Stealing from Social Security to Pay for Wars and Bailouts
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
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
military/security complex 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
"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
According to the US government and its shills among
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
It is the same sort of
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.
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
punish any [politician] who proposes spending cuts in
any middle class program." [CNN
Transcript] 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:
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
"welfare" that workers paid for with a 15% payroll
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
"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, amazon 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
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
The money left over for war would
be even smaller. More would have to be borrowed or
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
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.
Paul Craig Roberts
was Assistant Secretary of the Treasury during
President Reagan`s first term. He was Associate
Editor of the Wall Street Journal. He has
held numerous academic appointments, including the
William E. Simon Chair, Center for Strategic and
International Studies, Georgetown University, and Senior
Research Fellow, Hoover Institution, Stanford
University. He was awarded the Legion of Honor by French
President Francois Mitterrand. He is the author of
Supply-Side Revolution : An Insider`s Account of
Policymaking in Washington;
and the Soviet Economy
Meltdown: Inside the Soviet Economy,
and is the co-author with Lawrence M. Stratton of
The Tyranny of Good Intentions : How Prosecutors and
Bureaucrats Are Trampling the Constitution in the Name
of Justice. Click
for Peter Brimelow`s
interview with Roberts about the epidemic of