The GOP Attack on the Social Security Trust Fund and FDR’s Legacy

[Time for change]

In a speech during his first run for the Presidency of the United States, Franklin Delano Roosevelt noted that there “came a growing feeling that government was conducted for the benefit of a few who thrived unduly at the expense of all”. Cass Sunstein, in his book, “The Second Bill of Rights – FDR’s Unfinished Revolution and Why We Need it More Than Ever”, describes how FDR’s thinking progressed from the idea of the ‘few thriving at the expense of the many’ to government responsibility to ensure that everyone has an opportunity to make a decent life for themselves:

Roosevelt emphasized two rights that would be central to the new system. The first was the “right to life”, which means also the right to make a comfortable living… The second right was to property, “which means a right to be assured, to the fullest extent attainable,” of the safety of savings. This safety was necessary to assure people that they could live through situations that “afford no chance of labor: childhood, sickness, old age.”

FDR’s efforts on this front led to one of the most successful and popular programs in U.S. history – The Social Security Act of 1935. Prior to the passage of the Social Security Act, poverty among the elderly in the United States was about 50%. Elderly poverty has been proven to have an inverse relationship (See Figure 1) to Social Security expenditures, and by 2000 it was around 10% (though it increased substantially during the George W. Bush administration). There is no question that poverty in the elderly would skyrocket without Social Security. And that is the reason why no current day American politician will admit to doing anything to put Social Security at risk.

The Social Security Trust Fund is the system that accumulates money, by means of payroll taxes, to be paid to Social Security beneficiaries in order to enable the disabled and the elderly, as FDR intended, to enjoy a reasonably comfortable retirement. It became the center of a great deal of controversy during the administration of George W. Bush, due to Bush’s efforts to privatize the system. Thom Hartmann, in his new book, “Screwed – The Undeclared War Against the Middle Class”, explains how the Republican Party, beginning with Ronald Reagan and on through George W. Bush, has attempted to destroy the Social Security System. Social Security has been a major target of GOP hatred since its enactment in 1935, to the benefit of the wealthy few and the detriment of the great majority of American citizens.


Ronnie Reagan’s bait and switch ploy

As you can see from this chart, under FDR’s administration the tax rate for the highest tax bracket (top marginal tax rate) climbed to 94% by the time of his death in 1945. It then remained at or above 70% until 1981, with the Presidency of Ronald Reagan, who cut it to 28% by the time he left office eight years later. The effect on our national budget of this tremendous windfall for the wealthy was partially ameliorated by a reduction in the top tax bracket from about $215,000 when Reagan took office to about $30,000 by the time he left office. this amounted to a substantial increase in taxes for the middle class, notwithstanding the reduction in the top marginal tax rate. And not only that, but the regressive payroll tax was increased during the Reagan administration, and Social Security benefits were taxed for the first time, thereby constituting an additional tax burden for the middle class and the poor. As Thom Hartmann says, it was simultaneously the largest income tax cut (on the wealthy) and tax increase (on the poor and middle class) in our country’s history. Thus, despite all the bragging about Ronald Reagan’s tremendous tax reductions, the primary effect of his tax policies was to redistribute a massive amount of money from the middle class and the poor to the wealthy – not to mention a skyrocketing national debt.

Then, finding it difficult to run the government without adding to his record budget deficits, Reagan consulted with Alan Greenspan to find a way. Greenspan’s brilliant idea was to borrow the needed money from the Social Security Trust Fund. By doing that, so Greenspan claimed, the borrowed money would not have to officially be added to the national deficit, since it was simply a matter of the federal government borrowing money from itself.


Having his cake and eating it too

I am not able to think of a real life situation that better exemplifies ‘having your cake and eating it too’. Greenspan’s plan involved taking money out of the Social Security Trust Fund and replacing it with Treasury bonds (as an I.O.U.), in order to obtain money to run our government without the government having to borrow any more than Reagan had already borrowed. It was a win-win situation for him because he obtained the money he needed presumably without having to borrow it from an external source, and yet the source that he did borrow it from (the Social Security Trust Fund) presumably didn’t suffer because the money was replaced by secure Treasury bonds. Kind of like a magic trick, or as George H.W. Bush would say, “voodoo economics”.


“There is no trust fund – just IOUs”

Central to George W. Bush’s scheme to privatize Social Security is convincing the American people that the system is in grave trouble and needs something done to save it. After all, who would want to tamper with one of our country’s most popular programs unless it was in grave danger? Thus said George Bush in a 2005 speech:

A lot of people in America think there is a trust – that we take your money in payroll taxes and then we hold it for you and then when you retire, we give it back to you… But that’s not the way it works. There is no trust fund – just IOUs that I saw firsthand…

OK, Mr. Bush, but that’s not what your Party said when your ideological soul mate, Ronnie Reagan, replaced the money in the now non-existent (according to you) trust fund with Treasury bonds. Mr. Reagan claimed that the solvency of the trust fund was maintained with the Treasury bonds, which have the full power and prestige of the U.S. government behind it. But now that you want to hand OUR Social Security program over to your wealthy friends and backers, all of a sudden it’s not even a trust fund any more. Would you care to explain how that happened?

Of course, the truth of the matter is that the trust fund IS solvent because of those Treasury bonds, since they are generally considered to be a very safe investment. However, once we get to the point, which is not very long in the future, when we need to dip into the trust fund in order to pay new retiring beneficiaries, our government will have to back up those Treasury bonds with real money, and in order to come up with that money (since we are currently in debt up to our heads) it will have to either borrow it or raise taxes or both. And maybe when that happens our corporate media will finally start asking how we ever got to this point.


How might privatization affect our Social Security program and its Trust Fund?

The primary principal of George Bush’s privatization scheme for Social Security is to divert some of the money that would normally go into the Social Security Trust Fund into personal retirement accounts, at the discretion of young people who are currently paying into the system. The rationale for this is that the diversion of funds from the Trust Fund to private accounts will save the system by resulting in an increased rate of return for the diverted money.

There are several serious problems with this scheme that its advocates won’t talk about. First, as Paul Krugman explains, not only is it unrealistic to expect the investments in the private accounts to yield the rate of returns necessary (6.5 to 7% above inflation for the next 75 years) to result in a net gain to the system, but it is mathematically impossible unless the economy grows much faster than expected. And of course, a substantial fraction of the money diverted to the private accounts will be used to pay profits for the corporations that handle them. I’m talking about profits needed to pay for their overhead, lobbying, “donations” to politicians, and multi-million dollar salaries for their CEOs.

In other words, the whole idea of the program is to divert funds from OUR Social Security program into the hands of wealthy corporations and individuals. Even IF the returns on those accounts live up to the promises of George W. Bush – which is extremely unlikely – the whole scheme cannot possibly do anything to help people who are currently retired or who will be retiring in the not very distant future. Therefore, the system which they have paid into for several decades will be put at risk, with no possibility of benefit to them. And finally, the whole scheme subverts the main purpose for which the Social Security Act was devised – which is to reduce poverty and ensure a comfortable retirement for people after a lifetime of work.


What is their motive for doing this?

I don’t necessarily agree with Thom Hartmann’s full explanation for the motives behind Bush’s privatization scheme. We both agree that a major motive is to enrich the Bush administration’s wealthy friends and supporters. That should be obvious to anyone who is familiar with our current Social Security system and Bush’s plan to destroy it, as well as to anyone who is familiar with George W. Bush, period.

But Hartmann adds two additional explanations. One is that by destroying our Social Security program before our government has to begin buying up the Treasury bonds that Reagan used to borrow from the Trust Fund in the 1980s (which will increase our national debt even further), the fraud perpetrated by Reagan will remain undiscovered. And thus, the reputations of Reagan and the “supply side” economics that he perpetrated on us will remain intact.

Hartmann’s other explanation of their motives is that, by giving young people the option of partially avoiding having to pay into a system that helps to support elderly retired persons, the Republican Party can re-capture some of the youth vote that it has lost in recent years. In other words, they are playing off two different demographic groups against each other.

I don’t disagree with either of these explanations. It’s just that I prefer to stick to the simpler and most obvious explanation – the diversion of OUR money to the wealthy.


George Bush’s Social Security privatization scam in perspective

The roots of Bush’s Social Security privatization scheme go back to the hatred of FDR and his programs by an elite class of wealthy individuals who have beliefs that are …. well, the beliefs of today’s leaders of the Republican Party. FDR first campaigned for President during the midst of the Great Depression, on a platform that advocated the need for government to level the economic playing field in our country and thereby lend a helping hand to the least fortunate among us. As he said in accepting his second nomination for the Presidency of the United States:

Necessitous men are not free men. Liberty requires opportunity to make a living – a living decent according to the standard of the time, a living which gives man not only enough to live by, but something to live for. For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor – other people's lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.

This was no mere campaign propaganda. Roosevelt deeply felt the need for government to help people, and he vigorously acted upon his beliefs. And that is why he is widely regarded as the second greatest President in the history of our country, while at the same time being venomously hated by many of today’s Republicans.

Consequently, since the onset of the Reagan presidency in 1981, the Republicans have pushed, with much success, for the abolishment of the programs, policies, and philosophy that constitute FDR’s legacy. They have done this through a massive distribution of the tax burden, through subsidies to wealthy corporations such as those in the energy industry, by limiting the freedom of labor unions to function, and by de-regulating as many industries as they can. The result has been an increase in poverty and a greatly widening wealth gap that is manifested by an economy in which CEOs average 431 times the annual salary as their average employee.

These are just some of the starkest indications of the GOP attempt to destroy FDR’s legacy, the foundations for which can be briefly and vividly summarized by these thoughts of his:

I am getting sick and tired of these people on the local relief rolls being called chiselers and cheats… I have never believed that with our capitalistic system people have to be poor. I think it is an outrage that we should permit hundreds of thousands of people to be ill clad, to live in miserable homes, not to have enough to eat; not be able to send their children to school for the only reason that they are poor.

The attempted attack on Social Security is one more egregious and surreptitious attempt to destroy FDR’s legacy and revert back to the Gilded Age of the Robber Barons. FDR is probably rolling over in his grave.

I fervently hope that we can now begin to reverse the attack on FDR’s legacy, now that we have a Democratic Congress and an apparent mandate from the American people. I hope that our new Congress will not be shy about invoking the name, the principles, and the policies of FDR, thereby rehabilitating the dreaded “liberal” label and getting our country back on the road to democracy and the equality of economic opportunity.

[Trajan]

1. What a GREAT thread .....

Kudos to you ....

I am a BIG fan of FDR and his legacy .... and what it meant to be a 'citizen' in America ....

Slowly they chip at it ... and they wont finish until Chase and Mellon finally kill off the spirit of Smedley Butler and instill their fascist regime ....

Has it already happened ? ...

K&R .... Rarely do I do that ...

[Time for change]

25. Thank you trajan -- I believe that it is on the verge of happening

A combination of complacency by the American people and a corporate news media that aggressively tries to make right wing talking points seem normal has taken us to the verge of Fascism IMO:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=364x2269258

But November's elections were quite a setback to them. Now, if our Democratic leaders decide to use this window of opportunity it take our country back, I belive it will be done.

[katsy]

2. Great summary,

Here's a tidbit I found a while ago about ths which supports your analysis.

http://www.informationclearinghouse.info/article3977.htm

[Time for change]

27. Very nice article -- That just about says it all

Everything Bush (or rather, his handlers) do is calculated to enrich their wealthy friends at the expense of everyone else. Few of our corporate media, with some notable exceptions, are saying anything about it. Same thing with the Iraq war. Let our economy and Iraq go to hell, as long as it allows their friends to pull in massive amounts of money.

Hopefully our new democratic Congress will get to the bottom of this :mad:

[Jim Sagle]

3. 5th K & R - this is now a GREATEST thread, bayyybeeee!!!!!

[EST]

4. Good stuff, but not quite true.

Although it may have happened before, Lyndon Baines Johnson, in 1964, began the process of folding SS funds, at least as regards accounting methods, into the general budget in order to make the funds being spent on the ill-advised Viet Nam adventures look like a smaller expenditure amount. Since "investing" (borrowing) social security funds in government securities was already common practice, the net effect was similar to that which has been going on ever since.

I remember, in the mid to late sixties when I got my first real, professional job, the top income tax bracket was 91%. This was not nearly as bad as it sounds, as tax loopholes and scams were abundant and nobody with an ounce of gumption was about to pay that kind of money.

[papau]

8. LBJ used "unified budget" PR but first offical one was Nixon's 1969 budget

"Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself. "

http://www.ssa.gov/history/InternetMyths2.html

[TahitiNut]

9. The Federal Budget for FYE 1969 was prepared by the Johnson administration.

The budget for the first term (9 months, actually) of any administration is prepared by the prior administration - even though the incoming administration changes the spending priorities.

The on-budget (not including various trust funds) federal deficits during the Viet Nam Era were miniscule compared to Reagan/Bush, Bush/Quayle, and Bush/Cheney ... the three most profligate administrations in recent history.




Furthermore, the amount of 'spin' gained by citing a "unified budget" was nothing compared to the post-1984 OASDI rate changes to build up an enormous trust fund balance to offest the retirement of the baby boom generation - the first generation to pay, not only for the benefits of the prior generation but their own generation.

[papau]

16. True - as "unified" budget is just spin and presentation, Nixon could have

changed the presentation at anytime - granted that the actuall spending was set by LBJ.

My only point is that the change in Presentation to a Unified Budget is the basis for folks saying someone started a theft of Social Security Assets - and a presentation change does nothing real so the "theft of Social Security Assets" is a myth.

It is the Trust Fund investment in government bonds, which helps the GOP finance the tax cuts for the rich, that is the problem.

[Time for change]

20. Great graphs

They show that as the national debt skyrocketed under Reagan and the Bushes, an increasing proportion of it was held by federal government accounts. I assume that a large proportion of that represent borrowing from the SS Trust Fund? If so, that is a very clear graphic demonstration of Hartmann's main points.

[TahitiNut]

21. (Thanks!) Yes, "government accounts" includes the Social Security Trust Funds.

Until the late 80s, the Social Security Trust Funds were a plurality of such reserves but by no means all of such accounts. Since the Social Security Trust Funds have accumulated huge reserves to offset 'boomer' retirements, they've become the predominant component by far.

[TahitiNut]

35. I should also note that FY1969 ended in June 1969, not September.

Until 1976, federal fiscal years ended in June. In 1976, FY1977 began on October 1 and July through September was a "transition quarter" between FY1976 and FY1977.

[Lasher]

10. LBJ came up with the idea of including Social Security in the 'unified budget'

However, Social Security was not 'on-budget' until 1969 - Tricky Dick's first year in office.

This change took effect for the first time in the President's budget proposal for fiscal year 1969, which President Johnson presented to Congress in January 1968. This change in accounting practices did not initially put the President's budget proposal into surplus--it was still projecting an $8 billion deficit. However, it is clear that the budget deficit would have been somewhat larger without this change (it is difficult to say how much larger because this change was mixed-in with the other legislative, budgetary and fiscal policies the President was urging Congress to adopt). In early 1969--just five days before leaving office--President Johnson sent his 1970 budget message to Congress, also using the revised accounting procedures. At this point, a year later than his initial estimate, he was projecting the budget for 1969 to be in a net balance of $2.4 billion. (The fiscal year 1969 began on January 1, 1969, even though the President had released his FY 1969 budget almost a year earlier.)

The FY 1969 budget would not be implemented by President Johnson; it would instead be presided over by President Nixon, who took office on January 20,1969. This was 20 days into the 1969 fiscal year. When President Nixon took office, he too adopted the unified budget approach, and it was used by all Presidents thereafter until 1986.

<snip>

So, by 1986, Social Security was technically off-budget, but it was still being used in the deficit calculations. Absent other legislative change, this would have continued until 1993. However, in the Omnibus Budget Reconciliation Act (OBRA) of 1990 the law was changed to stop the use of the Trust Funds for any function in the unified budget, including calculations of the deficit. One sub-part of OBRA 1990 was called the Budget Enforcement Act (BEA), and it was this sub-part that specified this change in the law.

The BEA budget treatment of Social Security basically remains the law to the present day. Specifically, present law mandates that the two Social Security Trust Funds, and the operations of the Postal Service, are formally considered to be "off-budget" and no longer part of the unified federal budget. (The Medicare Trust Funds, by contrast, are once again part of the unified budget.) So where matters stand presently is that the transactions to the Social Security Trust Funds and the operations of the Postal Service are "off-budget" and everything else is "on-budget."

However, those involved in budget matters often produce two sets of numbers, one without Social Security included in the budget totals and one with Social Security included. Thus, Social Security is still frequently treated as though it were part of the unified federal budget even though, technically, it no longer is.

<snip>

So, to sum up:

1- Social Security was off-budget from 1935-1968;
2- On-budget from 1969-1985;
3- Off-budget from 1986-1990, for all purposes except computing the deficit;
4- Off-budget for all purposes since 1990.

http://www.ssa.gov/history/BudgetTreatment.html

National Debt Clocks and Savings Clocks

[papau]

17. Again - Unified budget is just a presentation and does nothing real - it is

the investment in government bonds that does something real - it mitigates the income loss from tax cuts for the rich.

[Lasher]

5. Very good contribution

The Publicans' goal is to destroy Social Security as we know it. With the highest deficits in history that have primarily come about due to Junior's tax cuts for the wealthy, and to his adventure in Iraq, they are trying to convince us we need to gut Social Security because we can't afford it. They are acting on the 'starve the beast' strategy that has long been advocated by right wing intellectuals.

Their plan to steal the trust fund is to drastically cut back on Social Security payouts under a ruse of 'reforming' or 'saving' the program, so that the general fund never has to redeem the treasury bonds. The trust fund that has been built up with regressive payroll tax collections would not have to be redeemed with general fund revenues, which are progressive - but only slightly so, thanks to Saint Ronnie of Reagan, Poppy, and Junior.

Well done, Time.

Lasher

Edit: Might as well share The Social Security Game. You can use it to come up with your own solutions to rectify the projected 2040 shortfall. I got out of Iraq and rescinded The Decider's tax cuts for the wealthy, which was all the adjustment that was needed.

[Time for change]

18. Thank you Lasher -- I love Krugman's articles

I'm no economist, and it is usually difficult for me to follow arguments written by economists, but I think that Krugman does as good a job as anyone in making complex arguments easy for laypersons like me to understand -- and I especially love the way that he calls Bush on all his blatant bullshit.

His book, "The Great Unraveling", about how the Bush administration is destroying our economy, as well as many other things, is one of the most informative books I've ever read.

[FogerRox]

23. I didnt like the SS game

I did not see the options I liked. Does the game rely on 1.8% GDP growth as the CBO did?. Does the game include interest on the Trust fund, the CBO doesn't...? Not likely.

Removing the cap solves 93% of the problem, according to the game. That was the only solution I used. Humph.

[Lasher]

39. I don't know for sure about the source of the assumptions used

But I assume that they used the same information that the Social Security trustees and the CBO does when they project the shortfall in 2040, which was projected in 2048 not long ago. Their extremely conservative projections base on assumptions like an average GDP growth of only 1.8% are obviously developed in hopes of convincing us something drastic needs to be done.

I liked the same solution you did, and only that one. It's all that's needed, don't ya think? Makes you wonder what all the mumbo-jumbo is about. Hmmmmm.

[FogerRox]

41. Thats the only option in my mind, yes.

[TahitiNut]

6. An essential element of Social Security funding is that it comes from

... the payrolls of working Americans. Thus, as labor continues to receive an equitable share in its own increasing productivity - productivity enhanced by education, health, and the legacy of working parents - those same parents whose blood, sweat, and tears were invested in their children were afforded a safe and secure retirement. In this sense, we are a national 'family.'

There is no better way to fund the retirement of our parents than through our own labors - labors the productivity of which they made possible. We can have no higher interest than working together as a nation - to raise and nurture our children and secure our parents' 'golden years.'

As labor is increasingly exploited for the profits of 'owners' and labor's share of the national income created by the workers of our society, the very legacy of their parents is pillaged for the appetites of the most powerful. The health of the Social Security system is, in a very real sense, an indicator of the economic equity of our nation.

[papau]

7. Excellent write-up -you're closer to the truth than Hartmann - indeed he is wrong

about some of the things he asserts relative to Social Security. The section below that you took from Hartmann is not correct:

"Then, finding it difficult to run the government without adding to his record budget deficits, Reagan consulted with Alan Greenspan to find a way. Greenspan’s brilliant idea was to borrow the needed money from the Social Security Trust Fund. By doing that, so Greenspan claimed, the borrowed money would not have to officially be added to the national deficit, since it was simply a matter of the federal government borrowing money from itself. THE BUDGET OF THE UNITED STATES IS A CASH BUDGET - THE DEBT GROWS BECAUSE OF LACK OF CASH. GREENSPAN HAD NO NEW IDEA ABOUT THE SOCIAL SECURITY TRUST FUNDS. HARTMANN CONFUSES THE ATTEMPT TO MAKE CLEAR TO THE INVESTOR THE LIKELY STRAIN ON THE CAPITAL MARKETS OF FINANCING THE GROWTH IN THE NATIONAL - WHICH RESULTED IN AN ACCOUNTING REPORT CALLED THE UNIFIED BUDGET - MEANING IT INCLUDES THE CASH AND OUTGO OF THE VARIOUS TRUST FUNS LIKE SOCIAL SECURITY - THERE SHOWING A "BUDGET DEFICIT" THAT HAS BEEN REDUCED BY THE PART OF THE DEBT THAT WILL BE FINANCED BY THE TRUST FUNDS - THUS THE UNIFIED BUDGET DEFICIT WARNS OF THE AMOUNT OF BORROWING THAT WILL HIT THE PRIVATE CAPITAL MARKET. THE CHANGE IN THE BUDGET REPORT FORMAT TO A "UNIFIED" BASIS CHANGED NOTHING. - AND I AM NOT EVEN SURE ONE CAN SAY IT WAS GREENSPANS IDEA AS LBJ PASSED THE RULES THAT BROUGHT IT INTO EFFECT, AND THE FIRST UNIFIED BUDGET ISSUED WAS NIXON'S 1969 BUDGET. IT IS A POLITICAL CON JOB AS IT ALLOWS YOU TO CLAIM A LOWER THAN REALITY BUDGET DEFICIT - BUT IT HAD NO FINANCING EFFECT ON ANYTHING. YOU STILL GET THE REAL DEFICIT BY SUBTRACTING THE BEGINNING OF YEAR NATIONAL DEBT FROM THE END OF YEAR NATIONAL DEBT - BUT THE MEDIA REFUSES TO NOTE THAT THE REAL DEFICIT HAS BEEN UNCHANGED YEAR AFTER YEAR UNDER BUSH - RUNNING JUST UNDER $600 BILLION EVEN AS BUSH CLAIMED AND OMB ANNOUNCED A DEFICIT CLOSER TO HALF THAT AMOUNT. LIKE I SAID - IT IS A POLITICAL CON JOB IF THE MEDIA LETS IT BE - AND OUR RIGHT WING GOP CONTROLLED MEDIA LETS IT BE,


Having his cake and eating it too

I am not able to think of a real life situation that better exemplifies ‘having your cake and eating it too’. Greenspan’s plan involved taking money out of the Social Security Trust Fund and replacing it with Treasury bonds (as an I.O.U.), in order to obtain money to run our government without the government having to borrow any more than Reagan had already borrowed. It was a win-win situation for him because he obtained the money he needed presumably without having to borrow it from an external source, and yet the source that he did borrow it from (the Social Security Trust Fund) presumably didn’t suffer because the money was replaced by secure Treasury bonds. Kind of like a magic trick, or as George H.W. Bush would say, “voodoo economics”. " THE TRUST FUNDS MUST INVEST IN SOMETHING AND GOVERNMENT BONDS ARE CONSIDERED THE "SAFEST" INVESTMENT, THEREFORE PART OF THE CURRENT YEAR DEBT IS ALWAYS FINANCED BY TRUST FUND PURCHASE OF BONDS. BUT A GOOD REFORM WOULD BE TO BUY NON-GOVERNMENT BOND ASSETS AS IS DONE IN A FEW COUNTRIES SO AS TO GET RID OF THE STUPID "WORTHLESS ASSETS" LIE. EVEN NOW THE ONLY REASON THE TRUST FUND DOES NOT SELL THE GOVERNMENT BONDS IT NOW OWNS AND BUY STOCKS AND REAL ESTATE IS THE GOP FEAR OF "SOCIALISM BY THE BACK DOOR" - MEANING A GOVERNMENT PROGRAM OWNING BUSINESSES IN AMERICA AS INVESTMENTS - AND THEREFORE PUTTING INTO LAW THAT THE BONDS SOLD TO THE TRUST FUND ARE SPECIAL AND CAN NOT BE SOLD INTO THE PRIVATE CAPITAL MARKET. OBVIOUSLY THIS LAW CAN BE CHANGED AND THE OWNERSHIP OF THE NATIONAL DEBT COULD BE TRANSFERRED IN TOTAL TO THE PRIVATE CAPITAL MARKETS - OF COURSE THIS MIGHT CAUSE A SLIGHT SUPPLY OF BONDS/DEMAND FOR BONDS IMBALANCE CAUSING INTEREST RATES TO GO UP, BUT I DOUBT THEY WOULD RISE ALL THAT MUCH AS THE PRIVATE CAPITAL MARKET IS VERY VERY LARGE.

IN SUMMARY, THE RICH ARE TRYING TO AVOID EVER PAYING THE HIGHER TAXES THAT WILL BE REQUIRED TO RAISE THE CASH TO REDEEM THOSE BONDS WHEN THE SS SYSTEM NEEDS MORE CASH FOR BENEFITS THAN IS COMING IN VIA THE PAYROLL TAX - ABOUT 2017. IF SS IS RESTRUCTURED SO THAT IT NEVER NEEDS TO CASH IN THOSE BONDS, THE HIGHER PAYROLL TAXES IN EFFECT BECOME NOTHING MORE THAN A WAY TO FINANCE LOWER TAXES ON THE RICH - FOREVER.

[Time for change]

13. Thank you for the explanations papau

It's not clear to me in what sense you mean that Hartmann was wrong, since it seems to me that you agree with his central concepts. Specifically, you say, I believe with respect to the idea of pretending that borrowing from the Social Security Trust Fund should not be counted in the budget deficit, "IT IS A POLITICAL CON JOB AS IT ALLOWS YOU TO CLAIM A LOWER THAN REALITY BUDGET DEFICIT - BUT IT HAD NO FINANCING EFFECT ON ANYTHING." I believe that that is Hartmann's main point. Is your point that this was Johnson's idea rather than Reagan's? If so, is it not true that Reagan borrowed a great deal more from the SS Trust Fund than Johnson did?

And then you summarize the situation by saying "IN SUMMARY, THE RICH ARE TRYING TO AVOID EVER PAYING THE HIGHER TAXES THAT WILL BE REQUIRED TO RAISE THE CASH TO REDEEM THOSE BONDS WHEN THE SS SYSTEM NEEDS MORE CASH FOR BENEFITS THAN IS COMING IN VIA THE PAYROLL TAX - ABOUT 2017". Again, it seems to me that that is another central point that Hartmann is trying to make.

So, do you think it be fair to say that though he may be wrong on some of the details, his main points are on target?

[papau]

15. Hartman may be wrong on some of the details, his main points are on target :-)

As long as there are investments in government bonds, it can be mis-characterized as "stealing" or "borrowing" money from Social Security - which is why Trust Fund investments in non-government assets is important, despite the fear the GOP has about a government agency owing a large part of the economy - "socialism by the back door"

:-)

As an aside, the "crisis" in SS that Reagan claimed was that the Johnson "borrowing" was paid back under Carter (meaning the Trust Fund was near zero and some of the cash for benefit payments would have needed to come from the rich via the General Funds provided by the Federal Income Tax, rather than from the payroll tax, Now this had happened before and was not a big deal). In the 80's the consolidation of the US media into the hands of the conservative rich was well underway, and they sold the crisis (indeed the August 1981 Budget that ended Carter's funding of mental health and which had the largest tax cut in history in it was accompanied by screams by the GOP about the need to cut benefits and raise payroll taxes so as to restore the ability of the Trust fund to buy government bonds - called making the system solvent by the GOP. Those who wanted to save SS from attack - like the chief Actuary Myers - noted that we had usually had 3 to 6 months benefit payments in the Trust Fund - a Trust Fund about 10% of the size of the one we now have - and that raising the tax rate so as achieve this was a good idea. The idea being that if SS was not a government agency, having assets on hand to keep paying benefits without the need to borrow from anyone was just good management. Greenspan and Reagan got an economist who had written some excellent books but who did not really understand or want to understand but who was a politician, the "scholarly" Senator Moynihan of NY, to buy into the over charge as a two-fer. The SS overcharge would mitigate the disaster that was federal finances after the Reagan tax cuts, reducing pressure on interest rates caused by Reagan's massive borrowing, plus it could be seen as the way the overly large boomer generation could avoid causing excessive pain via unusually large payroll taxes on their children and grandchildren.

[bleever]

11. Knowledge of history is the best defense against tyranny, and

this kind of conversation is a seminal contribution.

K&R.

:thumbsup:

[Time for change]

29. Thank you bleever

Maybe that's one reason our new generation of students is getting so short-changed in that regard. As Thom Harmann points out, "our current youth generation is the first one in more than two hundred years raised in schools largely unable to teach civics and American history both because of budget cuts and fear of claims of ‘liberal bias’ from conservative fanatics.”

[pnorman]

12. This is just what I was looking for, just a while ago!

I now have a better departure point to Google from. Thanks!

pnorman

[Lasher]

14. If you want more scoop about SS, let me know

I've saved lots of links on the subject.

[RedEarth]

19. Excellent post on Social Security......... thank you...

[Target_For_Exterm]

22. Don't forget that Baby Boomers are paying double - they're

paying for current retirees and pre-funding their own retirement because there's not enough young folks to cover the Baby Boomers. Another one of Reagan's ideas.

So when Bush talks about gutting Social Security, he's talking about screwing you out of DOUBLE your Social Security. Nothing like a big, fat no-benefit tax on the poor to make Bush and his cronies happy.

[TahitiNut]

24. Yep. The boomers are the first to pay for both themselves and their parents.

"War babies" (1940-45) like me get swept up in this, too - being neither the result of long-stifled libidos nor the participants in it. The progeny of boomers can regard it as a "legacy" I guess.

[IWantAChange]

26. Outstanding post. SS and the desire by the Repugs to dismantle

all programs that reach out to the masses is the reason why none of us can ever give up the fight.

[Time for change]

36. You are certainly right about that

This administration cares about nothing but maintaining the favor of its rich and powerful friends and supporters. The rest of us can go to hell for all they care.

We won a great victory in November, but we'd better not let our guard down.

[EVDebs]

28. Raise that goddamn cap on wages and watch them run for political cover

$90K cap needs to rise to $120K at least. "Running up" a tax that would fix a problem, that's not something Republicans want to do...actually fixing problems isn't their forte, running up problems seems to be their specialty.

http://www.csmonitor.com/2005/0218/p01s01-uspo.html

[TahitiNut]

31. Better to raise the minimum wage.

The amount of additional payroll taxes gained by raising the cap is dwarfed by the potential increase due merely to increases in payrolls for the bottom 95%.

The Lorenz Curve in the graph below aids in visualizing this.

[EVDebs]

38. Your graph makes my point. View the Red Line and area above it

All that would be subject to SS tax if the red line were raised to $120K for example. We're already taxed at below the $90K red line, as you can see.

[TahitiNut]

43. Actually, it doesn't.

Raising the federal minimum wage - increasing the payrolls of the 'lower 90%' - would lift the 'sag' in that curve and increase the aggregate payroll subject to taxation far more than increasing a 'cap' that only offers a small (about $xK x 8%) increase in the aggregate payroll subject to tax. In effect, we're talking about the payroll earnings of more than ten times the number of people when wages at the low end are increased.

[EVDebs]

44. Paying employees more in depreciated dollars a la Weimar Germany ?

The rich will still make out. The "sag" in the curve shouldn't be viewed as a mandatory tax break for the wealthiest 1 and 1/2 percent. Politically I support raising the minimum wage, I just want to see a contingent raise in the arbitrary SS payroll cap. My point is that that upper arrow in the curve seems to rise to infinity, the bar with the red line does too, but in real life those wages are finite whereas the untaxed and hidden wealth (that almost never gets taxed via offshoring) does seem infinite in the real world.

It's about time the rich, if they can't be "soaked" get just a spritz, don't you think ? Besides, during recessions and downturns in the business cycle you continue to hammer the very ones who keep the system going by shrinking the SS fund supply. Maybe we're both right then. Raise minimum wage AND raise the SS fund wage cap.

Will you compromise ? Or will the coming housing downturn, predicted for '07 along with a recession force the issue ? Besides, simply raising the minimum wage alone ends up creating more of an issue for R's by encouraging the present SS funding system i.e. having more Mexican illegals coming across the border in order to take those minimum wage jobs (and subsequently paying into our SS system without a prayer of legally receiving a SS check when they reach retirement age). This isn't a system you want to perpetuate.

[AzDar]

30. Kick......n/t

:kick:

[mod mom]

32. George bu$h, being the spiteful frat boy he is, also wishes to destroy the FDR

legacy due to past family matters (like getting back at Saddam for threats against his father). This time it goes back another generation and concerns the fat cats who profitted from the Hilter war machine. I guess we can also expect Castro will receive more grief for taking Uncle Herbie's sugar plantation. BFEE.

Another excellent post TFC!

[Time for change]

34. Yes, I think you may be right about that mod mom

Bush has a gigantic ego, and I don't doubt that he would love to destroy FDR's legacy. Of course, he'd also like to develop a decent legacy of his own -- good luck with that :rofl:

George Bush has referred to himself as a "war president". Cass Sunstein, in describing FDR during WW II, shows us some things about what a real war president does:

Roosevelt made special efforts to visit hospitals and attend to soldiers who were permanently handicapped: Even in the last year of his life, when the strain was beginning to show, he continued to visit the hospital wards...

[Pharaoh]

33. K&R

[Hidden Stillness]

37. A Larger, General Reason for Their Attack--Their Whole Mindset

I think there is a larger, general reason why the Bushs/Republicans want to get rid of Social Security and all other programs like it, that goes way beyond grabbing the money in the Trust Fund, and hatred of the Roosevelts and all other saintly "traitors to their class"--although that is all part of it, too. Now that the middle class populist Democrats are taking over the Party again, and throwing the corporate "D"LC out, it allows you to hear Republicans for what they are again, from the correct perspective and with the needed contrast. They are the Party of bankers and rich people, who would let you starve if it were left up to them, who fear that their servants are "cheating" them, by getting paid and having days off, and who actually believe that they are rich and we are not, because they are superior to us. It is a totally different mind-set.

This is the type that believes that there are "the right sort of people" and "the wrong sort of people," snobs right down to the core, and that if they steal taxpayers' money for their corporate friends, well, 1) we are the inferior losers, and 2) it is there for the taking, and only the go-getters and self-starters can prosper at these, the most dizzying heights of the game. It is "theirs for the taking," and if we had had any real talent, we would have stolen it first. They get drunk, shoot people in the face for disagreeing with them, refuse to cooperate with police, order the victims to crawl out of bed and publicly apologize--and there are no consequences for them! You think they aren't laughing every day of their lives? This ilk gets illegally obtained prescriptions, hires a team of lawyers, and makes all the charges go away. They dodge the draft, dodge the National Guard, and no one ever refers to it; it is only a crime, if the "little people" do it.

The thing to remember about Social Security is that it was not a savings account (for an individual), but an insurance program, that all of us together can rely on, and that a Government owed to its citizens. If you only had a job for a short time, became disabled, and could no longer work, you got a safe and reliable payment beyond what would have been possible if it had been based on your history alone. All contribute, and the total earns further interest from having been invested. Also, people who cannot have had work histories, such as the children of deceased workers, or the disabled, will have an income from Social Security. It is the obligation and promise of all of our society together, as one. The previously progressive tax structure guaranteed that all would pay into the total system as they could afford it, and carry their weight, as their price for belonging to, and benefitting from the American way of life. This was not "charity" that rich people choose to give, and that the recipient should feel "grateful" (and obligated) for; it was their right, and there was no further comment upon it at all.

There was a statement during the OP, the section "George Bush's Social Security privatization scam in perspective," that Roosevelt "advocated the need for government to level the playing field in our country and thereby lend a helping hand to the least fortunate among us." With all due respect, I don't think Roosevelt ever would have put it that way. Roosevelt would not have called them fortunate or unfortunate, but poor, exploited, abused, and about to be free again. More to the point, FDR would have called the capitalists something--criminals, "economic royalists," as during the 2nd Inaugural. This would have been treated as a moral outrage that rich capitalists further enrich themselves, by abusing the rest of the citizens of our country. It was not a "level playing field" that was called for, but justice, and laws.

This New Deal attitude was part of a larger attitude that believed that if you wanted to help people, and end poverty, you made direct cash payments to the poor people themselves. This way, you have instant economic relief: they pay bills, buy food, get repairs made on things they own, go to other stores in the neighborhood, and the whole area starts lifting itself out of Depression. They were not treated as slackers, "chiselers and cheats," according to the Roosevelt quote at the end; but as our neighbors, who will not regain their dignity until they have their lives back. The Republican attitude is the opposite--funnel all the money to corporate management, whether it makes any sense or helps anything, or not. Give nothing to the "lower classes." Nothing hurts a Republican more to think about, than the prospect that "the little people" are getting something, and worst of all, did not beg, crawl, or work for it. The idea that the rich have a moral obligation to help all of our citizens, is considered an effront to their social standing.

I wish I could convey how much I hate these people, and how I love saintly "traitors to their class," like Franklin and Eleanor Roosevelt, the Kennedys, and etc. I hope this does it, a little.

[PassingFair]

40. A lovely post, Hidden.

I enjoyed reading it!

[Time for change]

42. Yes, you certainly do convey your feelings on this matter

In many ways I share those feelings, and so do most DUers IMO. We may vary in how much personal hatred we feel towards those who are raping our country for their own personal gain and ego, but 99% of us certainly hate what they are doing.

I think you are wrong about some of what you say about FDR. But I don't understand why you object to my use characterization of Roosevelt wanting to "level the playing field", or what you think is wrong with that characterization. I don't know if FDR ever used precisely those words, but that phrase represents the need to make reasonable opportunities available to all Americans. And FDR's speeches were full of that kind of talk. Here are some excerpts from his acceptance speech for his second nomination for President in 1936:

The hours men and women worked, the wages they received, the conditions of their labor-these had passed beyond the control of the people, and were imposed by this new industrial dictatorship. The savings of the average family, the capital of the small business man, the investments set aside for old age-other people's money-these were tools which the new economic royalty used to dig itself in.

Those who tilled the soil no longer reaped the rewards which were their right. The small measure of their gains was decreed by men in distant cities.

Throughout the Nation, opportunity was limited by monopoly. Individual initiative was crushed in the cogs of a great machine. The field open for free business was more and more restricted. Private enterprise, indeed, became too private. It became privileged enterprise, not free enterprise.

An old English judge once said: "Necessitous men are not free men." Liberty requires opportunity to make a living-a living decent according to the standard of the time, a living which gives man not only enough to live by, but something to live for.

This is full of references to make opportunity available to everyone.

Also, though FDR was very courageous in his efforts to make more opportunity available to all Americans, it seems to me that he did this much more out of a desire to help those who needed it than out of hatred towards the oppressors. Though he referred to the wealthy elite of our country by such terms as "economic royalists", and even tyrants (which many of them were), still I detect no hatred towards them in his speeches. In fact, he even said in the above noted speech that it was perhaps natural for them to be like that.