On Aug. 14, 1935, 77 years ago, President Franklin D. Roosevelt signed the Social Security Act into law, and in 1939, the Social Security trust fund was created.
Much has been said and published concerning Social Security. Foremost in the deluge of information is that the U.S. government is pillaging the trust fund by moving the funds into the government’s general fund. It is rumored as well that without increasing taxable income or borrowing in the market, the United States does not have the funds to repay the moneys invested in U.S. Treasury Securities.
“Some critics have suggested that the lending of Social Security trust fund reserves to the Treasury represents a misuse of those funds. This view reflects a misunderstanding of how the Treasury manages the federal government’s finances,” according to an October 2010 article on the Center on Budget and Policy Priorities website.
The article suggests that the U.S. Treasury moves many funds in government accounts that have not been earmarked for specific use at a given point in time. The funds are used to pay government obligations in lieu of having to borrow in the market and increasing the deficit. Moneys from accounts held by the government are considered intergovernmental transfers and thus not considered a borrowing activity.
“When Social Security needs to start cashing in its holdings of Treasury securities to meet its benefit obligations, the federal government will have to increase its borrowing from the public, or raise taxes or spend less. That will be a concern for the Treasury—but not for Social Security, as long as the solvency of the federal government itself is not called into question,” the Center’s article states.
Social Security Trust Funds
The Social Security Board of Trustees provides an annual report to Congress. The latest was published on April 25 for 2011, detailing the receipts and obligations for the year.
At the end of 2011, the Social Security trust funds held $2.5 trillion in assets. During 2011, the fund received $699 billion, consisting of $482 billion in payroll deductions, $106.5 billion in interest payments, and other payments due. Social Security benefits during that year amounted to $596 billion. In total, the fund’s assets increased by $95 billion during 2011 from the $2.4 trillion at the end of 2010.
“Assets of the trust funds provide a reserve to pay benefits whenever total program cost exceeds income,” the report states.
Correcting Erroneous Beliefs
“The biggest misunderstanding out there relates to Social Security’s financial challenges. … But the fact is that Social Security isn’t going bankrupt, nor is bankruptcy really possible as the system is currently set up,” an Oct. 15 article on the Motley Fool website suggests.
Social Security has taken in more than it has paid out since it was established. Yes, Social Security benefits have exceeded the income from payroll tax contributions, but the report to Congress disregarded the interest receipts flowing into the fund annually.
“In short, to say Social Security is going bankrupt, you have to ignore its revenues. But by such a weird standard—ignoring revenues and seeing how long it would take expenses to drive tangible net assets to zero—the average member of the Dow would go ‘bankrupt’ in just under three months,” the Motley Fool article states.
For example, according to the Motley Fool article, large corporations, such as Microsoft Corp., United Technologies Corp., DuPont Co., Boeing Co., International Business Machines Corp., Pfizer Inc., Hewlett-Packard Co., Procter & Gamble Co., AT&T Inc., and Verizon Communications Inc., would be considered insolvent by now if they couldn’t include all revenues earned in their financial statements.
However, if the fund continues to pay out more in benefits than it receives, within time it may have to sell the Treasury securities. The fund’s report to Congress suggests that there are a number of options, including increasing payroll taxes, lowering benefits, or increasing the retirement age.
“With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations,” the fund’s report to Congress concludes.
America’s Retirement Funds Under Threat
“The money you pay into Social Security is not yours. Politicians can confiscate those dollars at their discretion such as when the Clinton Administration used the dollars from Social Security to balance the budget,” a June post on the Zero Hedge website states.
Actually, we are not only talking about Social Security, but also about the 401(k) or Individual Retirement Accounts (IRA).
The American government could learn from other countries about confiscating a portion of retirement accounts. Countries that have meddled with retirement accounts include Argentina, France, Ireland, and Hungary. These countries revamped their country’s private and public pensions.
In some instances, the government was seizing retirement accounts “in their entirety, and in others, taxing them to oblivion” according to an article on the Cash Money Life website.
Confiscation of Retirement Accounts
To be clear, the Cash Money Life article states, “Unless you have an IRS lien or other legal judgment against you, the US Government has no legal standing to seize the contents of your private retirement account, such as your 401k, IRA, Thrift Savings Plan, your self-employed retirement plan, or any other retirement plan.”
The article qualifies the above statement by stating unequivocally that the government can appropriate a 401(k), but has to either change existing law or create a new law. With current U.S. law, all three branches of government—Congress, the President, and the Supreme Court—would need to be involved for the aforementioned to be accomplished.
“And getting past the Supreme Court is where I see there being big problems,” the Cash Money Life article suggests.
Difficult to Ascertain Truth From Rumor
“The nationalization of the 401(k), also known as a ‘defined contribution plan,’ is the creation of Teresa Ghilarducci, a director at the New School for Social Research,” states an Oct. 15 article on the website of Morgan Gold, a gold investment company.
The Morgan Gold article states that in 2009, with funding from the White House, the Ford Foundation, and the Rockefeller Foundation, Ghilarducci made recommendations for a nationalized retirement plan. She proposed that all private sector employees should be members in a state operated retirement program.
The concept of Guaranteed Retirement Accounts was discussed in January 2010 with the Labor and Treasury Departments. At a later date, Internal Revenue Service representatives took part in the discussions.
“A small number of lawmakers are aware of the plot, Rep. Michele Bachmann, recently fired off a letter criticizing such efforts, to the Obama administration and warned against attempts by government to confiscate Americans’ retirement accounts,” the Morgan Gold article states.
Many articles can be found on the Internet concerning the above subject, but many are from investment companies trying to lure those with pension accounts into buying into an investment portfolio or gold or silver as a retirement nest egg.
“Browse and buy from our large selection of Gold and Silver bullion coins and bars at Morgan Gold or let us start you in a new Self Directed IRA Today,” the Morgan Gold article advises.
The Epoch Times publishes in 35 countries and in 19 languages. Subscribe to our e-newsletter.
Friends Read Free