Social Security: What is it and Where is the Money?

By John Mcdonald

Social Security is a government sponsored pyramid scheme signed into law by Franklin Delano Roosevelt and ruled unconstitutional by the Supreme Court. Actually, they ruled that way at first, until F.D.R. threatened to appoint five additional positions to the court knowing he could get his party-controlled Congress to approve the appointments because the constitution does not explicitly state how many supreme court justices there are.

The basic financial component is that the government began collecting a % of every working person's check to fund a supplemental retirement account designed to offset the way inflation was destroying elderly people's savings/fixed pensions during the great depression. At the time, there were 15 workers for every retiree and the system was set up to pay out so long as there were many more at the bottom paying to the few at the top - hence, a 'pyramid scheme.'

Today, the government collects 13% of the first $90,000 income earned - a regressive tax that hurts the working poor most - to pay a benefit for people over age 68, some people with health problems and disabilities, some who collect by lying about their situation, some lawyers, and some bureaucrats. Most of the people getting it today payed into it themselves and earned it through the legitimate guidelines, so the next few facts are extremely depressing...

The government has always run a social security surplus because of the demographics of the pyramid. Not just any surplus, a surplus that would be worth close to a hundred trillion dollars when adjusted for inflation and average market return rates. But that money is spent. In fact, it has been more than spent and there is only a nine trillion dollar debt in its place.

Within 20 years, there will only be two workers to every one recipient and the cost over the next 40 years is estimated around $70 trillion. So the people working today and paying 13% of their wages into this cannot reasonably expect the government to ever pay them back, Clinton himself even admitted it. One method of appearing to cover the deficit would be to devalue the dollar and therefor reduce the overall level of benefit received without ever having to go on record as having voted to cut social security. This seems to be the preferred method based on the last two decades of Democratic and Republican policies.

This article is written by John McDonald and originally appears at http://www.undergroundpolitics.com