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Social Security Going Bye-Bye

New -- 11 February 2011

 

With the Republican Party taking over the U. S. House of Representatives, and its offspring, the Tea Party demanding fiscal and/or conservative accountability... it’s becoming pretty clear that the Social Security system could easily become a target for any proposals in fixing the deficit. This is not surprising for many reasons, one of which is that in general Social Security is not a critical part of the average Republican’s retirement portfolio. Certainly not the politicians who control Social Security, in that Congress has had the foresight to have a separate, highly lucrative retirement plan in place for years for its members... such that they don’t have to really bother worrying about the future viability of Social Security. Accordingly, if Social Security does take a hit in being able to provide future benefits... it’s certainly no skin off their teeth.

There are numerous problems with Social Security, in addition to the fact that it has been from the outset a Ponzi Scheme, or that it currently accounts for roughly 20% of the massive Federal budget (i.e., about $708 billion). One of the prime problems is that the so-called “Social Security Trust Fund” is a great example of blindingly fraudulent smoke and mirrors. The $2.5 trillion contained in this “fund” are actually “invested” in U. S. Treasury Bonds. So, inasmuch as Treasury Bonds are simply how the government borrows money, it is in fact borrowing money from itself (i.e., the Social Security Trust Fund). It is then using the trust funds as the collateral to repay itself in order to simply operate. It means the U. S. Government has invested in itself, guaranteeing itself to pay itself back.

Succinctly put; there is in reality no trust fund. No trust... and certainly no actual funds. It would be equivalent to the average Jill borrowing money from herself to pay the mortgage, with a promise to pay it back later, and guaranteeing it with the value of the loan to herself. There is no new money here, nothing put aside for a rainy day, and absolutely nothing hidden under the mattress. (Although, in the Social Security system, it might be important to “pay attention to the man behind the curtain.’)

It is essentially an issue of theft. The money collected via FICA taxes over the past 25 years or so... the $2.5 trillion dollars accumulated thereby... has been “borrowed/stolen” from those who paid into the system. And now, it’s all gone.

There is a clever statement from the 2009 Social Security Trustees Report, to wit:

“Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public."

Succinctly put.

However... politically, increased taxation seems unlikely; additional borrowing from the public is probably inevitable, and the idea of reductions in “other” government spending is almost essential.

The good news... or the bad news, depending upon your viewpoint... is that for the last 25-30 years, the government has been methodically reducing social security benefits by the simple expedient of not keeping the retirement benefits constant with inflation. Oh... the government claims to be doing so, but in reality, the fraudulent government statistics quickly make out this claim to be a bald-faced lie.

Consider, for example, the Consumer Price Index (CPI), which supposedly measures inflation, and thus the necessary increase in social security benefits in order to maintain the purchasing power of the retirement savings. [BTW, any retirement program, even the ones that are allegedly fiscally responsible, are also doing the same thing: Using the same fraudulent statistics as a pretense of keeping pension benefits current with inflation, when in fact anyone with a fixed-plus-inflation income is simply being hosed.]

The CPI is intended to measure changes over time in the price level of consumer goods and services. As such, the annual percentage change in the CPI is used as a measure of inflation, and thus the CPI can be used to index (i.e., adjust for inflation) the real value of pensions... as well as wages and salaries!

The problem lies in the government methods of calculating CPI. In the last 27 years (since 1983), the CPI has been heavily manipulated in an effort to disguise the true inflation rate, and thereby eliminate its ability to measure the cost of living and thus to maintain a constant standard of living. The “new CPI” instead, makes assumptions about people settling for less, e.g., eating hamburgers instead of steaks.

This has resulted in a huge divergence between the CPI and the actual inflation rate. See, for example, Shadowstats, which shows the misleading CPI index against an “SGS Alternate”. Over the last thirty years, inflation rates reported by the government and the subservient media indicate inflation rates of roughly 3 to 4%, and in general, never really exceeding 5%. However, the SGS Alternate (i.e., reality) has inflation rates ranging from a minimal value of roughly 3% to a high value of ~13%. This makes a BIG difference in Social Security benefits and how they are calculated.

To illustrate this, assume for the moment, the following scenario: A man retires on Social Security so as to begin receiving benefits in January, 1990 -- at a benefit rate of $1,000/month; while his neighbor retires so as to begin receiving benefits in 2000... at the same benefit rate. The following table shows how their benefits increase according to the CPI and the “SGS Alternate”... the latter being the REAL purchasing power index.

Year Monthly CPI Monthly SGS Monthly CPI Monthly SGS
1990
$1,000
$1,000
1991
$1,031
~$1,080
1992
$1,061
~$1,130
1993
$1,090
~$1,220
1994
$1,119
~$1,300
1995
$1,147
~$1,340
1996
$1,185
~$1,520
1997
$1,206
~$1,590
1998
$1,225
~$1,720
1999
$1,258
~$1,830
2000
$1,300
~$2,050
$1,000
$1,000
2001
$1,321
~$2,100
$1,016
~$1,100
2002
$1,352
~$2,390
$1,040
~$1,160
2003
$1,377
~$2,690
$1,059
~$1,300
2004
$1,422
~$2,870
$1,094
~$1,430
2005
$1,471
~$3,070
$1,131
~$1,520
2006
$1,508
~$3,910
$1,160
~$1,760
2007
$1,570
~$4,300
$1,207
~$1,960
2008
$1,571
~$4,780
$1,208
~$2,150
2009
$1,614
~$5,380
$1,260
~$2,260
2010
$1,638
~$6,400
$1,260
~$2,690
Average
$1,308
~$2,550
$1,129
~$1,670
Annual Totals
$329,592
~$644,000
$148,992
~$220,000

Numbers based on Shadowstats Inflation Calculator.

The older retiree has lost to inflation ~$4,750/month in current benefits or about 75% of his 2011 purchasing power, based upon his social security (and/or any other pension, wage, salary, or other benefit). The younger retiree has lost about $1,430 or about 53% of his purchasing power from any similar sources... all because the government wants to hide the true rate of inflation. Also worth noting is that the older retiree (and his heirs) have lost some $315,000 in raw cash... but of course, the old fart would probably have spent it if he had his hands on it. But then again... The younger dude, meanwhile, has dropped a mere $70 g’s... and he probably had more to spend it on.

The end result is that the Republicans, their Tea Party and Democratic confederates really don’t need to cut Social Security. It’s being slashed to ribbons even as we speak.

Social Security is going the way of species unable to compete and thereby becoming extinct. Add in Medicare and the like and the handwriting is on the wall... has been on the wall for several decades. The very idea of trying to prevent abject poverty in old age for many citizens is simply that such an idea is not going to see daylight... ever. The rich will continue to get richer, and the poor will get poorer. It’s nothing short of survival of the fittest*.

*And where “fittest” appears to be very close to high levels of “moral flexibility”.

But... before each and every one of us gets too outraged, please note the following:

If the government had NOT pulled off this scam... the Social Security Trust Fund (not to mention every other pension plan in existence) would be in far worse shape than it is now. Just multiply the number of people receiving Social Security or other pension benefits by these values to get a rough estimate of just how bad things really are. The Social Security Trust Fund could have a deficit of more than $5 trillion. Add other pension plans... and there would likely not be a viable pension plan still in existence.

[Of course... this added $2.5 trillion is really only two or three bailouts to the banksters... so perhaps this is not an insurmountable problem. Just eliminating Goldman Sachs alone could probably save the Federal government a half trillion or so.]

There has in fact been for the last 30 years the certainty of the lack of viability in the System (Social, Medical, Pension, etceteras). It’s been public knowledge, and thus the motivation for the many efforts to “fix” the System. It’s just that the fix was primarily a consistent lowering of maximum benefit amounts (as based on individual monies contributed to the system), and equally if not more important, changing the stats on inflation so as to relieve the System from immediate failure. The plan thus became one of inflating ourselves out of a nasty problem.

The argument was in fact, that a wage of only 30 to 50% would be better than NO wages. And inasmuch as the demographics of the United States were only destined to dramatically increase the damages, no matter what... one can begin to see that mathematically there’s just no hope... and never was. The System is and has been literally bankrupt for a long time. It’s just a matter of time before it becomes sufficiently apparent to enough people to cause the System to completely collapse.

Some other real statistics include:

The current average retirement benefit is $1,117 per month to 36 million retired workers (as of December 2009).

Social Security also provides survivor’s benefits to 6.4 million surviving children and spouses, and disability benefits to 9.7 million disable workers.

Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) together account for 21% of the budget in 2010, or $753 billion... $468 billion alone to Medicare.

The Defense Budget is also roughly 20% of the budget... although it might well be notably higher than that... if one includes benefits for Veterans, for example, as well as other hidden costs.*

[*The ability to hide things in accounting is really quite phenomenal.]

Still... the old folks are picking up a cool $1.1 to 1.2 trillion. Keep in mind that the FY 2010 budget is projected to spend $3.6 trillion... so the old folks are getting roughly 30 to 40% of the federal budget for their old age... literally... even while they constitute only roughly 12% of the population.

BTW, Shadowstats also does unemployment statistics... such that the current claimed unemployment rate of 9 to 10% is more realistically 22-25 percent... the latter being comparable to the Great Depression in the 1930s. It took a World War to get us out of that one. It may take, as a minimum, a War Against Outsourcing to get us out of this particular depression.

Either way, kiddies, it’s time to wave Bye Bye to Social Security. If not now... soon.

Sigh.

 

Social InSecurity

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Infernal Revenue Service

 

               

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