Posted by | July 26, 2010 17:35 | Filed under: Top Stories

By Yashwanth Manjunath

The conventional wisdom in Washington is that the Social Security “Trust Fund” is insolvent and on the verge of collapse. Just ask Pimco’s Neel Kashkari (pictured), who says:

Unless we control our deficits we will face stifled economic growth and impaired standards of living, perhaps even as soon as a few years from now. Most economists agree that raising taxes cannot pay for these commitments; entitlements must be cut.

One of the “entitlements” he is referring to is Social Security. What the conventional wisdom in Washington does not tell anyone is that if the cap on Social Security taxable income was lifted so that those making over $110,000 were paying their fair share of the 7% tax, then Social Security would be solvent until 2087; so Neel Kashkari is wrong to suggest that “raising taxes” would not solve the problem. What the conventional wisdom in Washington also does not tell anyone is that there was no Social Security “Trust Fund” until the Reagan administration. During the Reagan years Wall Street promoters Alan Greenspan and David Stockman conspired to phase in Social Security payroll tax increases earlier than was needed to increase the Social Security surplus. This was sold to President Reagan as actually saving Social Security. Here is where the scam started, as the surplus money from the increased taxes paid by American workers was placed in a Social Security “Trust Fund” at the Treasury Department. Once at the Treasury the money could be used on the general budget, as long as an IOU was placed in the Trust Fund to replace the money that was taken.

Twenty years later that trust fund is filled with trillions in IOU’s, after that Social Security money was used to pay for things like wars in the Middle East, tax cuts for the wealthy, and TARP. Alarmists like Neel Kashkari, the architect of TARP and Hank Paulson, the former Bush Treasury Secretary, are now coming back and telling the American people that Social Security benefits need to be cut to save the budget deficit. What they are really saying is that after borrowing trillions of dollars from the middle and working class in this country through those Social Security IOU’s, Wall Street and their friends in the government do not want to pay up. Republicans scream about how Social Security is a giant Ponzi scheme, and they ought to know since they created it. They led Americans into believing that they were paying for their retirement when payroll taxes were increased in the 80’s, only to funnel that money to Wall Street and the Military-Industrial Complex. Now they are trying to pull another scam on the American people and convince them that they can never get their retirement money back because Social Security is in “crisis.” Don’t let them.

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