Web Letters: Looting Social Security

The name is no accident: Social... Security.

Picture, if you will, a sailboat challenged by a moderate storm--and its keel is missing. Without that stabilizing ballast, the craft would turn turtle with the first modest wave that came its way.

Social Security is the keel under America's ship of state. Most retirees get a check the first of the month and spend it before the following check arrives. Month after month, this simple, basic economic cycle stabilizes our economy and has done so for many decades.

Can you imagine the social chaos we'd be in today if our retirement funds had been invested in the stock market for the past few years? Retirees would have been living high on the hog in 2007, but since then the Dow Jones Index has lost almost half its value. If invested in the stock market, the income of every American living on Social Security would be almost half today of what it was just two years ago.

As a symbolic example, one month American seniors would have been living on $1,200 a month, then all of a sudden they'd be faced with an agonizing choice between medicine and food, with little more than $600 to live on. That's the way the unpredictable and often turbulent stock market works.

"Let's dine out tonight, dear. Which soup kitchen would you like to try this evening?"

The effect that privatizing Social Security would have on the rest of the country would be disastrous... over and above the trauma of poverty, uncertainty and humiliation to which it would subject our retirees.

Without the stabilizing keel of Social Security as we've known it for decades, both our economy and our society would capsize. Privatization would be the problem, not the solution.

William F. Brabenec

Attica, MI

Bravo to Pat Fahy's letter for calling out the right wing's accomplished linguists, or language perverters, on their clever "entitlements" dodge. Besides being the commander-in-chief of this latest campaign against Social Security and Medicare, Pete Peterson happens to be the first guy I ever heard, quite a few years ago, using that word to describe what's left of America's social safety net. I hated it then, but didn't see how useful it would become to the Republican agenda later on--now, for instance.

When Mr. Peterson and his cronies use that word, what they intend, of course, is sarcasm. To them, "entitlements" are unjustified wealth-eaters, an outright attack on Pete Peterson and wife Joan Ganz Cooney's next renovation plans for their homes on Sutton Place, in Water Mill and in Vero Beach. When Mr. Peterson says "entitlements," he's really saying that people who haven't gone to work in a CEO's office or otherwise arranged to lift themselves into the ranks of the well- or way-more-than-adquately heeled are really " entitled" to exactly nothing, nada, zilch, which is exactly what Mr. Peterson would like to see them get.

This is why I was so disappointed (and, yes, disillusioned) when I heard Mr. Obama say, with not a shred of shame, that he was working on "entitlement reform." Using the language of the enemy has the acrid smell of beginning to carry out the enemy's fondest wishes.

Mort Persky

New York, NY

This is a direct appeal to the author--and others who may feel as I do. Whatever the solution is to the task of sustaining Social Security and medicare and medicaid, it will not be based on the ideas of Peter Peterson and his conservative ilk. (The man is 82 years old and has $2.8 billion and he is devoted to removing the social safety net under millions and millions of elders. Better he, and those like him, should donate billions to a "Social Security Pool." )

My appeal is: Please tell your readers what we can do to stop Peter Peterson's foundation and his followers. He has $2.8 billion to spend on his campaign, but this is no match for "the people" if we become aware and organized. There can be a major backlash against Peterson and his followers. I think that a very strong public outcry will be necessary to alert Obama that every American retiree and pre-retiree is watching to see that this conservative scrooge has no influence on the president.

Years ago I read theories of why the US never had a socialist revolution. The answer was that (kicking and screaming) the employers and capitalists were forced to give workers a "share of the pie" and our consuming middle class was born instead of an overthrow of the capitalist class. Once again, this country stands at the edge of a potential revolution. The Mr. Big Bucks--like Peterson--and the über-wealthy are the targets. They are failing in their attempts to fool all of the people all of the time. "Let the retirees eat cake!' says Peterson from his insulated perch--but he should not be too sure that this country cannot generate a real revolution.

Mary Erickson

Albany, CA

Thanks, this is a good piece but for one thing. Social Security is not an "entitlement" program. Social security is deferred wages. All workers except for federal employees (they have their own plan) pay into it, and we all draw from it when we retire. Calling it an "entitlement" is a rather large blunder, a blunder that many wonk types make repeatedly.

Medicare is not an "entitlement" either. Medicare is deferred health insurance. We pay into it while we are working and use it when we reach the required age. Please don't let the right-wing pinheads frame the language of debate!

Pat Fahy

Denville, NJ

The GOP’s balance sheet for America has two sides, with liabilities on the left, and assets on the right.

The problem is that on the left, there’s nothing right, while on the right, there’s nothing left.

Thank you, Ronald Reagan.

Just to be certain, let's put that last dagger in Social Security.

Thank you, Timothy Geithner and Government Goldman Sachs.

Are we nuts?

James A. Swanson

Los Altos, CA

Mr. Walker, former Comptroller General of the United States, is absolutely correct when he states there is actually no Social Security Trust Fund.

Starting back in 1985, Ronald Reagan began "appropriating" all excess (surplus) funds from Social Security and made them available to the Treasury to spend on other government expenses. To date, the transfer of such funds to the Treasury is done on a daily basis!

On the website of the Treasury, you can find total national debt stated as $10,759, 196,587,563.44 trillion as of February 12. You will note that the national debt is divided between public debt and intragovernmental debt. To make things easier, lets go back to December 31, 2008. On that date, the total national debt amounted to $10.699805 trillion. The total debt was broken down as follows:
 Public debt: $6.369332 trillion
 Intragovernmental debt : $4.330486 trillion

The intragovernmental debt is the amount of money our government has looted from all retirement funds and trusts, 140 in all. The total allocated to Social Security is $2.202886 trillion. This means the government has appropriated $2.202886 trillion from Social Security since 1985 and has spent it all! It's gone!

And also gone are the funds supposedly in the Civil Service Retirement fund, the Military Retirement Fund, the Railroad Retirement Fund and many, many others. The primary reason for this practice is to make budget deficits appear lower than they actually are. Honest, eh?

Another source of this amount is the actuarial page of the website of Social Security. It lists the amounts taken from not only the OASI but also the Disability Insurance account.

Sad to say but all the above is true and Mr. Walker, former also CEO of the Government Accountability Office of the US Govemnent is also correct.

Richard J. Mullin

Marion, NC

There should be a national pension for those who work for thirty years but not for the same employer. Why should my neighbor who worked thirty years for Edison get a good pension while I don’t because I ended up working for several different companies that added up to thirty years?

Social Security should be left alone and kept separate and untouchable from all other funds. Those of us who started paying into Social Security in the 1960s and 1970s were told we had no other choice but to pay into the fund and if we didn’t we were facing jail. So why would anyone think that it would be OK to pull the rug out from under us now?

Also, there are many ways to pay for the stimulus without screwing with Social Security. A tax on each stock market transaction of one tenth of one percent would generate trillions. Instead of giving tax breaks, we should tax any and all new jobs created.

To reduce the type of speculation that caused all of this economic demise we should increase the capital gains tax to 30 percent on all property sales that are not by homeowners living in the same house for several years. Capital gains is now 15 percent thanks to Bush, and there are too many loopholes and ways to get out of paying it.

Gary Amstutz

Lake Isabella, CA

Your article is timely and on target. After reading your article and Mr. David M. Walker's letter, it is clear that the Peter J. Peterson Foundation and others are vigorously endeavoring to dismantle the Social Security Trust Funds.

Mr. Walker's letter implies that the United States debt instruments held by the Social Security Trust Funds are worthless IOUs, although they are guaranteed by the United States government. According to the Social Security Administration, "Trust fund assets may be invested only in obligations issued or guaranteed by the U.S. government."

The argument about worthless IOUs presented by Mr. Walker and others is the same argument propounded by the Bush Administration during the Congressional elections of 2006--that was the year that Democrats won back Congress. During that election cycle, I attended a town hall meeting conducted by an US Representative from Arizona (Republican). In that meeting, the Representative attempted to make the identical point about worthless federal government debt in the Social Security Trust Funds; he was voted out of office.

Also, the point that you made about a base-closing type commission (a commission designed to provide cover for US Representatives and Senators) was confirmed by Mr. Walker's idea of a "Fiscal Future Commission"; it sounded very much like what you described in your article.

In the end, Mr. Walker's letter to The Nation just confirms the key points made in your article.

Keep up the good work.

John Scott

Cave Creek, AZ

After the 401(k) mess, you would have to be insane to put your faith in any private pension plan. I have an LA County pension plan that is pretty good, but I'm one of the last people to have that plan. Over the years, new hires were getting a smaller and smaller versions of that plan combined with 401(k)s. They wanted to buy me out, but I have always been suspicious of Wall Street, and wouldn't touch a 401(k). I was vested in Social Security, but LA county opted out of paying into Social Security, so my benefits there are limited. I would have been willing to continue paying into Social Security.

If I were a baby boomer with my 401(k) in tatters, I would be threatening Congress if they touched Social Security. Social Security may be your only option for retirement. Indeed, every American should threaten Congress if they touch Social Security, Medicare and Medicaid.

Any cuts should be in corporate welfare through the privatization of government services. Government does government cheaper than private enterprise.

Pervis James Casey

Riverside, CA

Mr. Walker and Pete Peterson are doing a wonderful service for the nation. Mr. Walker is one of our great patriots--someone with real courage. These men are highlighting the greatest risks our country faces: structural deficits and financial over-commitment. They are among the few with the courage to speak up about this honestly.

There is one huge gap in their argument, however, which Mr. Greider did not effectively address. That is the ridiculous levels of defense and homeland security spending, which are about 20 percent of government cash-basis spending, similar to the Social Security and Medicare/Medicaid categories.

Secretary of Defense Robert Gates recently said that the US Navy battle fleet is "larger than the next thirteen navies combined--and eleven of those thirteen navies are US allies or partners." We spend nearly a trillion per year on defense, veteran affairs, and homeland security.

Why? Terrorists? We lose 40,000 people per year in auto accidents. The real threat is a nuclear terror attack, such as shipping such a device in a container through our ports. Perhaps 10 percent of our current defense spending relates to that risk-- a terribly dangerous oversight on our part. We need to start from scratch with a real risk assessment across the board.

So who does the concept of fiscal discipline really threaten? Well, the real risk here is to defense spending, as that is not a mandatory program and is therefore provided for after Social Security. We should make the minor tax increases and spending reductions to keep that program able to deliver on its commitments for the next 100 years. The changes required are minor. The Social Security Administration estimates we could raise the payroll tax to 14.1% from the current 12.4% or alternatively cut payouts by 11%. The longer we wait, the larger these changes become. Let's split the difference or use any variety of creative solutions out there (e.g., raise the payroll tax cap to infinity, progressive indexing so the rich get lesser annual increases, etc.) and get focused on Medicare and Medicaid, the real threat.

The late, great Senator Daniel Patrick Moynihan said that the compromises made after the 1983 Social Security changes proved that lawmakers could still govern. We'll see if that is still true. If they cannot get the budget balanced by 2012, then let's all vote to remove every incumbent. As a matter of principle.

David Doney

Chicago, IL

I literally can't believe all the drivel that I have read in the letters posted so far. I'm 70 years old and my 401(k) just went south with the stock market (i.e., by at least 1/3). Reagan drove us so far in debt with his military buildup that it took Clinton eight years to climb out and cost the Democrats the Senate and the Congress. Yup, you all are correct, Reagan did drop the taxes on the billionaires and so did our hero Bush. Clinton had to raise taxes on the poor via the fuel tax and every other consumption regressive tax to make up for it. Ain't revisionist history great, eh fellers? I agree, both Reagan and Clinton deregulated the banking industry so they could make big buck$ investing in such secure things as oil, and according to Greenspan they would be able to make credit cheap by spreading the risk through other investments, oops. A gal makes beds at Motel 6 all her life and retires on $500 a month on Social Security, and you think she is stealing from the country, but our CEOS walk off with billions and we celebrate them as heroes and cut their taxes? Is there something in the water?

I wish that there was a floor under Social Security. One trillion dollars for that wonderful war in Iraq, and you want to give all us old geezers a shopping cart and a cardboard box to live in. Do we get a tin cup too? Look, the class war is over and the "rich" have won.

James L. Pinette

Caribou, ME

The problem with Social Security and the other entitlement programs that are so worrisome to Pete Peterson is that we accumulated adequate surpluses in Social Security to see the baby boomers through their retirement while for thirty years we allowed at least 50 percent of the nation's income to accumulate in the top 1 percent of earners and gave them massive tax cuts to boot. We funded the deficits in the income tax-funded budget that resulted from this policy by borrowing the surpluses in the entitlement funds, and those funds now have to be paid back. That means raising income and Social Security taxes now or in a few years, and that is what Peterson et al. object to. They've run off with the loot and don't want to give it back.

They and the Republicans are the ones who argued that supply-side tax cuts would increase the nation's wealth and tax revenues. They are the ones who have increased military spending but not funded those increases with tax increases. They are the ones who created the budget deficits that now threaten the system. And just as David Stockman once whispered to Bill Greider, they did it to bankrupt the New Deal so that we would not be able to spend any more on social programs.

I mean, Pete Peterson did not object to a 15 percent capital gains tax rate on the $1 billion he took out of Blackstone when it went public. He supported the threat, or was silent, when hedge fund managers said they would leave the country if Congress increased that tax to an earned-income rate. Moreover, this economy was running at a $13 trillion annual rate before the recession hit, so the ostensible $58 trillion shortfall in funding of entitlements represents a little over four years of GDP, while the time horizon over which that $58 trillion will come due is seventy-five years. Assume we produce only $10 trillion of GDP annually for the next seventy-five years. That is $750 trillion, and $58 trillion represents 7.7 percent of economic activity. Even in the current crisis atmosphere, the number $58 trillion should lose some of its power to scare people.

Robert Abbott

Gilbert, AZ

I have contacted President Obama and much of the leadership of both House and Senate and told them how to solve the problems of both Social Security and Medicare or healthcare. All without cutting benefits raising age or requirements and or taxes.

They don't want to solve these problems and want the excuse to raise taxes or in some other way take more from the people. Anyone who thinks either party wants to do what's right and fix these problems is very foolish.

My simple way is to start lotteries to fund these things. A well-designed lottery that has many small prizes so people can actually win once in a while and have a chance to win big would be supported beyond belief. If people knew that these supported these important progams and took away the need for more tax money, they would play.

Our government has stolen more from Social Security than we think because had it invested the funds at compound interest instead of spending them, the program would remain sound into the future. It would rather steal more of the people's money in the form of taxes and do less for the people instead of actually doing something that would support these programs and let the people invest in the support of them with a chance to win.

They can't use the excuse that this would be gambling, because gambling is all around us. We gamble every time we vote and with every tax dollar we give them to spend. We have gambled for years our government would work for us, and we keep losing.

Not one person in Washington ever thinks or talks of ways to support the government other than taxes. They complain we don't save constantly and blame that for our problems. We don't save because banks pay no interest, forcing us to the markets to lose our money. I have suggested they sell stock in the government and pay a good rate of interest on it. People need a safe way to save and invest and would gladly buy stock and support the governement. They would rather give our money away and borrow from other countries than to pay a good interest rate. A solvent government and safe savings and investments for the people would do more for the country than saving all the crooked banks and markets we have.

James C. Barnes

Port Charlotte, FL

I do not disagree that Ronald Reagan screwed this country. He did so among many other things by (1) drastically reducing the progressive tax rate (the highest bracket went from 75 percent to 35 percent), which changed the behavior of the leaders/CEOs from gaining a long-lasting name (by growing the company and the community) to making a quick buck, stored in tax havens such as Bermuda; and (2) pushing the country too much to the defense sector (with the result that most companies left the consumer market to serve Uncle Sam). But I disagree with members of the left-leaning elite like you as well. Social Security as it is run is (1) a Ponzi scheme where money is taken from one generation and given to other and (2) a white person's welfare (where most folks have been getting much more than what they put in) disguised as something they deserve (most of these guys think of blacks when welfare is mentioned, but would argue that they deserve all the money that they are getting). Any country that adapts such measures to appease the voters is bound to fail and disintegrate. We are unfortunately seeing the first stage of it. As a visible minority, I am worried if the German experience of the 1930s would follow.

Dr. P.A. Ramamoorthy

Cincinnati, OH

I find it amusing that the author thinks a government-run pension program would be a better investment vehicle than a 401(k), irrespective of whether there is mandatory savings. Certainly it would be free of direct Wall Street machinations, but do we really trust a Congressman to manage our finances any more than our employers?

Private pensions are only as good as the company you worked for, and any government-run program would have much more indirect and political ways of making individuals make bad investments. Would a government-run pension/retirement plan promote "green" investing? If so, that would be encouraging middle-class individuals to invest in an area better suited to venture capitalists and other rich investors who can afford to lose a high percentage of their investment to a young, unproven business. Would a government program promote investing in the home state of the senator in charge of the committee overseeing said program? Any government program would have significant perverse incentives to it as well, I think.

Also, to pretend that Social Security is not a major issue is quite delusional. The problem is not current retirees, it is those who are about to retire and who will be retiring over the next decade. Trying to blame past government spending and tax cuts for the breakdown of a Ponzi scheme is quite silly. When Social Security started, there were a large number of people who had never paid Social Security taxes who began receiving benefits immediately, i.e., the top of the Ponzi scheme. Such a scheme works as long as the new generation of the pyramid is always at least as wide, or a little wider then the previous generation. That is why Social Security is a long-term problem.

Government deficits can rapidly be erased, as we saw in the 1990s under the bipartisan and more moderate rule of Bill Clinton and the Newt Gingrich Republicans. But a pyramid with a smaller base than peak will never stand up. If you need more information about Ponzi schemes, I would direct you to a Mr. B. Madoff, currently in a penthouse in New York. He should have plenty of information about the creation, management and eventual windup of a Ponzi scheme, and he currently has quite a bit of time with which to teach you all about them.

Brent Lundberg

Dallas, TX

Mr. Greider says: "Ever since, working Americans have paid higher taxes on their labor wages--12.4 percent, split between employees and employers. As a result, the Social Security system has accumulated a vast surplus--now around $2.5 trillion and growing. This is the money pot the establishment wants to grab, claiming the government can no longer afford to keep the promise it made to workers twenty-five years ago."

What $2.5 trillion "money pot" is he talking about? The Social Security surplus is debited to its trust fund as non-negotiable treasury bills and the cash is rolled over into the General Fund to pay for yearly appropriations voted upon by Congress such as roads, bridges, welfare etc. There is no money in this "money pot" or trust fund, only federal IOUs.

Mr. Greider should know this. If he does not he is ignorant. If he does, he is at best, disingenuous.

This whole article is based on the false premise that there is money to be stolen where there is none.

Robert J. Lovretich

Niceville, FL

There are no guarantees and there are no rights. That is a made-up fantasy that is promulgated by all governments in all countries. The money paid as payroll tax is a mandatory payment to Uncle Sam and the government is able to do what it likes with it because it is in possession of it. No one is going to rise in anger or demonstrate in front of the Capitol regarding any changes to Social Security. No one thinks that money is being set aside for them because it isn't. Social Security should be looked at as a gift because it is. Because it is a gift one should not perform a social faux pas by complaining about it.

Robert Karasek

Washington, DC