Editorial: Which Senate candidate is right about Social Security?

We find Democratic Senate candidate Jacky Rosen’s sanguine and naive response to the recent 83rd anniversary of Social Security Act disturbing to say the least.

Rosen put out a press release touting the fact she had met with a senior citizen group in Henderson to mark the anniversary.

“Social Security successfully lifts millions out of poverty and helps ensure economic security for Nevada seniors when they retire after a lifetime of hard work,” Rosen was quoted as saying. “These are benefits our seniors have earned, and Nevadans deserve another Senator who is committed to protecting and strengthening Social Security. Unfortunately, Senator (Dean) Heller is yet another Washington politician who wants to cut programs like Social Security and Medicare to pay for tax cuts for his ultra-wealthy donors.”

She paid no heed to the fact the so-called Social Security trust fund that she apparently wants to “save” is not going broke, but already is broke.

According to an article in The Hill by Merrill Matthews, this year Social Security must pay out more money than it receives from the payroll tax of 12.4 percent on current paychecks. This is the first time that has happened since 1982.

You see that trust fund of $2.9 trillion has already been spent and replaced with what are essentially IOUs. “Thus the government must borrow the money — or raise taxes — to redeem its IOUs so Social Security can pay benefits,” Matthews writes.

If some reform is not instituted in a few years benefits will have to be cut to 75 cents on the dollar or less.

Some have suggested cutting benefits for the rich and raising the retirement age. Others have suggested allowing younger workers to invest a portion of their payroll tax in private accounts.

Rosen specifically chastised her Senate opponent, Republican incumbent Heller, for having supported partial privatization in the past. Historically, such private accounts would likely pay retirees far more than Social Security ever can.

Rosen’s press release also screeched, “Sen. Heller is an architect of the reckless Republican tax bill that will add nearly $2 trillion to the debt and put Medicare and Social Security at risk,” paying no heed to the fact tax revenue has actually increased since the tax bill was enacted and the increased deficit and debt are due entirely to continued excessive spending by both political parties.

According to The Wall Street Journal, in the first 10 months of fiscal year 2018 revenues were up $26 billion, but spending increased by $143 billion.

No Band-Aid will stanch the hemorrhaging at the Social Security. It is fundamentally flawed. Eight decades ago when the Social Security Act was passed there were 40 workers for every retiree. The ratio is rapidly approaching 2 to 1.

Social Security was and is a Ponzi scheme. That’s when early investors are paid with money invested by newcomers. When the newcomers stop coming, the scheme goes bust.

Stephen Moore wrote an op-ed in Investor’s Business Daily a couple of years ago explaining, “From the moment Franklin Roosevelt created Social Security in 1935, the system was set up as a classic Ponzi scheme.”

Moore said there are options to fix the program, such as giving younger workers the option of partial privatization. For example, giving them the option of putting 10 percent of their 12.4 percent payroll tax dollars into an individual account. Moore estimated, “At historic rates of return, this would give workers a 7% return per year, which would let them retire as millionaires after 40 years of work. They’d receive two to three times more than Social Security promises.”

Or we can do like Rosen suggest — just wait for the whole darned thing to collapse.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

The Social Security Ponzi scheme is running out of steam

You can’t say we didn’t warn you.

While most news accounts said Social Security will dip into its trust fund this year for the first time since 1982, The Hill’s Merrill Matthews points out that there is no trust fund, because the federal government has borrowed that money and spent it.

Matthews writes:

Historically, workers have paid in more than was needed to cover benefits, allowing the trust fund to grow to $2.9 trillion — at least on paper.  However, the federal government has borrowed the trust fund surplus to cover other government expenses, depositing interest-bearing IOUs in its place.

If Social Security must pay out more than it receives, which the trustees say will happen this year for the first time since 1982, the government cannot draw from other assets because it doesn’t have any.  Indeed, the federal government has to borrow hundreds of billions of dollars every year just to cover its current expenses.

Thus the government must borrow the money — or raise taxes — to redeem its IOUs so Social Security can pay benefits.

A certain prescient politician warned us in 1990 while standing in from of a sign reading “embezzlement”:

“It is time for Congress, I think, to take its hands — and I add the president in on that — off the Social Security surpluses. Stop hiding the horrible truth of the fiscal irresponsibility that we have talked about here the past two weeks. It is time to return those dollars to the hands of those who earned them — the Social Security beneficiaries and future beneficiaries. … I think that is a very good illustration of what I was talking about, embezzlement, thievery.”

That was Harry Reid. The same Nevada senator who years later said, “Unfortunately, despite decades of success, many Republicans continue to threaten the future of Social Security. Republican leaders routinely exaggerate the financial challenges facing the program in an effort to create a false sense of crisis. … I have spent my career fending off attacks against Social Security.”

Actually, Social Security is and always has been a Ponzi scheme, depending on future “investors” to pay off the original “investors.” That worked so long as there were 40 workers for every retiree, but does not work so well when the ratio of workers to retirees nears two-to-one.

Embezzlement?

 

 

 

Ponzi Nation: Taxation without representation

So what should our children and grandchildren say when they are told their taxes are going up to pay the interest on the $17 trillion in debt this nation has rung up?

How about: “There’s the graveyard. They borrowed the money. Collect from them.”

Maybe it is time to default. Full faith and credit? No one has any faith we’ll ever be able to repay and our credit rating is rapidly declining.

Not only is our debt unsustainable, it is unfathomable, because the feds have been cooking the books.

Just like the Nevada public employees pension program, which claims to have $10 billion in unfunded liability but really has $40 billion, the federal debt is not just $17 trillion and growing by $1 trillion a year.

WSJ illustration

According to a column in The Wall Street Journal this past fall by Chris Cox, a former chairman of the House Republican Policy Committee and the Securities and Exchange Commission, and Bill Archer, a former chairman of the House Ways & Means Committee, “The actual liabilities of the federal government — including Social Security, Medicare, and federal employees’ future retirement benefits — already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.”

For the government to actually pay as we go on all spending and entitlements would require revenue of $8 trillion a year, Cox and Archer calculate. To cover this, they say, confiscating every dollar of income from Americans earning more than $66,000 a year, plus all of the corporate taxable income in the year before the recession, that of course is less now, wouldn’t be enough.

That $1 trillion tax hike Harry Reid wants would hardly cover the nut.

Another sad part of all this is that at the same time we are saddling the next generations with an impossible tax burden, we are simultaneously hobbling them with inferior education, scant employment opportunities and piles of college loan debts.

According to the Department of Labor, in July only 33 percent of 16- to 19-year-olds without any disability had a job. Only 65 percent of able-bodied 20- to 24-year-olds held down jobs.

According to Pew Research data,  63 percent of 18- to 31-year-olds had jobs in 2012, down from the 70 percent in 2007. Fully 36 percent of these so-called Millennials were living in their parents’ homes in 2012, compared to 32 percent in 2007 and 34 percent when the recession officially ended in 2009.

It’s been 30 years since “A Nation at Risk,” was published, declaring, “If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war.” Little, if anything, has changed since.

On top of this, as if this camel needed another straw, young people will have to shoulder a disproportionate share of insurance costs under ObamaCare, because the law states no age group will pay more than three times the premiums of another age group, even though older people require five times as much expense as younger people.

To contort Churchill: Never have so many asked so few to do so much with so little.

I am ashamed.

Pew Research graphic

IBD graphic