The Money Party Deficit Reduction Scam and Social

Security
Michael Collins

Economic Populist, November 8, 2010

http://www.economicpopulist.org/content/money-party-deficit-reduction-scam-and-
social-security

President Obama announced the new National Commission on Fiscal Responsibility and
Reform on February 18 to address astronomical federal budget deficits. There has been
considerable speculation that this commission will target current and future benefits for
Social Security recipients to achieve its goals.

Why would this be the case? We need look no further than the treatment of major
retirement funds over the past 20 years to get the answer. When the mob needed cash, it
looted the Teamsters retirement fund. When large corporations or government entities get
in trouble, they effectively borrow from their employee retirement funds by delaying
required payments or otherwise gaming the programs. This provides a source of ready
cash, a quick vehicle to cover management errors, or jack up their bonuses.

Think of the Social Security Trust Fund (trust fund) as the most lucrative retirement fund
in the country, the ultimate pot of gold, and you'll immediately understand why it is that
for decades, big business has plundered the trust fund. How does this happen?

The Biggest Retirement Fund Rip Off Ever

Each year, federal taxes fall short of covering government expenditures. At the same
time, Social Security payments are more than enough to cover retirement benefit
payments. However, in order to keep funding the rest of its programs, the government
takes money paid into the trust fund in return for special issue securities from the Federal
Government. These securities (IOUs) are a promise to repay the trust fund, which will
then pay your benefits.

The Social Security payroll taxes paid by over 90% of US citizens are the premier means
of funding the national debt, well ahead of foreign debt holdings. The 2010 Annual
Report by the Board of Trustees noted that, "assets held in special issue U.S. Treasury
securities grew to $2.5 trillion" (p. 10).

If there were absolutely no anticipated problems honoring the promised payout of the
special issue securities, IOUs, this process might be acceptable. But mega deficits have
become habitual behavior in the budget process. Year after year, the government spends
money it doesn't have through the vehicle set up to tap your social security payroll taxes.
This entire process is presented as sound budgeting. In reality, it's a scam. Sure we'll pay
back the trust fund, no problem. But there is a problem and it is not due to Social
Security. It's due to excessive spending authorized by Congress that consumes the trust
fund annually, spending driven by those big corporations who benefit most and receive
payment through your payroll taxes.

Left alone, the Social Security trust fund can meet its obligations. The rest of the
government can't. The 2010 $1.3 trillion deficit makes that abundantly clear. The biggest
budget busters are the corporate entitlement programs: defense and homeland security
contractors; agricultural subsidies for large corporate farms; and the numerous companies
who receive large contracts through the federal budget. In addition, the endless wars in
Asia now account for $160 billion annually.

The corporate beneficiaries of those programs want money. They behave as though
they're entitled to it. Social Security revenues flow in at rates set by the board of trustees.
The receipts, sufficient to fund benefits, are then swallowed up by the true entitlement
programs that produce no offsetting revenues.

Ironically, as this budget scam comes to a head in the form of astronomical deficits due to
corporate entitlement programs, those who created the problem, the cash hungry
beneficiaries of government spending, declare a crisis in Social Security. It is a crisis that
they created.

Rigged Commission

The commission is a rigged panel. The White House selected eighteen members due to
report out recommendations for reducing the federal deficit by December 1. Of the
eighteen, thirteen are sure votes for higher payroll taxes and lower benefits and the
continued reliance on the payroll tax trust fund to keep budget busting programs in place.
There are five possible votes against tax increases and lower benefits, although the five
lack the cohesion of the thirteen likely to endorse higher payroll taxes and lower benefits.

It takes a majority of fourteen members to report recommendations to Congress. These

will be considered by the lame-duck session of the 111th Congress meeting in November
and December. Congress will debate the commission recommendations then take an "up-
or-down" vote. There will be no amendments allowed, just Yea or Nay on the entire
proposal. The all-or-nothing vote makes it easy for Congress to do the dirty work of the
Money Party. After the vote, members of Congress will bemoan what a tough decision it
was.

The president selected Wall Streeter Erskine Bowles as co-chairman along with former
Republican Senator Alan Simpson as the other co-chairman. Simpson has a history of
hostility to Social Security. The president hand picked four other members, two
Republicans and two Democrats. With the exception of former Service Employee
International Union president Andy Stern, this corporate heavy group is a solid vote for
ongoing trust fund subsidies for corporate budget items through increased payroll taxes
and reduced benefits. Stern may feel some pressure due to a leaked FBI corruption
investigation targeting his actions while president of the union. The anti Social Security
vote count among these presidential appointees looks like a solid five to one.
The party leaders in the House and Senate picked three members each for a total of
twelve members from the 111th Congress. With the exception of Sen. Richard Durbin
(D-IL), the Senate contingent represents small, highly conservative, mostly white states.

Appointed by Speaker-to-be John Boehner, the House commission members on the

Republican side reflect the Republican Senators in that they're from districts, mostly
rural, mostly white highly conservative House
districts. The three Democratic House members are
from urban, suburban, and rural districts where
Social Security is a priority.

The anti Social Security vote from the twelve

members of Congress is estimated at eight to four,
with the three Democratic House members plus
Senator Durbin as opponents of benefit cuts and
increased taxes.

On paper, it looks like a thirteen to five deadlock

on any increases in payroll taxes and reductions in
benefits. In practice, a rigged commission is supposed to look somewhat reasonable but,
ultimately, behave like a rigged commission. It is assured that one or more of the five
assumed pro Social Security members, for whatever reason, is already in the bag to
modify the program by raising taxes and reducing benefits. The vote to report any
recommendations on budget deficits and Social Security retirement should be fourteen to
four in favor, at least.

There will be little, if any, sentiment expressed by any on the commission against the
annual looting of the trust fund to pay the tab for corporate entitlements in the federal
budget.

What's This Commission Really Up To?

The commission may very well be a replica of the 1983 Greenspan Commission on
Social Security Reform. Greenspan was tasked with producing a plan to shore up trust
fund finances. As a result of changes put in place at that time, the trust fund rapidly
accumulated a surplus, currently at $2.5 trillion (in IOUs). This sounds like a positive
move until you factor in the federal deficits funded by enhanced trust fund revenues. The
total federal deficit accumulated between 1983 and 1996 is $2.8 trillion, a sum that could
not have been spent without the ready cash taken from world's largest retirement system,
Social Security.

We've reached another crisis point in the history of the ruling elite. Their ability to raise
money is dwindling. The dot.com bubble burst, now the real estate bubble is down for the
count. We have depression level unemployment. What to do? Raise payroll taxes; reduce
benefits, and continuing taking every available dollar of citizen payroll taxes in return for
IOUs that they can worry about later. Our payroll taxes for Social Security are "interest-
bearing securities backed by the full faith and credit of the United States" government.
We all know who that is, the Money Party. And we know how good their word is.

END

See: Statement to the Commission on Deficit Reduction - James K. Galbraith, June 30,
2010

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