Congress’ great Ponzi scheme
By: Celia Murray; Columnist
Many believe that the true greatness of a society is measured by how well that society takes care of its members who are least able to take care of themselves – children, the poor, the sick, and the elderly. Franklin Roosevelt’s Social Security Act was an attempt to limit the dangers to those, the most vulnerable among us, and his advocacy for the protection of the elderly rates him as among the greatest of American presidents.
Under the Social Security system, payments to current retirees are financed by a payroll tax on current workers’ wages, half directly as a payroll tax and half paid by the employer. The 1939 amendments to the Social Security Act established a trust fund for any surplus funds with the Secretary of the Treasury being the trustee.
For decades, the fund has taken in more money than it has paid out in benefits. Unfortunately, at the same time, the Treasury Department has continuously borrowed money from the Social Security trust fund to finance other government operations. When (not if) the surpluses dry up, as they are doing now because of an aging population and falling payroll tax revenues (due to unemployment), the government will be forced to borrow additional money from China to finance operations. And, at some point, the Treasury will have to start repaying the billions it has borrowed from the trust fund over the past 25 years, driving the nation further into debt or forcing Congress to raise taxes.
Al Gore was routinely ridiculed by the right during his run for President in 2000 for his proposal that Social Security entitlement trust funds be put in a “lock box,” thus preventing Congress from raiding the funds to pay for its pet projects at the expense of future generations. We should have listened to Al. For the next eight years, Congress and the Republican President treated those surplus funds like a free lunch, eating away at the future in order to avoid raising taxes on the wealthy.
The war in Iraq, Bush’s tax cuts for top income earners, and Congress’ record spending have bankrupted Social Security. The damage has now been done and the piper has to be paid. The Social Security system, if run by a private business, would result in arrest, prosecution, and imprisonment for operating a Ponzi scheme, i.e., Bernie Madoff. In the real world, taking invested funds (in the form of Social Security taxes), paying current claims, and skimming the rest for other purposes is called embezzlement.
However, when the government does it, it is simply politics. In either case, the math is the same – the scheme is unsustainable. Congress routinely acts in its own self interest, hijacking essential legislation just to load it with amendments to haul pork back home to solidify a death grip on power.
Congress must now set aside this obsession with self-preservation and, for once, do the people’s business; that is, put the interest of their constituents above their own and address the critical needs of Social Security.
Otherwise, we will all pay the price in lowered benefits, a longer wait for checks, and higher taxes for everyone. More importantly, we will have demonstrated that we are not truly a great society – one that looks after its humblest members.
Celia Murray is a member of the Morgan County Democratic Party.
PRINTED IN THE APRIL 9, 2009 EDITION