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Copyright c 9-17-2005 by Raymond Uhric

Federal Reserve Chairman Alan Greenspan’s testimony to Congress on February 25, 2004, was a perfect example of the fundamentally flawed premise of the entire social security/Medicare funding debate. Greenspan told members of the House Budget Committee that we “don’t have the resources” to fulfill the government’s promises to the American people regarding social security and Medicare. Is this breach of contract really necessary? Is it true that we don’t have the resources?

On the other side of the debate, the Democrats say the funding problem is exaggerated by the Republicans, in fact, they claim there is a surplus. But, if there is a surplus, why was the social security retirement age raised? Why wasn’t this surplus used to return the age for social security retirement to where it was before it was raised in 1983? These questions are never properly discussed.

There are two major omissions that render the past and current social security funding debate almost meaningless. The first major omission: Alan Greenspan (and many others) would have us believe that because we “will go from having just over three workers supporting each retiree to 2.25 workers for every retiree by 2025,” the system will be under-funded and the retirement age must be raised again (to age 70 if Senator Rick Santorum has his way) and/or benefits must be cut. However, common sense tells us that the baby boomer’s population spike funded the social security “trust fund” with a proportionally larger amount of money that should have covered the proportionally larger number of retirees. The current workers do not support the current retirees; they fund their own retirement and Medicare. What happened to the money the baby boomers paid into the “trust fund” over the last forty years for their retirement?

What Greenspan (and many others) don’t mention is that, according to the Congressional Budget Office, more than 1.5 trillion dollars (at the end of 2003) has been raided from social security beginning in 1969. Of course, there are more than 1.5 trillion dollars worth of IOUs in the “trust fund” but, unfortunately, retirees can’t pay their bills with IOUs. Since the missing 1.5 trillion dollars never comes up in the debate, we must assume there is no intention of ever repaying the money. This would mean that the money has been stolen. When one Republican Congressman was asked why Congress doesn’t simply put the money back to cover the IOUs, he said he would have to raise our taxes to do that! What? He wants to pay back what was stolen from us by taking more of our money and then giving it back to us? Despite claims to the contrary, that FICA money is the personal property of the people insured by social security and Medicare and we have a right to demand that the money be returned.

Various dates, in the future, have been proposed for the date when the social security system will be unable to meet its commitments to the American people. These dates are all meaningless. The day the social security retirement age was raised in 1983 was the day the system failed to meet its obligations to the American people.

We are constantly told that social security is a “pay as you go” system. This is only true today because of the gigantic theft of social security money that occurred in the past and that larceny continues to this day.

Now that the Bush administration has temporarily given up on the idea of “privatizing” social security, (this scheme is nothing but a multi-billion dollar free gift for Wall Street), the funding issue has suddenly disappeared from the radar screen. What happened to all the talk about a “lock box?” Apparently the talk was nothing but empty words. Not only will the politicians continue to raid social security, they plan to increase the rate of theft because social security and Medicare are what they call “non-defense discretionary spending.” Why did everyone stop talking about the lock box? There is a simple answer. The politicians don’t have the guts to raise taxes to pay for what they spend. They would rather sneak around behind our backs, steal our social security, and then say, “Look, I cut your taxes. Vote for me, I’m a fiscal conservative.” “Fiscal conservative” George W. Bush has spent every penny of the so-called “surplus” every year that he has been in office. This blatant theft of social security money must stop!

The public social security “debate” seems to be scripted by people who want to destroy the system and work people until they drop dead on the job. These “experts” appear to be more interested in confusing people rather than informing the public with the truth. A prime example of this deception is the term “payroll tax.”

The FICA contribution, which is deducted from a worker’s paycheck, is not a tax and it should not be called a tax. FICA is an acronym for “Federal Insurance Contribution Act”. The FICA money is an insurance premium payment. When an “expert” or public official calls FICA the “payroll tax”, it is either a sign of ignorance or a deliberate attempt to deceive the American people into believing that politicians have a legal right to commingle our social security money with general tax revenues and then spend it on things other than social security. Although this is done every day, it is about as “legal” as someone intercepting a payment check that you send to the Allstate Insurance Company and depositing your money in their bank account.

Somewhere along the way, the FICA acronym disappeared from the W-2 form. It now says “social security tax” in box number 4. However, the Federal tax withheld is found in box number 2. Common sense tells us that every penny that goes into box number 4 should be spent only on social security. Is this level of common sense beyond mental capacity our Congressional representatives or are there more sinister forces at work? Do “market forces” trump “the general welfare” of the American people?

The vote by the U.S. Congress during the Nixon administration to “unify” the Federal budget and the ruling by the Supreme Court that FICA money is not the personal property of the American people insured by social security has disgraced the great Government handed down to us by the founding fathers. These actions should be reexamined and challenged. The basis of this challenge would be the simple fact that Congress and the Supreme Court do not have the right to legalize larceny (the theft of our social security money) any more than they have the right to legalize murder. Both are against the law.

What would the financial condition of the social security “trust fund” look like if those missing 1.5 trillion dollars (actually, today it is more like 1.7 trillion) worth of IOUs were 1.7 trillion real dollars? At that point, all the conservative rhetoric about the inadequacies and problems of the social security system would sound extremely stupid.

If the baby boomers weren’t putting enough money into social security to adequately fund the system as some people say, why did it take 40 years before anyone finally noticed it? The funding level should have been continuously monitored and adjusted to meet the needs of the system, i.e., the American people. Assuming the level of funding for social security and Medicare was all the American people could reasonably afford over the past 40 years, then the “free market” forces of the global economy that slashed wages and consequently FICA payments have backfired on the very consumers these forces were supposed to benefit. Not to mention the poverty, pollution, workplace abuse, injuries and death around the world that results from “free market” global competition.

The conservatives claim that the brutal “lean and mean” global economy that shifted a huge amount of productive economic activity from the United States to low wage countries around the world has “raised the standard living of the American people.” This claim has been proven to be false. The under-funding of social security, Medicare, and the Pension Benefit Guarantee Corporation (PBGC), record levels of personal debt (9.9 trillion dollars) and bankruptcies, fiscal crisis in city after city because of shrinking tax revenues (because of shrinking incomes), millions of people working with no or inadequate health care insurance, dangerously neglected national infrastructure, shabby, dilapidated neighborhoods from one end of the country to the other, people desperately struggling to find the money to pay for health care insurance with a pay check that has been slashed so their employer can be competitive in the “free market” global economic system are just some of the ugly facts that debunk that bogus claim put out by the conservative think tanks.

It is important to remember that “the markets” and conservatives have a vested interest in seeing the social security system ruined. By raiding our money from social security and then telling us the system is running out of money, conservative politicians make it easier for conservative economic “experts” to convince the American people that social security and Medicare are “flawed and broken ‘social programs’” that should be privatized. With confidence in the system undermined, the Bush Administration can move forward with the Wall Street mandated scheme to privatize social security. But, what Bush and the conservative “experts” don’t tell us is that this was tried in England and Chile with disastrous results for the people on the lower end of the economic scale.

Now that corporate America (in order to be competitive in the global economy that they created) has stripped away (or shortly will strip away) the pensions that millions of workers had depended on for their retirement, the destruction of social security, Medicare and the PBGC would produce an enormous windfall for corporate America and the investors in the “ownership society.” This windfall would be a gigantic pool of cheap labor, old people, with no choice but to work until they die. This is the real motive behind the conspiracy that masquerades as “free market forces.”

The second major omission: We are never told that with legislative action, Congress can replace the missing 1.7 trillion dollars and insure that the social security system, Medicare, and the under-funded PBGC are never under-funded again. Remember, no one said we didn’t earn social security, Medicare and a pension, they just said we don’t have the money to pay for it.

The date of this essay, September 17 -- Constitution Day, is appropriate. Article One, Section 8, Paragraph 5 of the United States Constitution grants Congress the power “to coin money, regulate the value thereof, and of foreign coin.” By issuing United States Notes (Greenbacks), Congress can replace the missing 1.7 trillion dollars and not increase our national debt one penny, as was done in 1862 by Republican President Abraham Lincoln. This would not cause “currency inflation” because Congress (not currency speculators) has the constitutional mandate to control the value of our money.

Treasury-issued United States Notes would be an inflation free/debt free stimulus to the economy; the Social Security retiree’s buying power would increase with no increase in costs to producers or sellers and, consequently, there would be no cost inflation. The assertions from mainstream economists that issuing United States Notes would be inflationary are simply not true, for the reasons cited above.

Of course, some economists will say there will be inflation because there would be “too much” money in circulation. However, there is no reason why the Treasury and Congress would put “too much” money in circulation. Issuing United States Notes would not overload the national money supply with cash because the money would be put directly into social security, Medicare, the PBGC and the U.S. Treasury.

It is true that there would be more money available for the people who are entitled to it, but this is no justification to raise prices. Greed is not a legitimate reason to cause inflation with unjustified price increases. If inflation does become a problem, targeted tax increases would put these unjustified windfall profits back into the Treasury. There would be no need to raise interest rates and penalize borrowers for the actions of a few greedy business people. Borrowing from the credit markets would be unnecessary. It is important to remember that we have been unnecessarily saddled with an 8 trillion dollar national debt.

The increased benefits and a return to the pre 1983 retirement age would greatly improve the lives, standard of living and peace of mind of the people on social security and Medicare. And United States Note funding of the Pension Benefit Guarantee Corporation is the only way to save the system from collapse.

The theme of the Republican National Committee meeting in Pittsburgh on August 4, 2005, was: “Strengthening Lincoln’s Legacy.” Abraham Lincoln was the first Republican president. Will today’s Republicans learn from his example, and obey the Constitutional mandate, to “Promote the general welfare” of the American people by issuing United States Notes? Or will they continue to protect the interests of “the markets” even if it means economic disaster for the vast majority of the American people and financial ruin for our country?

Compare the United States Constitution based solution outlined in this essay to the Bush administration’s “conservative” market-based scheme to borrow 2 trillion dollars from the credit markets to partially “privatize” social security. The “experts” claim, “this will save the tax payers money in the long run.” But, remember, the taxpayer must pay off the 2 trillion dollar debt plus the interest before a penny is made on the investments. And, it is a well-known fact that “privatization” will do nothing to improve the financial condition of the social security/Medicare system. In fact, the effect would be to weaken the system. This is hardly a fiscally conservative proposition, especially when compared to the Constitutionally based, debt free solution outlined above.

What would be the effect of a sudden, massive infusion of cash into the stock and bond markets that “privatization” would cause? Of course, the markets would go up – this is called a “bubble.” Remember what happened after the 401K legislation was passed: millions of people who never invested before and millions who had, poured billions of dollars into the stock markets. History clearly recorded that the massive infusion of cash that resulted from the 401K legislation inflated a gigantic stock market bubble. And history clearly recorded the fact that, without warning or explanation, the bubble burst and wiped out the “savings” of millions of Americans. Now we know that, contrary to the propaganda put out by “the markets,” savings and investments are two different things.

A check of the historical record will quickly reveal that conservatives fought the creation of social security from the first day the idea was proposed. So the idea that the conservatives would conspire to destroy the social security system in order to put the FICA “taxes” into the financial markets is not far fetched. In fact, “privatization” is a major part of the Republican-led “conservative revolution” (this isn’t to say that they’re not getting plenty of help from conservative Democrats).

The fateful and possibly fatal (for social security and Medicare) blunder occurred when Congress authorized the commingling of FICA money with general tax revenue. This was the beginning of the so-called “unified budget.” The result of this betrayal of the American people is the reality that there is no social security trust fund. It’s gone – stolen!

The evidence of this theft can be found in the Congressional Research Service report for Congress, updated Sept. 8, 2003. It states: “payroll taxes, once received, become indistinguishable from other monies received by the government.”

If the Bush Administration has spent every penny of the “surplus” and, as Greenspan admits, we have “three workers supporting each retiree” and 1.7 trillion dollars of IOUs is owed to the system, where is the “trust fund?” This is why social security is now “pay as you go.” What is really insane is that people meekly accept this fact and say things like “give me my social security money and let me invest it myself in the financial markets. I know the money won’t be there when I retire because the politicians are stealing it.”

What a brilliantly diabolical scheme: a Washington/Wall Street squeeze play. Why don’t the people demand that the politicians STOP stealing their money and return what has been taken in the past? If the politicians and bureaucrats had been included in the social security system when the vote came up to commingle social security money with general tax revenue, it is extremely unlikely the bill would have passed. They are very generous with our money. It has been said that Americans have one of the lowest savings rates in the world. Is this really true? That stolen 1.7 trillion dollars of social security money was the savings of the American people, and we want that money returned!

So, if the solution to the under funding problem of social security, Medicare and the PBGC and a debt free method of funding the rebuilding and repair of what was destroyed by the hurricanes is as simple as a stroke of the Congressional pen, why is there all this talk of cuts, “offsets” and a shortage of money? Every person insured by social security, Medicare and the PBGC (and the people whose lives have been devastated by the hurricanes) should be demanding an answer to that question from all the past and present Presidents, their fiscal policymakers and our past and present Congressional representatives.

Of course, the conservatives will instantly reject the idea of using United States Notes for domestic government spending. But a brief look at the historical record will quickly prove them wrong.

In 1861, President Abraham Lincoln and the Secretary of the Treasury went to New York to apply for loans for the money they needed to fight the Civil War and save the nation from destruction. But the “patriotic” bankers (during wartime!) would only loan their government money at 24-36% interest. Lincoln had a better idea. In accordance with the Constitutional provisions cited above, and under the Congressional Act of July 11, 1862, President Lincoln began issuing United States Notes (Greenbacks.)

Despite the vital need for this debt free currency, conservative banking interests fought against the United States Notes all the way to the Supreme Court, and lost. Unfortunately, the bankers, and their conservative friends in Congress, attacked the Greenbacks with legislative action. Despite the fact that United States Notes proved to be universally popular and remarkably sound, Congress in 1878 contracted this debt free currency down to $346,681,016 and froze the amount at that level. In 1994, Congress withdrew them completely from circulation and the result is an 8 trillion dollar national debt! Congress could have just as easily increased the amount of United States Notes in circulation in 1878 and avoided burdening the taxpayers with a gigantic national debt. This would have been perfectly legal then, and it is perfectly legal now. It must be emphasized, however, that United States Notes should only be used for domestic government spending.

Of course there are hundreds of economists who will say an 8 trillion dollar national debt is perfectly fine because it is a “manageable percentage of the gross domestic product.” However, this statement is arbitrary and highly dubious in the face of the costs the war, the hurricanes, the interest on the national debt, crumbling national infrastructure and shortfalls in social security, Medicare and the PBGC. The conservative economists who claim the economy is in great shape because GDP growth is up and corporate profits (and executive compensation) are at record levels ignore the above- mentioned problems and the financial difficulties of millions of working Americans.

As for the conservative politicians who are calling for “offsets” to pay for everything, Abraham Lincoln showed us a better way. In 1862 Abraham Lincoln proved our government does not need to borrow money. So why do we have an 8 trillion dollar national debt? Who will answer this question? Who will even discuss this question?

We all know that paying the interest on the national debt isn’t the only place our stolen social security money is squandered. And, of course, the proper use of tax money can be debated endlessly. But, what cannot be debated is the fact that FICA money is not tax money! And it must not be treated as tax money.

We are constantly told that we shouldn’t rely on social security as our sole source of income for our retirement. (Why not?) We are told we can get a better “return” if we invest the money. This is the equivalent of going to Las Vegas with your life savings and trying to win your retirement. Even if you accept such a stupid idea, how would you know when you won enough?

The same problem exists when you invest for your retirement. How do you know you won’t, as they say, “outlive your retirement ‘nest egg’?” The “financial advisers” and “investment professionals” tell us that we need some enormous amount of savings (read investments) so we don’t out live our “nest egg.” And the money we don’t spend before we die will go to our heirs who don’t have to work for the money or pay taxes on the first 3.5 million dollars. Now there’s a really stupid idea. What happened to the work ethic and personal responsibility? Of course, the non-productive financial advisers get to make money “managing” that money so, naturally, they think it’s a great idea. Social security should have been set up to be the sole retirement plan for every American. This would have eliminated the “need” to scour the world for investment opportunities (read cheap labor) to build up our IRA or 401K “nest egg” and the need to “manage our risk.” What would the “return” be on social security if the stolen 1.7 trillion dollars were suddenly returned to the “trust fund”? Why is this point never brought up in the “debate?” Why is there this conspiracy of silence?

It has been said many times: “The stock market has delivered an average of nine percent return since 1929.” Is this really true or is this simply a reflection of a meaningless change in the “value” of our currency. The value of your portfolio may be worth nine percent more in dollars but what you can actually buy with that money has probably been drastically reduced. This is analogous to paying $9000 for a car that you could have bought in 1929 for $900; you have more money but it buys the same amount of goods and services.

With a properly funded social security system, Medicare system and PBGC, you won’t have to worry about outliving your “nest egg” or endure the misery of investing. (What a waste of time!) Your social security check should be big enough for a good standard of living without investments. You won’t have worry about where you will get the money for a supplemental medical insurance policy. Medicare will pay for everything. Supplemental medical insurance is a redundant, expensive and needless private sector bureaucracy. Of course, the conservatives will heap scorn on such an idea. They will say “this is an ‘entitlement’; you’re getting something for nothing.” Wrong! You have earned your social security, Medicare and a pension by working all those years producing goods and services in the American economic system. And remember, the FICA money is your money -- your personal property. Why wouldn’t you be entitled to it? Our internationalist, interventionist, politicians must be reminded that foreigners are not entitled to our social security money because they didn’t earn it, we did.

These are perilous times for the people who depend on social security, Medicare, the PBGC and the people whose lives have been devastated by hurricanes Katrina, Rita, Ophelia as well as other recent hurricanes. Disasters at home and abroad have provoked calls for drastic cuts in “non-defense discretionary spending”; massive borrowing from the bond markets, and “offsets” to pay for hurricane relief and the rebuilding of the gulf coast. Why should we let the financial markets and financial market driven crackpot neoconservative ideology make a very bad situation even worse for the American people? There is a better way. U.S. Treasury issued United States Notes is a debt free, inflation free solution that is found in the Constitution of the United States. Unfortunately, “the markets” made sure this solution never found its way into any of our economics textbooks. Of course, the conservatives will vigorously oppose this proposal.

I welcome all POINT-BY-POINT, WRITTEN rebuttals. The time has come for the American people to stand up and demand what is right and just and sensible and moral. We should heed the words of the Constitution and Abraham Lincoln, not Alan Greenspan.

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