Stealing from Social Security to Pay for Wars and Bailouts
By Paul Craig Roberts
March 09, 2011 "Information Clearing House" -- The
American
Empire is failing. A number of its puppet rulers are being overthrown
by popular protests, and the almighty dollar will not even buy one Swiss
franc, one Canadian dollar, or one Australian dollar. Despite the
sovereign debt problem that threatens EU members Greece, Ireland, Spain,
and Portugal, it requires $1.38 dollars to buy one euro, a new currency
that was issued at parity with the US dollar.
The US dollar’s value is likely to fall further
in terms of other currencies, because nothing is being done about the US
budget and trade deficits. Obama’s budget, if passed, doesn’t reduce
the deficit over the next ten years by enough to cover the projected
deficit in the FY 2012 budget.
Indeed, the deficits are likely to be
substantially larger than forecast. The military/security complex, about
which President Eisenhower warned Americans a half century ago, is more
powerful than ever and shows no inclination to halt the wars for US
hegemony.
The cost of these wars is enormous. The US media,
being good servants for the government, only reports the out-of-pocket
or current cost of the wars, which is only about one-third of the real
cost. The current cost leaves out the cost of life-long care for the
wounded and maimed, the cost of life-long military pensions of those who
fought in the wars, the replacement costs of the destroyed equipment,
the opportunity cost of the resources wasted in war, and other costs.
The true cost of America’s illegal Iraq invasion, which was based
entirely on lies, fabrications and deceptions, is at least $3,000
billion according to economist Joseph Stiglitz and budget expert Linda
Bilmes.
The same for the Afghan war, which is ongoing. If
the Afghan war lasts as long as the Pentagon says it needs to, the cost
will be a multiple of the cost of the Iraq war.
There is not enough non-military discretionary
spending in the budget to cover the cost of the wars even if every
dollar is cut. As long as the $1,200 billion ($1.2 trillion) annual
budget for the military/security complex
http://www.tomdispatch.com/blog/175361/ is off limits, nothing can be
done about the U.S. budget deficit except to renege on obligations to
the elderly, confiscate private assets, or print enough money to inflate
away all debts.
The other great contribution to the US deficit is
the offshoring of production for US markets. This practice has enriched
corporate management, large shareholders, and Wall Street, but it has
eroded the tax base, and thereby tax collections, of local, state, and
federal government, halted the growth of real income for everyone but
the rich, and disrupted the lives of those Americans whose jobs were
sent abroad. When short-term and long-term discouraged workers are added
to the U.3 measure of unemployment, the U.S. has an unemployment rate
of 22%. A country with more than one-fourth of its work force unemployed
has a shrunken tax base and feeble consumer purchasing power.
To put it bluntly, the $3 trillion cost of the
Iraq war, as computed by Joseph Stiglitz and Linda Bilmes, is 20% of the
size of the U.S. economy in 2010. In other words, the Iraq war alone
cost Americans one-fifth of the year’s gross domestic product. Instead
of investing the resources, which would have produced income and jobs
growth and solvency for state and local governments, the US government
wasted the equivalent of 20% of the production of the economy in 2010 in
blowing up infrastructure and people in foreign lands. The US
government spent a huge sum of money committing war crimes, while
millions of Americans were thrown out of their jobs and foreclosed out
of their homes.
The bought-and-paid-for Congress had no qualms
about unlimited funding for war, but used the resulting “debt crisis” to
refuse help to American citizens who were out of work and out of their
homes.
The obvious conclusion is that “our” government does
not represent us.
The US government remains a champion of
offshoring, which it calls “globalism.” According to the US government
and its shills among “free market” economists, destroying American
manufacturing and the tax bases of cities, states, and the federal
government by moving US jobs and GDP offshore is “good for the economy.”
It is “free trade.”
It is the same sort of “good” that the US
government brings to Iraq and Afghanistan by invading those countries
and destroying lives, homes and infrastructures. Destruction is good.
That’s the way our government and its shills see things. In America
destruction is done with jobs offshoring, financial deregulation, and
fraudulent financial instruments. In Iraq and Afghanistan (and now
Pakistan) is it done with bombs and drones.
Where is all this leading?
It is leading to the destruction of Social Security and
Medicare.
Republicans have convinced a large percentage of
voters that America is in trouble, not because it wastes 20% of the
annual budget on wars of aggression and Homeland Security porn-scanners,
but because of the poor and retirees.
Pundits scapegoat the middle class and blame the
struggling middle along with the poor and retirees. Fareed Zakaria, for
example, sees no extravagance in a trillion dollar military budget. The
real money, he says, is in programs for the middle class, and the middle
class “will immediately punish any [politician] who proposes spending
cuts in any middle class program.” What does Zakaria think the
military/security complex will do to any politician who cuts the
military budget? As a well-paid shill he had rather not say.
Andrew Sullivan also has no concept of reductions
in military/security subsidies: “they’re big babies I mean, people keep
saying they don’t want any tax increases, but they don’t want to have
their Medicare cut, they don’t want to have their Medicaid [cut] or they
don’t want to have their Social Security touched one inch. Well, it’s
about time someone tells them,you can’t have it, baby.”
Niall Ferguson thinks that Americans are so
addicted to wars that the U.S. government will default on Social
Security and Medicare.
Republicans tell us that our grandchildren are
being saddled with impossible debt burdens because of handouts to
retirees and the poor. $3 trillion wars are necessary and have nothing
to do with the growth of the public debt. The public debt is due to
unnecessary “welfare” that workers paid for with a 15% payroll tax.
When you hear a Republican sneer “entitlement,”
he or she is referring to Social Security and Medicare, for which people
have paid 15% of their wages for their working lifetime. But when a
Republican sneers, he or she is saying “welfare.” To the distorted mind
of a Republican, Social Security and Medicare are undeserved welfare
payments to people who over-consumed for a lifetime and did not save for
their old age needs.
America can be strong again once we get rid of these
welfare leeches.
Once we are rid of these leeches, we can really fight
wars. And show people who is boss.
Republicans regard Social Security as an “unfunded
liability,” that is, a giveaway that is
interfering with our war-making ability.
Alas, Social Security is an unfunded liability,
because all the money working people put into it was stolen by
Republicans and Democrats in order to pay for wars and bailouts for
mega-rich bankers like Goldman Sachs.
What I am about to tell you might come as a
shock, but it is the absolute truth, which you can verify for yourself
by going online to the government’s annual OASDI and HI reports.
According to the official 2010 Social Security reports, between 1984 and
2009 the American people contributed $2 trillion, that is $2,000
billion, more to Social Security and Medicare in payroll taxes than was
paid out in benefits.
What happened to the surplus $2,000 billion, or
$2,000,000,000,000.
The government spent it.
Over the past quarter century, $2 trillion in
Social Security and Medicare revenues have been used to finance wars and
pork-barrel projects of the US government.
Depending on assumptions about population growth,
income growth and other factors, Social Security continues to be in the
black until after 2025 or 2035 under the “high cost” and “intermediate”
assumptions and the current payroll tax rate of 15.3% based on the
revenues paid in and the interest on those surplus revenues. Under the
low cost scenario, Social Security (OASDI) will have produced surplus
revenues of $31.6 trillion by 2085.
When I was Assistant Secretary of the US
Treasury, Deputy Assistant Secretary Steve Entin worked out a way to put
Social Security on a sound basis with the current rate of payroll tax
without requiring one cent of general revenues. You can read about it in
chapter 9 of my book, The Supply-Side Revolution, which Harvard
University Press has kept in print for more than a quarter century.
Entin’s solution, or a variation of it, would still work, so Social
Security can easily be saved within the current payroll tax rate.
Instead of acknowledging this incontrovertible fact, the right-wing
wants to terminate the program.
Treasury was blocked from putting Entin’s plan
into effect by the fact that other parts of the government and the
Greenspan Social Security Commission had agendas different from ensuring
a sound Social Security system.
Wall Street insisted that the Reagan tax rate
reductions would explode consumer spending, cause inflation and destroy
the values of stock and bond portfolios. When inflation collapsed
instead of exploding, Wall Street said that the deficits, which resulted
from inflation’s collapse, would cause inflation and destroy the values
of stock and bond portfolios. This didn’t happen either.
Nevertheless, the Greenspan commission played to
these mistaken fears. The “Reagan deficits” could not cause inflation,
because they were the result of the unanticipated collapse of inflation
(anticipated only by supply-side economists). As I demonstrated in a
paper published in the 1980s in the US, UK, Japan, Germany, Italy, and
other countries, tax revenues were below the forecast amounts because
inflation, and thus nominal GNP, were below forecast. The collapse of
inflation also made real government spending higher than intended as the
spending figures in the five-year budget were based on higher inflation
than was realized.
The subsidy to the US government from the payroll
tax is larger than the $2 trillion in excess revenue collections over
payouts. The subsidy of the Social Security payroll tax to the
government also includes the fact that $2.8 trillion of US government
debt obligations are not in the market. If the national debt held by the
public were $2.8 trillion larger, so would be the debt service costs
and most likely also the interest rate.
The money left over for war would be even smaller. More
would have to be borrowed or printed.
The difference between the $2 trillion in excess
Social Security revenues and the $2.8 trillion figure is the $0.8
trillion that is the accumulated interest over the years on the mounting
$2 trillion in debt, if the Treasury had had to issue bonds, instead of
non-marketable IOUs, to the Social Security Trust Fund. When the budget
is in deficit, the Treasury pays interest by issuing new bonds in the
amount of the interest due. In other words, the interest on the debt
adds to the debt outstanding.
The robbed Social Security Trust Fund can only be
made good by the US Treasury issuing another $2.8 trillion in US
government debt to pay off its IOUs to the fund.
When a government is faced with a $14 trillion
public debt growing by trillion dollar deficits as far as the eye can
see, how does it add another $2.8 trillion to the mix?
Only with great difficulty.
Therefore, to avoid repaying the $2.8 trillion
that the government has stolen for its wars and bailouts for mega-rich
bankers, the right-wing has selected entitlements as the sacrificial
lamb.
A government that runs a deficit too large to
finance by borrowing will print money as long as it can. When the
printing press begins to push up inflation and push down the exchange
value of the dollar, the government will be tempted to reduce its debt
by reneging on entitlements or by confiscating private assets such as
pension funds. When it has confiscated private assets and reneged on
public obligations, nothing is left but the printing press.
We owe the end-time situation that we face to
open-ended wars and to an unregulated financial system concentrated in a
few hands that produces financial crises by leveraging debt to
irresponsible levels.
The government of the United States does not
represent the American people. It represents the oligarchs. The way
campaign finance and elections are structured, the American people
cannot take back their government by voting. A once proud and free
people have been reduced to serfdom.
http://www.informationclearinghouse.info/article27644.htm
[Non-text portions of this message have been removed]
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