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Each year nearly every congress-person in both parties
claims they want to save social security.
But every year they allow every penny of paid-in surpluses
to the trust fund to be spent on other stuff.
The total amount siphoned-off from the social security trust
fund to date is $2.2 Trillion,
with an additional 2 Trillion siphoned from other trust funds,
With zero plan to pay anything back to support future retirees.
Trust fund surplus siphoning continues to help camouflage
So budget surpluses can be claimed when, instead, huge deficits were created,
Or smaller deficits can be claimed than is really the case.
This camaflauge helps politicians get elected,
Drives up debt like crazy
And destroys social security and other trust funds.
And - destroys citizen trust in government.
Total Federal Government debt at end FY 2008 was $10.6 trillion, according to the.Federal Debt Report. Of that total, according to the Treasury Dept., $4.2 trillion was owed to trust funds, because the general government siphoned-off all surpluses that should have been kept in those trust fund accounts for specific use - - like federal employee and senior pensions. After siphoning off trust funds for other uses they placed non-marketable IOUs in the trust accounts instead of marketable assets - - with no budget to pay-back the trust funds.
Trust funds include many different special trust accounts: such as the social security trust fund, the federal employee retirement fund, federal hospital trust fund, railroad retirement fund, military retirement fund, employee life insurance fund, etc.
The practice of siphoning-off trust fund surpluses to spend on non-trust stuff is a way of camouflaging general government deficit spending, making it appear to be in surplus when it's really in deficit - - - or making it appear that a huge deficit is just a modest deficit. Politicians like this practice, but such is dangerous to the financial health of future retirees and our young generation - - and such undermines citizen trust in government..
Note the left chart showing exploding debt owed to trust funds - - an increase of $3.4 trillion during the past 17 years - - or 428% higher.
After bragging in the late 1990s about budget surpluses, when in fact the general government was in deficit (not surplus) despite the highest tax revenue share of the economy in peace-time history, we know they were claiming trust fund surpluses as their own. They were understating their claimed deficits by mixing in surpluses of trust funds.
According to the above chart, 4.2 trillion of the general federal government government's $10.6 trillion debt is owed to the group of trust funds.. As we will see below, $2.2 trillion (of that $4.2 trillion) is owed just to the social security trust fund. The government never budgets paying back its $4.2 trillion debt to trust funds with its own money. Why should we allow FICA and trust surpluses to be siphoned-off to pay for programs of the general government for other stuff, like welfare, military, education, etc. - instead of retained in marketable assets for the purposes intended? Its smoke and mirrors. The general government should run its own surpluses for that purpose, not siphon from others.
Using trust fund surpluses to for other stuff is equivalent to - 'a son siphons-off surpluses in his mother's retirement account and uses same to pay for a world cruise or pay down his own credit card dedt - - and then gives her non-marketable IOUs which contain zero pay-back plan, and instead of paying interest in cash (as he would have to do to a credit card company) he will just slip in a few more IOUs to her account - - while telling others that he is a good guy because he is paying off debt and at same time he is saving her retirement account.' Of course it should be just as wrong for a government to self-deal with social security trust funds as it is for a son self-dealing in his mother's retirement account.
Bottom-line: when someone says we are going to use surpluses to pay down debt - - then, you should say whose surplus funds are you using - - your own (of which you have zero), or trust fund surpluses funds that are not yours? Answer: trust funds. And then ask, where is the budgeted plan to repay the trust funds trillions siphoned-off to date to help save social security, etc.? Answer: there is none. Lastly ask, what is the true surplus of the general government if you don't count trust funds as if they belonged to the general government? Answer: the general government has no surplus - - its still running a big deficit. If we want debt reduction (and we do) then its total debt reduction, not just shifting debt from the public to trust funds.
Recognizing a picture is worth a thousand words, a simple graphic follows - -
HOW CAN THEY SAY THEY WANT TO SAVE SOCIAL SECURITY WHEN THEY ARE RAIDING IT?
At the left is a chart showing the growing amount the general federal government owes the Social Security trust fund at the end of each year shown - the increase being that additional amount of new paid-in surpluses (that came in from such payroll deductions as FICA) but were siphoned-off by the general government as fast as it arrived, and spent on non-pension things - and, every penny is gone, never to be available for its intended purpose - - senior social security pensions.
The Blue bar in the chart - As of the end of fiscal year 2008, $2,150 billion ($2.2 trillion) of in-coming surpluses from workers have been siphoned-off to-date from the Social Security trust fund - a 700 % increase of $2 trillion since year-end 1991 - every penny spent on non-pension stuff. ($183 billion of that was siphoned-off in just one year, FY 2008). Non-marketable IOUs were put in the trust in exchange for the cash taken out - - with zero plan budgeted to redeem those IOUs in order to repay in cash or marketable securities the surpluses taken.
Such is illegal in the private sector, misleads citizens of what is and is not a surplus, and creates distrust with government controlling trusts, and makes a mockery of statements like 'saving social security'.
When a firm or a government takes money out of my (or my working kid's) pension fund
for its own spending, and put in non-marketable IOUs to cover their tracks and then brag
about how efficient they are, the word is 'siphon'. Should politicians be allowed to
siphon from trust funds? I hope more of the public becomes educated on this. Then we will
have to see how they would vote regarding agreeing the general government continues to
'siphon' from their pension trust fund and with no budget to pay-back that siphoned-off to
date, while at the same time yelling, 'save social security'.
Question: how could federal government politicians and employees in the past claim a general government surplus when total federal debt increased to another record high each year? Answer: despite what they said, they ran deficits not surpluses as they siphoned-off and consumed trust fund surpluses which don't belong to the general government. That practice is equivalent to an attorney siphoning-off money from his elder client's retirement savings and using it for his own personal consumption and credit card payments while claiming he is running a surplus and saving her retirement account. Bottom-line: there never was a surplus. Now they quit talking about surpluses, yet the true deficits are still grossly understated. Gamesmanship continues.
Question #2: if part of the social security taxes (FICA) workers and their employers pay for building a surplus in the trust fund for their retirement is all siphoned-off by the general government as fast as it arrives and consumed for non-pension stuff having zero to do with pensions, how does this 'save social security first?' Answer: it doesn't
Question #3: does the Social Security Trust Fund have any real hard, marketable assets to show for past paid-in surpluses? Answer: It has NO real assets, according to Treasury Secretary Paul O'Neill in June 2001. Unlike private pension funds, the trust fund holds zero marketable assets even though workers paid-in cash surpluses. It contains only non-marketable bookkeeping IOUs for which no budget commits their play-back and no cash interest is paid. In 2002 the trust fund took in from social security payroll taxes of workers $596 billion and paid out to seniors about $456 billion - - meaning a cash surplus intake of $140 billion intended for future retirees - - but, every penny of that surplus was siphoned-off and consumed on non-pension stuff, instead of saving it in hard assets for future retirees - - and, more meaningless IOUs were issued to 'paper-over' the siphon.
I am concerned about rising debt being passed to our younger generation (now an all-time record high), and siphoning-off social security trust fund surpluses to spend on non-pension stuff. This is not the way to 'save social security first' or protect our younger generation and retirees, and certainly it's not the way to improve citizen trust in government.
Remember in the late 1990s when political leaders bragged to the general public "we ran more than $100 billion budget surplus in both calendar years 1998 and 1999?" They also said they wanted to 'save social security'. Listening to such rhetoric citizens might be misled to believe the federal government cut general spending so as to produce general government surpluses, and thereby save social security and reduce total federal debt. But, that was 'smoke & mirrors' - - as they did not tell the full truth, since they really ran an operational deficit (not a surplus) of $282 billion combined in those two years, since total federal debt increased $120 billion in calendar 1998 and increased another $162 billion in calendar year 1999. If one needs new debt to get through a year then a deficit resulted, not a surplus.
What would politicians rather say for calendar years of 1998 and 1999, for example? Did they say they were really smart because they operated several hundred billion in surplus by cutting spending, or or did they admit to running an operational deficit of $282 billion? That combines to misleading the public by about a half trillion dollars. So, how did they design their accounting gimmick? Answer: they siphoned-off from trust funds (social security an other trusts) all $189 billion of trust surpluses in 1998 with another $228 billion siphoned in 1999 to cover their general government operational deficit spending on other things - - and every single penny of two year's of former trust fund cash surpluses totaling $417 billion is gone, gone, gone. And that was just for 1998-99. For 2000 and 2001 they siphoned off another $463 billion from the various trust funds, of which $272 billion came out of the social security trust fund). In 2002, 2003, 2004, 2005,2006 and 2007 such scam practices continued, as seen in the above data trend charts.
(for those using fiscal years instead of calendar years, Treasury Dept. data reports total federal debt increased $113 billion in FY 98 and another $130 billion in FY99 - - totaling $243 billion increase in debt, as debt soared from $5,413,146,011,397.34 at the end of FY97 to $5,656,270,901,615.43 at end of FY99. This proves operations ran a $243 billion deficit those years - - not a surplus. Yet for those two years politicians claimed a $70 billion surplus in FY98 and a $115 billion surplus in FY99 - - totaling $185 billion of claimed surplus. How can they claim $185 billion in combined surplus when debt went up $243 billion - - a huge $428 billion swing? Answer: they siphon-off surpluses from trust funds to cover their deficit spending on other stuff, and they don't count the funds they siphon off trust funds in their budget calculations they announce to their citizens via public media.). By the way, debt increased in 2000 and 2001 by another $151 billion, and those years were also claimed as surplus years.
The above for 1998-99 is provided to show how in the past when most claimed surpluses were achieved, when in fact deficits were created.
Trust in Government and the future of Social Security cannot be advanced by such actions.
For several articles with data this subject, see Trust Fund Report for FY 1999 - FY 2002
How can they say on one hand they want to save social security - while at the same time they raid trust fund surpluses - - and spend it all for non-pension things? How can they claim a budget 'surplus' if at the same time they increase debt? How can they say they want to 'pay-down' debt when they are increasing it?
Do you think we will soon hear the whole story
- - the truth - - something like the following?
(we use actual data for 1998 and 1999, since surpluses were claimed those years)
Picture the President, in 2000, going on TV and telling the American people: "We have a new 'truth-in-government policy, more transparency and openness', and that's why I make this address of 9 points - and add a picture-chart at the end:
I hope you appreciate our new attempt to be more open, and I hope you don't ask me why we didn't tell you the full story the first time or ask when we will stop siphoning out of the trust funds or pay-back that taken out to-date so we can really save social security, or ask if we in Washington would go to jail if we engaged in this pension fund siphon practice for private sector trust funds - - as such questions fall under our 'don't-ask-don't-tell policy."
Although the above is a satirical presentation, the numbers are real (right out of the U.S. Treasury Dept. published accounts, such as ftp://ftp.publicdebt.treas.gov/). You will note that I use the word "siphon-off" for spending trust fund surpluses for non-trust fund purposes, while Senator Ernest Hollings calls it "looting the trust", and Mr. Bartlett (formerly of Treasury) calls it "raiding the trust". Take your pick.
Raiding Mother's Retirement Account. Is that OK?
What the federal government is doing with the social security trust fund is equivalent to an elderly person's lawyer siphoning-off all cash surplus money from her pension savings account which she had labored to set aside, and the lawyer spending all for his own consumption - - while bragging that he is running a surplus for himself, and doing this in order to save her retirement account for her benefit. That lawyer also likes to brag he may use some of her retirement funds to pay-down debt he owes to others, such as his credit cards. Whose surplus savings was it - - his or his elderly client's? Would you say that lawyer is responsible and trustworthy, and exercising proper fiduciary actions? What should be done about him?
What would happen to officers of a company if they siphoned-off funds in an
employee's pension trust account and spent it on their own things including some to reduce
the firm's own debt to others? Answer: that's against the law in every state.
I don't think many parents and grandparents want today's youngsters saddled with more IOUs and camouflage. So, why is the general government siphoning off retirement trust funds for non-pension use? Why do we allow it?
Although it sounds nice when a politician proposes spending 'so-called surpluses' on things like more teachers, the public must be told it's not lotto money or free money that just grew on a tree - - and, its not theirs to spend - - its funds intended by workers to be held in trust for future retirees - - its real cash money paid in by workers and their employers for their own retirement - - and spending it all today robs future retirees and generations.
Maybe a respected public official will go on TV and tell the American people the whole story. Telling it will not fix anything over night, but it might start the ball rolling to restore confidence and get on with a meaningful fix with full transparency and openness.
"egregious misconduct by the federal government," says US Judge, regarding trust fund - August 1999
Is the following not relevant to trust funds in general?
"I have never seen more egregious misconduct by the federal government," said U.S. District Judge Royce C. Lamberth - as he ordered payment of $625,000 for the "disobedience" of Interior Secretary Bruce Babbitt and former Treasury Secretary Robert E. Rubin in withholding documents of a lawsuit involving the mismanagement of Indian trust funds.
Judge Lamberth had sought the records and other materials involving more than 300,000 individual accounts and 2,000 tribal accounts managed by the Interior and Treasury departments. The departments manage money from, among other sources, land settlements, royalties from minerals and other resources, and companies that use Indian land. Officials have not produced accounting records or statements to verify how much cash has been collected. An audit by the accounting firm Arthur Andersen said the Bureau of Indian Affairs could not account for $2.4 billion in transactions involving the funds. (see article By Jerry Seper, 8/11/99, front page of THE WASHINGTON TIMES)
The above begs the question: if such willful misbehavior can occur involving the government's handling of Indian trust funds, why should citizens not raise the question of concern regarding other trust funds, such as the Social Security Trust Fund - - especially considering the general government and the Treasury Dept. control the books?
The Trust Fund Report, starting at the top of this page at http://grandfather-economic-report.com/deficit-trusts.htm, describes in easy-to-understand terms the way the general government siphons-off all incoming surpluses of the social security trust fund (and other trust funds) and spends it all on other stuff having zero to do with the trust funds - - putting non-marketable IOUs in the trust fund to paper-over their dipping in the 'cookie jar' - - siphoning while yelling, 'save social security,' with no budget plan to pay back that siphoned-off to-date. Last year the government claimed a budget surplus, but they counted trust fund surpluses as if it were their own - - while in fact the general government ran a deficit, not a surplus.
UPDATE > As of Jan 2008 the present value of un-funded Social Security and Medicare spending has risen to $99.2 Trillion (see debt summary report).
The general government should keep its hands out of the trust fund 'cookie jars', and start budgeting reduced general spending to pay-back that siphoned from trust funds to date.
I hope the media will work harder to broadcast the issue,
to help more citizens become more knowledgeable.
Thanks for reading.
Acknowledgments and Links
I would like to thank Professor Gerald Dwyer of Clemson and the FRB for his unsolicited February 1999 review of the material on this page, including his statement: 'I like your discussion of the "surplus." It's very pointed and quite correct.' You can view a summary of one of his own publications via the Federal Reserve Bank's Economic Review titled 'The Federal Government's Budget Surplus: Cause for Celebration?'(a pdf file) at http://www.atl.frb.org/publica/eco-rev/rev_abs/3rd98.html .
This author wishes to commend Senator Ernest Hollings for his efforts to broadcast his concerns in this area, such as reported February 5, 1999 in the N.Y.Times - 'Dipping into the Social Security Bank'. The thrust of the Senator's article was on the mark in his call to 'stop looting the trust fund for spending programs'.
AND, FINALLY AN HONEST CONFIRMATION
Do you need more confirmation that trust fund surpluses are gone? Finally, we have a top official honest enough in public confirming the accuracy of this report: 'Social Security Trust Fund has NO Real Assets', per Treasury Secretary Paul O'Neill on June 10, 2001.
Additionally, I want to commend Thomas Smith for his review of the page you are now viewing and expanding same in more detail in his report, 'Fixing Social Security - Just Another Fraud'.
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