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Sunday, March 14, 2010

Uncle Sam is Enron

Guess what folks. Remember all that extra money Social Security was collecting, well they aren't anymore. This year they have to pay out $29 billion more in benefits than they collected in taxes. That means breaking into the office in West Virginia that holds 2.5 trillion in government bonds (really IOUs).
Think about that for a minute. If your private company decided that it was going to spend all of the money it made, plus it's reserve fund, then repay the reserve fund with IOU's, from itself, it would be called Enron. When the IOU's came due and the accounts were all broke, Congress would be holding investigations and the CEO and CFO would go on trial. When Congress does it this is called "safe investing".
Did you know that your company can't legally require you to put any of your retirement into company stock? Yet the government gives you no choice but invest your social security payroll tax in their bonds.
If you wonder why the deficit is going up so fast, keep in mind that for the last 30 years we've been counting the Social Security surplus twice. We count it the first time and claim it's a surplus, then spend it (replacing the money with T-Bills). Then we count that money again as part of the general budget to show lower deficits than we truly have.

Bill Clinton never had a balanced budget, the closest he ever came was really about $330 billion in deficit spending, then raided the Social Security surplus to tell us it was balanced. Every President since Social Security started has done the same thing.
So how do we fix the Social Security problem? First, we'll have to raise the payroll tax, either on everyone paying it, or extend the limit on the amount that's taxable; or cut benefits (good luck with that).
Then the surplus needs to actually be put somewhere that the government isn't paying itself for the use of the money. Either corporate bonds, or another government's debt would be the safest place to do it. Then when the IOU's are do, Uncle Sam isn't trying to pay you with money he has to borrow. Instead he's paying you with money coming from a different source.
Congressfolks have demonized the idea of investing Social Security's money anywhere but in the same government that's supposed to pay the benefits; but at the same time have made it illegal for private business to do the same thing. If business isn't allowed to do it, there is probably a reason, one that government should probably think about in terms of itself.

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6Comments:

OpenID crisismaven said...

Now the chicken come home to roost - this social security calamity is the beginning of inevitable sovereign default and bankruptcy, after which even these IOUs are worthless. Siphoning money out of Social Security via these IOUs in effect will just mean you were paying a higher, non-redeemable income tax all those years.

2:30 PM  
Blogger Crazy Politico said...

After about 5 more years of spending like this our debt rating will be a C-, and then it will get real interesting.

10:46 PM  
Blogger LAZ said...

Social security has been very successful.It has in fact funded trickle down economics by enabling G W Bush and republicans to enact massive tax cuts for the wealthy.
Al Gore would have put the social security surpluses in a locked box for times like these.
Over 2 trillion dollars are owed to social security by those who benefitted most in the past 30 years under a failed trckle down economic system. Higher taxes on the top 1% of earners is logical and fair.

8:48 PM  
Blogger Crazy Politico said...

Laz, is that short for lazy, like too lazy to look up facts.

Every President and Congress since Social Security was enacted has spent it's surplus and paid it back with IOU's.

Our 30 years of "failed trickle down" has had an annual unemployment rate greater than Europes 30 years average exactly twice. What's failed is the social welfare states of Europe, Greece is going broke and Spain is so close they can't help them.

Higher taxes on the 51% of earners who pay no taxes, or the 35% of earners who receive more in the "income tax refund" than they pay; now that would be fair.

Then again life isn't fair. Those who expect it to be are bound to be disappointed.

4:24 AM  
Blogger The St00bert said...

LA Z, you are funny. Obviously, you are treating us to some witty sarcasm, right?

If not, that means that you are uninformed enough to NOT know that the top 10% of earners in this country pay 60% of the taxes taken in by the Federal Government. That number will now skyrocket with passage of Commie-Care.

Hey big Bro', could you please turn the Stupid Filter back on?

9:27 PM  
Blogger Crazy Politico said...

Stoobert, I tried turning on the idiot filter, they just keep making better idiots.

10:19 PM  

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