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Bush is Selling a Trojan Horse, Says Author of 'The Looting of Social Security'

Greenspan wrote plan in 1983 that was to save Social Security

Dec. 15, 2004 - "President Bush is trying to sell his privatization proposal as a plan to save Social Security, when it is actually a clever scam designed to destroy the program that conservatives have hated since its enactment in 1935," says economist Allen W. Smith, Ph.D., author of the book, "The Looting of Social Security: How the Government is Draining America's Retirement Account."

A Warning for Social Security Reformers

By Bernard Wasow, senior fellow and economist at The Century Foundation
http://www.seniorjournal.com/NEWS/Opinion/4-12-15BushSelling.htm
Nov. 17, 2004 - While the administration is preparing its drive to replace part of Social Security with private investment accounts, an obscure government agency is planning to go to Congress to ask for a bail- out. The Pension Benefit Guarantee Corporation (PBGC), which guarantees private pension plans, just announced that its net liabilities are double earlier estimates, more than $23 billion. More... 11/17/04*

Guest Opinion

Social Security Investment Accounts Would Be Dangerous For Seniors

By David J. Roberts, Associate Professor of Accountancy, DePaul University

Nov. 13, 2004 - Proponents of so-called personal accounts (to use the more politically marketable terminology for what is really partial privatization) typically argue that such accounts are needed to save Social Security. But partial privatization would not likely "save" Social Security, and would probably cause serious harm to seniors and long-time participants in the current system. More... 11/13/04*


Smith argues that Social Security is not facing an imminent crisis and that Bush is using scare tactics in an effort to stampede the public into accepting his plan.

According to Smith, the Bush plan is a Trojan horse with which Bush, Greenspan, and fellow conservatives hope to destroy the current Social Security program before the American people wake up to the fact that $1.5 trillion of Social Security money has been spent on other things by the government, in violation of federal law, over the past two decades, with more than one-third of the money having been looted during Bush's presidency.



Smith says that Alan Greenspan was the chief architect of a plan to fix Social Security that was enacted into law in 1983. That legislation increased payroll tax rates high enough so the baby boomers would be required to prepay the cost of retirement benefits for themselves, in addition to paying for the benefits of the preceding generation.

The 1983 payroll tax increase has generated more than $1.5 trillion in Social Security surplus, earmarked specifically for funding the retirement of the baby boomers. Because of that tax increase, the trust fund should today contain at least $1.5 trillion in real liquid assets in the form of regular marketable Treasury Bonds just like those bonds in which many private pension plans invest, but it does not contain any marketable bonds.

According to Smith, "Most Americans do not yet know about the 'theft' of the Social Security money, and Greenspan and Bush would like to keep it this way. After all, Greenspan, who supposedly fixed the baby boomer problem in 1983, has kept silent while the last three administrations have spent Social Security money as if it were general revenue. He knows that the government has made no provision for repaying the money, despite the fact that, beginning in 2018, the money must be repaid in order for full benefits to be paid. By focusing the nation's attention on a proposed privatization plan, the administration hopes to draw attention away from the unlawful use of Social Security money."

According to Smith, the surplus Social Security money has been spent and replaced with non-marketable special-issue government IOUs that, unlike regular marketable Treasury Bonds, have no real value and thus are not real assets. These IOUs are nothing more than accounting entries that tell us how much Social Security money has been taken by the government. They are akin to a note that a bank robber might leave in the vault stating the amount of money he took. When the Social Security program begins to experience annual deficits in 2018, these so-called "bonds" in the trust fund will be of no help, whatsoever, in raising additional funds to help pay benefits.

According to the 2004 Social Security Trustees Report, Social Security will run massive annual deficits in the years ahead. Table VI.F9 of the report reveals that there will be annual deficits of $281.1 billion in 2025; $511.9 billion in 2030; $747.0 billion in 2035; and $959.8 billion in 2040. Unless the government can come up with these massive amounts of money to repay the money it has looted from the trust fund, Social Security benefits will have to be cut. Privatization does nothing to change this harsh reality. Instead, it is being used as a smoke screen to cover up a crime against the American public that makes Enron pale in comparison.