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Deficit panel chiefs say everything on table
U.S. President Barack Obama delivers remarks before signing an executive order creating a National Commission on Fiscal Responsibility and Reform in the Diplomatic Reception Room at the White House in Washington February 18, 2010.
Credit: Reuters/Jason Reed
WASHINGTON |
WASHINGTON (Reuters) - The United States cannot grow its way out of budget deficits and both revenue increases and spending cuts will be needed to stem the flow of red ink and create a brighter financial outlook, top members of a newly created budget commission said on Sunday.
The independent National Commission on Fiscal Responsibility and Reform created by President Barack Obama is to hold its first meeting on Tuesday. The co-chairmen of the 18-member panel told "Fox News Sunday" that everything had to be on the table as it considers ways to reduce huge deficits and mounting debt.
"We're not going to say we're going to grow our way out of this," said former Republican Senator Alan Simpson. "Hell, we could have double (-digit) growth for 30 years and never grow our way out of this."
The deficit was $1.4 trillion in 2009, nearly 10 percent of the overall economy, and it is expected to be that much again this year. Longer term, the retiring baby boom generation will strain the Social Security retirement and Medicare health program for the elderly, putting even more pressure on government spending.
Erskine Bowles, former White House chief of staff under President Bill Clinton, said spending on those politically popular entitlement programs also has to be considered.
"If we're going to be serious about balancing the federal budget and righting this fiscal ship, then we have got to have everything on the table, and that includes the entitlement programs," Bowles said. "We'll never get to balance unless they're on the table.
Both liberals and conservatives have expressed concern about the commission. It is due to make its recommendations in December, well after the November mid-term congressional elections where record deficits and the $12 trillion national debt are likely to be major issues.
Liberals are worried the panel will recommend deep cuts to Social Security and Medicare as well as other social programs. Conservatives believe the panel is a way to set the stage for raising taxes.
"I'm not a stalking horse for taxes," Simpson said. "I had a terrific record on that. I'm a stalking horse for my grandchildren."
Bowles said the panel should look at the tax system, which critics say is so riddled with breaks and loopholes that it is becoming dysfunctional, and that a European-style value-added tax should also be on the table.
"I think there are many good arguments that you can make for a value-added tax or consumption tax, as opposed to a tax on wages," Bowles added. "But I think it's just one of the things that ought to be on the table that we ought to discuss."
A value-added tax is imposed on goods at each stage of production and critics say it would push the cost of goods too high. Supporters argue it has some trade advantages as the tax generally does not apply to exports but is put on imported goods.
(Reporting by Donna Smith; Editing by Eric Walsh)
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I hope that these guys can come up with some plan to move us to a fiscally more responsible position. We absolute must address the deficit or we will see ourselves crumble into oblivion.
We need to end these wars abroad that are draining us (which is exactly what Bin Laden said he wanted to do to us) and we need to find a way to cut back on entitlements.
I think this panel will come up with some good ideas, but I doubt congress will have the stomach to do anything with them.
The bi-partisan Presidential Fiscal Commission is scheduled to issue its report and recommendations in December, and there will be an effort to push legislation through Congress, implementing the recommendations. My greatest fear is that the commission will try to sweep all the dirty evidence, involving the looting of Social Security, under the rug and call for cuts in Social Security benefits.
Many people wrongly point to the “success” of the 1982 Greenspan Commission in fixing Social Security. At the time, the Social Security Amendments of 1983 were enacted, it seemed like a good plan. The possibility that crooked politicians from both political parties would spend the surplus Social Security revenue on other government programs just did not seem to occur to anyone. But that is exactly what happened.
The net effect of the big hike in the regressive payroll tax in 1983 was to provide revenue to compensate for the lost revenue resulting from the big Reagan income tax cuts. It was a way of transferring part of the tax burden from high-income taxpayers to working Americans. Every dollar of Social Security contributions, in excess of what was needed to pay current retirees, went into the general fund to help offset the lost revenue resulting from the income tax cuts. The net effect has been a substantial redistribution of income and wealth from working Americans to high-income taxpayers over the past three decades.
Although it is not politically correct to say so, I have argued that Ronald Reagan and Alan Greenspan pulled off the greatest fraud ever perpetrated against the American people by their government with the enactment of the 1983 payroll tax hike. A lot of Democrats also played key roles in the initial legislation, and President Bill Clinton was just as big a looter of Social Security money as any of his Republican counterparts. Whether or not Reagan and Greenspan actually planned the great Social Security scam, or whether it just became a natural result of their actions, is not clear. But consider the following sequence of events:
1) President Reagan appointed Greenspan as chairman of the 1982 National Commission on Social Security Reform (aka The Greenspan Commission)
2)The Greenspan Commission recommended a major payroll tax hike to generate Social Security surpluses for the next 30 years, in order to build up a large reserve in the trust fund that could be drawn down during the years after Social Security began running deficits.
3)The 1983 Social Security legislation enacted hefty increases in the payroll tax in order to generate large future surpluses.
4)As soon as the first surpluses began coming in, in 1985, the money was put into the general revenue fund and spent on other government programs. None of the surplus was saved or invested in anything. The surplus Social Security revenue, paid by working Americans, was used to replace the lost revenue from Reagan’s big income tax cuts that went primarily to the rich.
5)In 1987, President Reagan nominated Greenspan as the successor to Paul Volker as chairman of the Federal Reserve Board. Greenspan continued as Fed Chairman until January 31, 2006. (One can only speculate on whether the coveted Fed Chairmanship represented, at least in part, a payback for Greenspan’s role in initiating the Social Security surplus revenue.)
6)In 1990, Senator Daniel Patrick Moynihan of New York, a member of the Greenspan Commission, and one of the strongest advocates of the 1983 legislation, became outraged when he learned that first Reagan, and then President George H.W. Bush used the surplus Social Security revenue to pay for other government programs instead of saving and investing it for the baby boomers. Moynihan locked horns with President Bush and proposed repealing the 1983 payroll tax hike. Moynihan’s view was that if the government could not keep its hands out of the Social Security cookie jar, the cookie jar should be emptied, so there would be no surplus Social Security revenue for the government to loot. President Bush would have no part of repealing the payroll tax hike. The “read-my-lips-no-new-taxes” president was not about to give up his huge slush fund.
The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue, which is supposed to be in the trust fund. But the trust fund is empty! As a result, the government will soon be unable to pay full benefits without a tax increase. I have been laboring for more than a decade to expose the great Social Security scam. For more information, please visit my website or contact me.
Allen W. Smith, Ph.D., Professor Emeritus, Eastern Illinois University
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
The most serious problem that Social Security faces is that the government has “embezzled” every dollar of the $2.5 trillion in surplus Social Security revenue that is supposed to be in the trust fund and spent it.
I have been researching and writing about Social Security for more than a decade, and I have published four books on the subject. The hard fact is that every dime of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been spent on wars and other government programs. Every month, for the past 25 years, the total receipts from the payroll tax have been split two ways. First, benefits for current retirees are paid from the Social Security revenue. Then, all remaining Social Security revenue, not needed to pay that month’s benefits, are deposited into the general fund and become indistinguishable from other general fund revenue.
Most workers think that at least some of the FICA taxes deducted from their paychecks will be saved and used to pay future Social Security benefits. But it doesn’t work that way. Not a single dime of payroll tax revenue has ever been saved and earmarked for the payment of future benefits. To put it bluntly, the government has “borrowed,” “embezzled,” or “stolen” every penny of the $2.5 trillion of surplus revenue that was supposed to be saved and invested. I consider this to be the greatest fraud ever perpetrated on the American people by their government. I have been trying to expose this awful truth for more than a decade, and some courageous people were trying to expose it even before I stumbled onto the scam in 1999.
On October 13, 1989, Senator Ernest Hollings of South Carolina issued the following warning in a speech on the Senate floor.
“…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund ..in the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.”
On January 21, 2005, David Walker, the Comptroller General of the GAO, tried to make it clear to everyone that the trust fund contained no real assets. He said:
“There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”
If anyone has any remaining doubts about whether or not the trust fund contains real assets, those doubts should be removed by the following statement from the 2009 Social Security Trustees Report:
“Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”
I urge everyone who cares about the future of Social Security to please visit my website at www.thebiglie.net to learn more about Social Security and my efforts to expose the scam. Excerpts from my latest book, “THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” are posted on the site. Please feel free to download them.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
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