have always produced a surplus and none of these "borrowed" funds have ever been repaid. Nor will they ever be, if the White House and the Congresshave their way. And they probably will.
Copyright Edward J. Bradley 2006
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