Raiders of the lost fund: The story of Social Security
May 7, 2013
The Social Security program originally drafted by President Franklin D. Roosevelt was set up as a trust fund, and it was meant to supplement the golden years of American citizens. The money removed from paychecks was secured in a trust, invested and then distributed to retirees when the time came.
A good idea thought many and the fact that the funds would be squirreled away meant peace of mind that the money would always be there.
As governments go, however, we know that where there is money, there are usually government hands reaching to grab it.
Those “hands” came in the 1960s when President Johnson created the Unified Budget to disguise the real cost of the Vietnam War. Johnson did not want to ask for income tax increases to pay for several ambitious government programs of that era (the Vietnam War, the Great Society, its War on Poverty and the NASA Space Race), so with a few bookkeeping changes, the dipping began. Government IOUs were put back where the money used to be and the new accounting method kept the spending as off-budget items so most people were none the wiser.
Magically, billions disappeared from the trust fund and just as magically appeared in the general budget to cover more government spending.
What is good for the goose was also tempting for the other ganders, and raiding the social security trust fund became common place for future Washington bureaucrats.
To buffer the fund, President Clinton pushed for a tax increase on Social Security benefits and got them. He then proceeded to raid the fund on multiple occasions to the tune of more than half a trillion dollars during his eight-year tenure. He then claimed to have balanced the budget. Clinton supporters still claim he balanced the budget but fail to recognize he did it only by raiding a fund that was supposed to be in trust.
Not to be outdone, Bush raided the fund of $1.5 trillion during his administration, of which a good portion of that money paid for our two military excursions to the Middle East.
And so goes the fund today. Social Security is now jammed full of government IOUS, which, according to Washington, are as good as cash.
The bigger question now is how good is that so called “cash” and why the heck did they raid the fund in the first place?
This article expresses the opinions of Marc Cuniberti. He hosts “Money Matters” on KVMR FM 89.5 and 105.1 FM at noon Thursdays. His website is http://moneymanagementradio.com.