It's All Lies, Social Security Panel Admits
Saturday, Aug. 4, 2001
Americans are wrong in believing a bald-faced lie that they have a legal right to collect their Social Security benefits - Congress can stop paying anytime it wants.
The government has been lying about that for years - and it's just one of the whoppers Washington has been telling about Social Security.
The government and other apologists for Social Security have been lying to the American people about the system, according to an interim report just issued by President Bush's Social Security Commission staff, writes professor Gary M. Galles in a blockbuster article in Friday's Washington Times.
The main point of the report, which concluded that " the system is broken, " is " essentially to admit that, when it comes to central claims made to defend Social Security, the government and other apologists of the system have been lying to Americans all along, " charged Galles, a professor of economics at Pepperdine University in Malibu, Calif.
" By finally 'fessing up,' the intent is to set the stage for reform by overcoming this long-term disinformation campaign. "
According to Galles, the " three essential misrepresentations " about Social Security are:
That maintaining the status quo is a possibility. It's not.
That the Social Security Trust Fund represents real assets to maintain the system and put off the day of reckoning 20 years or so. The so-called Trust Fund assets are all government IOUs.
That Americans have a legal right to their Social Security benefits as an unbreakable promise. Congress can welsh on that promise whenever it wants to.
The report explains that maintaining the status quo is not a possibility. " Unless we move boldly and quickly, the promise of Social Security to future retirees cannot be met without eventual resort to benefit cuts, tax increases, or massive borrowing. "
The fact is that Social Security benefits should begin to exceed the amounts taken in by payroll taxes by the year 2016. Moreover, the entire trust fund is expected to be all used up by 2038. At that point payroll taxes are forecast to cover just 72 percent of promised benefits, which Galles write will cause " a shortfall of trillions of dollars. "
It is, he insists, essential to admit that Social Security cannot be sustained in its present form. To do that would undercut " the most effective argument against reform - the results will be worse than the status quo for at least some Americans (and you should vote against those evil politicians proposing any change). "
While that's true, it really doesn't matter because all possibilities " are worse than what the system promises now, as any reform would have to fund what is now a 14-digit unfunded liability. " Using the false alternative of the status quo conveniently disregards that detail. "
Galles ridicules Rep. Robert T. Matsu of California - the Democrats' leading Social Security spokesman - for maintaining that there's no need to worry, Congress in its great wisdom will certainly solve the whole problem long before 2016 rolls around.
" By invoking an imaginary future solution, while ignoring the fact that any such solution would require breaking some unsustainable promises now being made by the system, [Matsu] finesses this reality even more neatly, " he chides.
The assertion that the Social Security Trust Fund can keep the system going between 2016 and 2038, pushing the need to do something well beyond most people's time horizons, is also false because the so-called trust fund consists of nothing but U.S. Treasury securities, which are really only IOUs from the federal government.
" But how will the Treasury redeem those IOUs when they come due? " Galles asks, citing a 2000 Congressional Budget Office report that said, 'To repay what [the Treasury] has borrowed from the trust fund, the federal government must raise the cash by boosting taxes, reducing other spending, borrowing more from the public, or retiring less debt,' making the trust funds essentially just a commitment to massive future tax increases. "
The third major lie the report exposes is the whopper that Americans have a secure right to their promised Social Security benefits.
" What they have is a political promise that can be changed at any time, by any amount, for any reason, " the report reveals.
Galles exposes the shocking fact that despite Social Security's propaganda " the Supreme Court long ago ruled that the government is not legally obligated to pay workers their promised Social Security benefits, and any commitments made today can simply be unmade tomorrow. "
History shows that that's a real danger: Congress began reneging on Social Security commitments a mere four years after its adoption.
According to the House Finance Subcommittee's report on establishing Social Security in 1935: " We can't ask support for a plan not at least as good as any American could buy from a private insurance company. The very least a citizen should expect is to get his money back upon retirement. "
Therefore, " Social Security originally guaranteed that a taxpayer who reached 65 without qualifying for Social Security benefits, or who died before age 65, would be refunded all the taxes they had paid into the system. But rather than live up to that promise, the law was amended to eliminate it in 1939 (rather than a refund, applicants received a form letter telling them how the change would strengthen the system). "
Galles concludes by noting, " The Social Security Commission ... by clearing up some of the 'lies, damned lies, and statistics' that have been used to bait and switch the public into opposing Social Security reform, it increases, however slightly, the chances for a reasoned discussion of which option to pick from an unappetizing menu. "