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How Budget Deficits Steal from Social Security

How Budget Deficits Steal from Social Security

Years ago, we published an article called, “Who Stole Your Social Security and Why.” The point of the article, in those days, 2009, was to make people understand that deficits do matter. But they matter for reasons that are often quite at odds with the story that was being told to the public in the major media. They matter because, when the government borrowed, they were borrowing from you, from your Social Security payroll contributions. And then they would say, “Entitlements need to be cut.”

This was clearly and objectively, theft. You, the American citizen, paid in. Every year until the last few, the money that was paid in was much greater than what Social Security paid out. So, there should have been a positive balance…in the trillions…of your money in a trust account, a savings account, for the time when there might be more retirees than the total of the payroll deductions. But that didn’t happen. The billionaires wanted lower taxes. So, under Republican Presidents and with Republican Congresses, they lobbied for and received huge tax cuts that caused huge budget deficits.

Think about this. We have a large national debt, about $21 trillion. It’s about equal now to our annual GDP. But it wasn’t always this large. When budgets went out of balance, Right Wing billionaires began to ask for Social Security or Medicare “entitlements” to be cut. But these funds are not for general government use. They are payroll deductions you take out for your retirement. They are your funds. Not the government’s to spend as it likes.

Under Reagan, Bush I, Bush II and Trump, the Republicans cut taxes and created huge deficits. Reagan created a $2.14 trillion debt. Under Bush I, another $1.8 trillion. Under Bush II and Cheney, an astounding $12 trillion dollars (counting the first four years of the Obama Presidency. In the teeth of the Great Recession, Bush and Cheney left Obama the Great Recession and annual deficits of $1.4 trillion, $1.3 trillion, $1.3 trillion and $1.1 trillion. By 2013, President Obama was able to bring the deficit down to $600 billion And he dropped it lower still. In the range of $500 billion.

Why didn’t Obama reduce it more? At first, he was fighting two Bush/Cheney wars, 10.8% unemployment (that he reduced with no Republican help to 8% by 2013, and by 2016 to 4.6%.) For the last 40 years the Republicans had come into office, cut taxes on the wealthy and corporations, then left a big bill, an increase in the national debt.

When the Democrats were elected and they had the responsibility of cutting government, trying to raise taxes again and try to make some sense out of government for the average American family. Many foolish Americans voted Republican, and some still do. The Republicans continue to try to reduce Social Security payments to retirees, while continue trying to make Medicare and Medicaid riskier, more costly and less available.

Bill Clinton became President in 1993 during a recession with a national debt of $4 trillion. He raised taxes  just a bit, from 35% to 39.4 on the top income  earners (with not one Republican vote.0 When he left office, the national debt had increased, over 8 years, by only $1.6 trillion.

More importantly, however, he brought the deficits down every year until, by 1998,1999 and 2,000, government expenditures and government revenues were the same. He balanced the budget. No deficits in his last years. According to The Congressional Budget Office reported that if the Bush administration had continued Clinton’s policies, the U.S. government would have been debt free by 2011.

So, if someone tells you that Social Security is going to go bankrupt, that’s a lie. Even if Social Security continues as it is funded right now, the trust funds will continue to make regular payments until 2035, at which point those retirees would receive approximately 80% of current level payments. Even the current levels are not great, and older retirees, especially women, have a difficult time surviving on them, but the funds do not go bankrupt. Nothing happens at all for 15 years, so there is plenty of time to make changes, which are minor and involve simply moving some tables up a little to create enough funds to keep things in balance forever. If we wanted to simply keep Social Security at current levels of funding and add 401K incentives to corporate tax legislation, beginning in 2025 or some such date, senior citizens would have enough on which to retire. Currently, only an average of 44% of the workforce has a 401K. In the beginning, government could probably cover some minimal shortfalls, as we do now for things like disability.

The legislation says that your Social Security taxes were only meant to be used for Social Security. But Republicans, working for the super-rich, who support only Republican candidates, elect Senators and Congress members who ignore that law and claim that “entitlements” need to be fixed, which means reduced. So the rich spend your money today, while claiming that you do not save enough for tomorrow, and therefore government should reduce Social Security payments, or your disability, if you should, God forbid, get Parkinson’s or Multiple Sclerosis or be run over by a concrete truck.

Behind this are the Right Wing billionaires, like the Koch brothers. They (actually one has now died) organized various groups to argue for tax cuts. In order to justify tax cuts, they needed to reduce the size of government. These same people own about 70% of the stock in our largest corporations, certainly the 1000 largest, and they leveraged their ownership into cash and that cash into corporate campaigns for a variety of different issues, all of which led up to one thing…reciprocal support for them from these groups, like the NRA, and Fundamentalist Christian churches and the fossil fuel industry. And what did they want? What they got.

While your Social Security has stayed essentially the same, taxes on the rich have gone down while their share of U.S. income, before taxes, has skyrocketed. And what has that meant? It means, for example, that the federal minimum wage is set at $7.25 an hour and still is, in places like Mississippi, Wisconsin and South Carolina. In in places like Idaho and Georgia and Wyoming some employers can get away with $5.15 an hour. A majority of states still have the $7.25 minimum wage, while places like Arizona and Colorado are now at $12, while Illinois, now at $9.80 has legislation to raise the minimum wage every year until it reaches $15 an hour.

At this point, we need to provide some context. If you make $10 an hour, you need two incomes to reach what is now considered the average American annual wage, of $48,241 to $52,145. That is the average wage at the exact middle of the American wage scale. And here are the costs of living in many of our states. Let’s start with California. The average cost of living for a family of four in California is $81,000+. Now, in California, as in other places, your income may adjust up or down depending on the city and your skills. But if you make the average wage right now, you have to earn $20,000 more to move to California and have the same lifestyle.

In no state except Mississippi is the average cost of living for a family of four within five thousand dollars of the average one-person wage, even crediting the higher range of $52,145 as the figure. In fact in only a handful of states is the cost of living for a family of four calculated at under $60,000. What can we draw from this? It means that 77.5 million individuals who filed tax returns, if they are the head of household of a family of four are living below the necessary income levels in over 90% of the areas in this country. The cost of living for an average family is more than the average income, in most cases, by about $10,000.

There are now well over 600 people with assets in excess of 1 billion dollars. In other words, these people have enough assets—cash, stocks, bonds, real estate—to provide them an income of a mere $10 million a year for one hundred years.  But that’s just one billion. Most of these people have more than one billion. Jeff Bezos, starting from scratch, has enviably created a business that has made him worth more than $100 billion. There is little of value to mankind that he can do on $100 billion that he could not do on $50 billion or even $25 billion. Bernie Sanders’ Democratic Socialism (which I call, with Bishop Fulton Sheen, “Moderate Capitalism”) would reduce Bezo’s income less than I would. But it would still provide for better education, improved climate conditions and health care for everyone while providing the best military in the world.

Today, the groups that work for these immensely rich Right Wing billionaires are well known. They include organizations like the Cato Institute, the Heritage Foundation, Americans for Prosperity, the Hoover Institute, the Mercatus Center, the Manhattan Institute, FreedomWorks, the Hudson Institute, not to mention the national lobbying organizations, like ALEC and the State Policy Institutes, in every state and state legislature,  sponsored by the American Oligarchs (a handful of names like Koch, Adelson, Stephens, Palmer, Wynn, Singer, Marcus, Mercer, Uihlein, and other Right Wing Billionaires, as evidenced by their support of causes such as guns, lower taxes on the super-rich, fossil fuel development, cuts to public health care, and military spending (to protect their global corporations…they own 75% of the stock in U.S. corporations.)

The Republican politicians must be mentioned as having sold out to the billionaires, who like Trump’s Right Wing billionaire Cabinet, are the ones creating the legislation and approving tax cuts like those by Trump that increased income among the billionaire class by over a trillion dollars and increased the debt on the rest of the American people by a trillion, every year for as far out as we can forecast.

Why should you care? You should be screaming at them at the top of your lungs. If you are over 50, look at your situation. If you are the average person, you may or may not have a 401K. If you have one and it is sufficient to retire on…on those funds alone…you are one of the rare individuals among American workers. You may have a pension. If you do, you are one of a dwindling number of individuals who do. Only about 13% of workers outside of unions and government have a pension plan. About 78% of government workers do. About 67% of union workers in private industry have a pension. But the bad news is that only about 10% of all workers belong to a union. (About 14 million Americans.) That means only approximately 9,300,000 Americans out of 150 million families have pension retirement funds.

How do people who do not have pensions function in retirement? Before 1935, when Social Security was created by the Roosevelt Administration, only about 3% of all Americans had pensions, mostly government workers. Individuals who had no savings or incomes or businesses largely depended on their families for support. Others found residence in almshouses or charity homes for the aged and infirm. Today, while we have some fixed pensions left, mostly among union members and government workers, the average 401K amounts to just $95,000, and only about half of all workers even have a 401K.

You saw the cost of living in most places in the country. The cost of living is now higher in most places than the average annual wage. Which means to live at the level that the government calls average, the individual family must have more than one income. So how is the person with only Social Security going to survive? For those under the median income, now struggling to survive, it will be difficult at best with Social Security and a modest amount of savings from a 401K. Without Social Security, it will be a disaster for individuals and for the country. We need to restore pre-Trump tax rates and add more on billionaires and near-billionaires. We need to take back our Social Security trust funds and build them up to cover our Senior Citizens. It is good morally and it is good economically.


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