Apart! And reveals it to be
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| FIGURE 43 (continued;
legally compel another generation to supply it with what it thinks it "needs"? Is it based on the premise that the next generation will supply that generation with what it thinks it needs?! How could a panel of "experts" come up with such a ludicrous thesis? But wait... it gets worse! Current Cost Financing "The current cost method would be unacceptable for a private pension" we are told, (Figure 41, [b]) "but it is a sound alternative for OASDI because the government has the continuing power to tax future workers in order to pay benefits in the future for those who are now working.". More proof that Social Security taxes are not levied "for the general welfare of the United States"! This statement alone proves that apparently no one on that committee had the foggiest idea of what they were talking about. For one thing "current cost funding" means that no funding whatsoever takes place!7 All the money that comes in, goes out. Oh, some of it might stay in the goverment's checking account for a month or so, but that hardly constitutes "funding"! On this basis defense spending can be said to be "current cost funded" as well as the spending for the Justice Department and the S.E.C. Does the government make gradiose claims that the S.E.C., the Justice Department and all other government departments and agencies are equally "current cost funded"? The development of "current cost funding" was obviously done to confuse the public into believing that "funding" was taking place when 7 Funding means to set money aside out of which a future liability can be paid. Since no money is being set aside to be used later, no "financing" or "funding" can be said to take place. such was not the case. It illustrates the lengths to which the Federal government will go in order to delude the public as to what is really going on. The Committee employs this concept so the public and the media can continue to be fooled. What the Committee should have said is, "Social Security is not funded on any basis whatsoever, and all talk of funding* has no more relevance to Social Security than it has to defense spending or the F.B.I. So let's drop all pretenses that Social Security is 'financed' or 'funded' on any basis whatsoever. Such terms have no meaning when applied to Social Security and can only contribute to the public's confusion regarding the program." The Committee should have said, "Money comes in and money goes out —period and the government will hope and pray that it can continue to coerce the public into paying what the politicians have irresponsibly promised."8 This Book Explodes Another Committee Misconception Of course, this book knocks into a cocked hat the committee's belief that while "the current cost method would be unacceptable for a private pension (it) is a sound alternative for OASDI because the government has the continuing power to tax future workers..." * The 1983 Report put it this way — "Over the years, the original emphasis on building up and maintaining a large fund was reduced. Gradually, the funding basis shifted, in practice, to what might be called a current-cost or pay-as-you-go basis. The intent under such a basis is that income and outgo should be approximately equal each year....". This book proves9 that the government has no such power once the public discovers the truth and learns how to stop paying! Since this book will undoubtedly cause millions of Americans to stop paying Social Security taxes, the Committee's admission proves and establishes that "current cost funding" is not a valid alternative and, therefore, Social Security cannot be responsible (on any basis) for saving Americans "from the rigors of the poor house" — the very basis upon which the program was illegally found to be constitutional. The Committee's comments on the "trust funds" themselves are also illuminating. The Committee states that if Social Security collections were, indeed, invested in trust funds, these trust funds would have to be (Figure 41, [c]) "one or two trillion",16 and would "almost certainly go into government bonds because they are considered to be the safest investment". (Figure 41, [d]). Considered safest by whom? The reason that they would have to go into government bonds is that by law that is the only "investment" that can be made. Can the government buy stock in General Motors or IBM? Of course not! But a government's "investment" in its own "bonds" is no investment at all! (This is explained fully on page 217.) Committee Admits Social Security Founded on Fraud Note, however, the Committee's comments (Figure 41, [e]) ridiculing the importance of a trust fund: "... * Along with my other book, How Anyone Can Stop Paying Income Taxes. 10 Social Security actuaries had already established that the unfunded liability in 1974 was $2.118 trillion. (See The Biggest Con, page 75) So the report that the trust funds would need an off-handed "one or two trillion" was an obvious attempt to minimize the amount the fund actually needed. the value of such bonds, however, depends on the power of the government to tax in the future and it would be, therefore, no really greater security behind the system than it is today.". In other words, the program is no better off with a "reserve" than it is without one. This simple statement explodes the myth originally promoted by the government concerning the value and reliability of a "gigantic" Social Security "reserve". And when the Committee states that a belief in a "reserve" made up of government bonds is actually an illusion, they are admitting that the government sold Social Security to the American public and to the courts on the strength of that illusion. All Government Trust Funds An Illusion The Committee's admission that government bonds held by the government amount to having no bonds at all, verifies that those programs backed by such "assets" are actually backed by nothing at all. Note, for example, Figure 44 which is an excerpt from the 1982 "Statement of Liabilities and Other Commitments of the United States Government" as of September 30, 1982. This schedule shows that as of that date the government claimed that various government agencies held approximately $208 billion of such "assets" supposedly as financial backing for various government projects. All such "bonds" (as the Committee explains) are meaningless, and merely deceive the public concerning the actual financial soundness of all of these programs. This report shows that the Federal Deposit Insurance Corporation owns $13.3 billion of such FIGURE 44 Section I Schedule 2 - The Public Debt as of September 30, 1982 (In millions) Public debt securities held by— Amount of public debt securities •utstanding Government accounts: Legislative Branch: Library of Congress........................... J86 United States Tax Court: Tax Court judges survivors annuity fund..... ! The Judiciary: Judicial survivors annuity fund............. 73 Funds appropriated to the President: Agency for International Development.......... 29 Overseas Private Investment Corporation....... 669 Bequests and gifts—disaster relief........... 1 Department of Agriculture: Milk market orders assessment fund............ 1 Rural Telephone Bank.......................... 3 Reforestation trust fund...................... 106 Other......................................... * Department of Commerce: Federal ship financing fund, revolving fund........................................ 147 Fishing vessel and gear damage compensation fund........................................ 4 Uar-risk insurance revolving fund............. 10 Gifts and bequests............................ * Department of Defense: Department of Defense—Military............... 5 Department of Defense—civil: Inland waterways trust fund................. 55 * Department of Health and Human Services: f Federal old-age and survivors Insurance 1 trust fund.................................. 11,427 Federal disability Insurance trust fund....... 6,753 Federal hospital Insurance trust fund......... 20,800 Federal supplementary medical insurance trust fund.................................. 5.874 Other......................................... 13 FIGURE 44 (continued) Department of Housing and Urban Development: Federal Housing Administration fund........... $2,559 Special assistance functions fund............. 1 Participation sales fund...................... 1,143 Guarantees of mortgage-backed securities fund 379 Low-rent public housing program............... 20 Department of the Interior: Deposits. Outer Continental Shelf Land Act.... 4.807 Indian tribal funds........................... 335 Preservation, birthplace of Abraham Lincoln... * Other......................................... * Department of Labor: Pension Benefit Guaranty Corporation.......... 26S Relief and rehabilitation. Longshoremen's and Harbor Workers' Compensation Acts as amended 12 Relief and rehabilitation. Workmen's Compensation Act within the District of Columbia..................................... 1 Unemployment trust fund....................... 9.644 Department of State: Foreign service retirement and disability fund 1,190 Conditional gift fund, general................ 1 Department of Transportation: Airport and airway trust fund................. 3,868 Aviation Insurance revolving fund............. 26 Coast Guard general gift fund................. * Deepwater port liability fund................. 2 Federal ship financing fund, revolving fund. Maritime Administration................ 37 Highway trust fund............................ 8.749 Offshore oil pollution compensation fund...... 27 War-risk Insurance revolving fund. Hart time Administration...................... $1 Department of the Treasury: Exchange Stabilization Fund................... 3.011 Assessment fund............................... 88 Other......................................... 1 Veterans Administration: Veterans reopened insurance fund.............. 487 Veterans special life insurance fund.......... 797 National service life Insurance fund.......... 8,311 Servicemen's group life Insurance fund........ 37 United States Government life Insurance fund............................... 356 General post fund, national homes............. 5 FIGURE 44 (continued) Environmental Protection Agency: Hazardous substance response trust fund....... \ 424 Other Independent agencies: ^ Federal Deposit Insurance Corporation......... » 13.334 federal Home Loan Bank Board: Federal Savings and Loan Insurance Corporation...............................• 5,159 General Services Administration: National Archives trust fun*................ 3 National Archives gift fund................. * Harry S Iruman Scholarship Foundation......... 40 Japan-United States Friendship Cowdssion.................................. 1» National'Credit Union Administration: National credit union share Insurance fund.. 1200 Office of Personnel Management: Civil service retirement and disability fund 95.858 Employees health benefits fund.............. 664 Employees life Insurance fund............... 4,680 Retired employees health benefits fund...... 1 Railroad Retirement Board: Railroad retirement account................. 1,190 Railroad retirement supplemental account.... 30 Small Business Administration................. 14 United States Postal Service.................. , z.5/2 Total held by Government accounts.......... $216,405 he public: Interest-bearing................................ $92?'J?? Nonlnterest-bearing............................. 1,151 Total held by the public................... $925.629 Total public debt securities............... $1.142.034 "bonds", presumably to "insure" savings deposits. This gives you some idea of the legitimacy of the government's claim that it "insures" bank deposits.11 In any case, the Committee admits that the initial premise upon which Social Security was based (the creation of a reserve based upon government bonds) was an illusion and the government now seeks to perpetuate Social Security by the creation of other illusions. Other Startling Committee Observations Next note the Committee's astute observation that payment of Social Security taxes (Figure 41, [£])"... has a very real affect on capital formation in this country ...". This observation certainly took a good deal of expertise! Obviously a system that collected approximately $75 billion in 1974 (the year prior to the study) or approximately 30% of all Federal revenues, must have a "real effect" on capital formation since, if this $75 billion had not been forceably extracted from the private sector, a good portion of it could have gone into investments, i.e. capital formation. Exactly how much is not known, but obviously a substantial reduction in capital 11 The government intends to make good on its "insurance" claims — not with the bonds it holds, but by the phony currency it may print to pay such claims. Such counterfeiting of currency doesn't meet these commitments, it means that the government will loot the deposits of some (through inflation) in order to meet its obligations to others. The value of such payments and deposits will, therefore, depend on how much money the government prints. As long as there are trees in Canada, the government can always print enough to "pay" its claims. Of course, this money "may not be worth anything when recipients get it" (see page 154), but this is obviously how Washington plans to "pay" its bills, including FDIC commitments. formation must occur whenever the government takes that much money away from the public. For comparison purposes it might be noted that the total amount invested by business and industry in new plant construction and equipment in 1974 was $157 billion, of which $20 billion was spent by public utilities. So if only 1/4 of what was collected in Social Security taxes in 1974 had been invested by the public, that would have been equal to the amount that all America's utility companies invested in new plant construction and equipment in 1974. Social Security Taxes Now Take Far More Out Of The Economy Than Private Citizens Save Total private savings in 1974 were $85 billion. Social Security collections alone, therefore, amounted to approximately 90% of all private savings. However, by 1982, Social Security taxes of $200 billion exceeded private savings by 40%! This must have a substantial negative effect on capital formation, even if we don't know precisely how much, due to the fact that such taxes are transferred back to the public who could, in turn, save a portion of them. Social Security taxes, remember, are paid by producers who might otherwise have saved a portion, while Social Security benefits are paid to non-producers who obviously use their checks for consumption purposes and not for savings. There is, of course, no way to know exactly how much capital formation is destroyed by Social Security taxes, but precise figures are not important. What is obvious, however, is that Social Security taxes must substantially reduce capital formation. Savings in America are now only 4Vz% of personal income — the lowest level in our history!12 Since capital is essential for jobs, it is obvious that the marked reduction of capital formation caused by Social Security has substantially reduced the number of jobs available in the private sector. So, when a Committee on finance observes that "... even with the current cost method, the OASI system has affected the capital formation of this country and will continue to affect it in ways that are not clearly understood at this time...", I must ask, "Not clearly understood by whom?" If members of that "finance" Committee did not "clearly" understand this simple issue then they had no right to be on it, or any other, "finance" committee for that matter. Committee Recommends Another Committee! Note the Committee's recommendation that yet another committee study this problem. I outlined the same problem in 1976 — what further study is required? The only further study required is a study on how to dismantle the entire program so as to cause the least financial injury to those who (unfortunately) have come to rely on it. The Committee also observed (Figure 42, [g]) that the weighting of Social Security benefits "represents society's recognition of 'adequacy' as a criterion of the plan and is a departure from the strict principle of individual equity"; that the "... Social Security pro- 12 With the possible exception of a few years following World War II when savings dropped to extremely low levels as the nation went on a buying binge. gram is necessarily a blend of social goals and individual equity"; and that "Maintaining the proper blend is very important if we are to sustain the workers' support of the plan". Just who determined the "adequacy" of the plan, the blend of "social goals and individual equity", and what expertise did such people have to make such judgements? More importantly, where in the United States Constitution is the Federal government authorized to determine a necessary blend of "social goals and individual equity"; and just what does it mean? The council further states (Figure 42, [h]) that in order to "sustain the worker's support" they have to "view their protection as being reasonably related to the taxes they pay". Since, at this point, Social Security benefits are not all related to current levels of taxation or to the prospect of even getting future benefits, the Committee euphamistically admits that workers must be tricked into "viewing their benefits as being reasonable" in order to "sustain (their) support". In other words, it isn't that the benefits are related to the taxes being paid, they only have to be perceived (by the suckers) as being related! |