Dakota Beacon

Since the end of the 20^th century a crisis atmosphere surrounds the discussion of how to save Social Security. A quote by former Senator Alan Simpson (b. 1931) published by CBSNews.com on 8/25/2010: “Social Security is like a ‘Milk Cow with 310 Million Tits’.” Simpson made his remark in an e-mail addressing the recommendations of President Obama’s deficit commission of which he was co-chair along with former White House Chief of Staff Erskine Bowles. President Obama appointed the National Commission on Fiscal Responsibility and Reform by executive order in February 2010. Addressing criticism of the commission’s recommendations, Simpson responded, “We had the greatest generation – I think this is the greediest generation.”

Really?! Citizens want their money and Simpson called them greedy! Wyoming senator for 18 years, Simpson was a “swamp rat” before the term became popular.

Anyone who has been “means tested” knows they will not get back what they paid in. I know one lady who, in November 2022, was notified by the Social Security Administration (SSA) that her Medicare Part B payment was so large that, when deducted from her social security, it reduced her SSA check in 2023 to less than the check she was receiving each month in 2022!

Remember these points. First, it’s our money. Second, Social Security withholding was never voluntary. It was money mandated from individuals’ monthly pay. Third, as instituted in the 1930s, only a small number of people “contributed” and fewer still withdrew retirement benefits. Then came the “baby boomers” who increased the funding hugely. Moreover, wages grew as the economy expanded providing greater receipts for SSA. Fourth, SSA benefits have since expanded far beyond those originally promised.

As baby boomers age and retire, SSA makes their monthly payments from the current receipts of the younger generations. Older generations are living longer while the current demographics indicate a declining birth rate and a shrinking working-age population. This pay-as-you-go program closely resembles a Ponzi scheme -- which is illegal except when run by the federal government.

Enter the concept of the Social Security “trust fund.” In the early decades excess dollars were “invested” in bonds. Here is a quote from “Policy Basics: Understanding the Social Security Trust Funds” dated July 13, 2022 (https://www.cbpp.org/research/social-security/understanding-the-social-security-trust-funds-0) “… Social Security is largely a “pay as you go” program…Today’s benefits are funded primarily by the payroll taxes collected from today’s workers. For over three decades, however, Social Security collected more in payroll taxes and other income than it paid in benefits and other expenses…The Treasury invested the surplus in interest-bearing Treasury securities, ultimately reaching a total of $2.9 trillion in trust fund reserves. In 2021, Social Security began redeeming those reserves to help pay benefits. Payroll taxes from current workers will continue to pay for the bulk of benefits. The trust fund reserves will make up the difference between income and costs until the reserves are depleted.”

Government Executive is government's premier business news daily for senior leaders in the federal government. On November 28, 2022 the following story appeared. (https://www.govexec.com/management/2022/11/social-security-warns-public-declining-service-if-congress-doesnt-increase-funding/380209/) “The Social Security Administration last week warned the public that unless Congress approves a $1.4 billion increase in funding for the agency in fiscal 2023, the agency’s customer service will continue to deteriorate. When Congress passed a continuing resolution in September as a stopgap to keep the government open until Dec. 16, it included $400 million in emergency funding for Social Security to cover cost increases and support the agency’s ongoing hiring efforts.” In a rare blog post on the agency’s financial situation, Social Security Deputy Commissioner for Communications Jeff Nesbit wrote that the agency will need far more funding to maintain an acceptable level of service.

Wait a minute! Doesn’t the SSA “trust fund” cover shortfalls? Why should the SSA ask for funds when it has cash in the till -- $2.9 trillion in fact?

Well, maybe the money is not in the till. It was put in the “trust fund” and then loaned to Congress in the form of special bonds. Maybe the money has been spent instead of earning interest as with private bonds. When you or I invest in Treasury bonds, they represent a debt owed by one party to another -- the government to you. But when the government itself invests in Treasury bonds, those bonds represent a debt owed by one party to itself. Realistically, you can’t owe money to yourself. What would it mean to borrow 20 bucks from yourself today and promise to pay it back to yourself on Tuesday?

The Trust Fund exists, supposedly, to secure a commitment by setting money aside today so that in the future the money doesn’t have to come from taxes, borrowing, or spending cuts. Fine -- in principle. But when that money is invested in Treasury bonds, those bonds themselves are not growing. They will have to be redeemed with interest in the future. The money to do that will have to come from taxes, borrowing, spending cuts, -- or printing more dollars. Can anyone say “inflation?”

See the light? In a Ponzi scheme the last person, or in this case generation, “investing” gets left holding the bag. And to think – the US is already $31 trillion in debt and growing.

Hell hath no fury like a senior taxpaying voter scorned.

Dennis M. Patrick can be contacted at (JavaScript must be enabled to view this email address).