The Truth about Social Security

I have heard it said, and it is in my favorite quote list that rotates on the header that [paraphrasing] “if a person will lie about a small thing, he will lie about a big thing”, well what does it say for a Government when it will lie about a huge thing…for fifty years… can you trust them with anything? This will, I believe, tie in with what Joel is posting on, and I have been wanting to do this for a while now. Let me start with this, the Government's attitude toward the program was summed up well by a Social Security official "Continued ...support for [social security] hinges on continued public ingnorance of how the system works. I believe that we have nothing to worry about because it is so enormously complex that nobody is going to figure it out."*

Well I hope to help change that...

Part I: The History of Social Security:

When the bill we call Social Security (OASDI) was first introduced in 1935 it was full of all kinds of Insurance jargon, and it was explained as an Insurance policy, by none other than FDR himself. Why? Well, during the Depression most financial institutions failed, which is whythe FDIC was created. Insurance companies were by and large spared from collapse, and most folks trusted them. Also, culturally in 1935 people were against “relief” as welfare was called.

BUT, during the the final days of the debate on the bill, the insurance language was downplayed because Congress was afraid that the Supreme Court would declare it unconstitutional as the Constitution had no provision for the Government to run an insurance program. (Oh, for the days when the supreme court could be trusted to do the right thing). So during the passage the tax collecting part and the insurance parts were separated. This is KEY because you need to understand there is nothing binding the two together.

In 1956 in the case of Flemming v. Nestor a deported immigrant sued the Government because after contributing to OASDI he was denied benefits. The Government stated in its defense that OASDI was

“in no sense a federally adminstered ‘insurance’ under which a worker pays premiums over the years and acquires at retirement…a right to receive…a fixed monthly benefit IRRESPECTIVE OF WHAT CONGRESS HAS CHOSEN TO IMPOSE FROM TIME TO TIME…the ‘contribution’ exacted under [the plan] from an employee…IS A TRUE TAX…it is NOT COMPARABLE to an [insurance premium]…” AND “no contractual obligation exists on the part of the Government and no contractual right of a beneficiary could coexist with this reservation of power”

Which is a reference to section 1104 of the act .

SO, which is it? Is it Insurance, with a guaranteed benefit or a Tax with no guarantee of anything other than taking your money? Well lets ask the Amish…

While the Amish have no objection to paying Taxes, they do have problems with commercial insurance. The Amish view of separation of church and state normally means not accepting money from government programs, especially something viewed as welfare. More importantly, the Amish see the care of the elderly as the responsibility of the family and community, not the government. And No one could deny that this program’s purpose is to pay money to the government and then receive a benefit in return.

In a 1961 IRS press release, the IRS recognized the Amish stance that "Social Security payments, in their opinion, are insurance premiums and not taxes. They, therefore, will not pay the ‘premium’ nor accept any of the benefits."

By 1959, Valentine Byler owed four years of IRS taxes. The IRS added the interest owed and came up with a total of $308.96. Byler explained that his religion forbid paying insurance. When he was told that this was a mere technicality and that it was indeed a tax, he apparently replied, "Doesn’t the title say Old Age, Survivors and Disability Insurance?" (OASDI)

So on April 18, 1961...Valentine was literally in his field with his team of horses doing some work prior to spring plowing when his horses were seized. With these same horses he would prepare his fields, do his planting, reap the harvest, and earn his living.

Further meetings and public reaction mainly in support of the Amish continued through the year 1964. And so in 1965, the Medicare bill was passed by Congress and tucked into it was a clause exempting the Amish from paying Social Security payments, providing that sect had been in existence since December 31, 1950. President Lyndon B. Johnson on August 13, 1965, made it official and canceled tax accounts of some 15,000 Amish people amounting to nearly $250,000.

Part II: How it Works:

But wait, you have an OASDI account with your name on it right?

NOTHING in the world could be further from the truth. When OASDI income (taxes) exceed expenses (like that ever happens) the surplus goes into the trust fund. That money is INSTANTLY SPENT by the Fedzilla on whatever it wants. It is not earmarked for a specific individual; it is not even earmarked to OASDI payments in general. It goes to whatever, bubblegum, beer, and cigarettes, that the FED is spending money on. The money you “contribute” (forcibly taken from you before you see it) is NOT sitting in an account, it is not “invested” it is just GONE. SO after Congress raids the trust fund, the Fedzilla then replaces the money with special non-marketable (worthless) Treasury bonds. Those bonds continue the lie that the Fedzilla has not really spent your money on Bubblegum and Cigarettes, because there is paper “worth” the same amount as the money they spent in the “trust fund”.

Let me explain it this way. You have a joint checking account with your spouse. You deposit your paycheck, your spouse goes through the drive through at the bank as soon as you walk out and get in your car, your spouse withdraws all the money in the account and then deposits a check from your account to replace the cash your spouse just took. How much money is in your account now? Let’s say your spouse is the president of the bank and can then hide the fact that the check was bogus? That is the system we are in.

NOW the final point, there are only two ways to look at this system

1. The trust fund is empty, there are no bonds in the fund; the first time the fund comes up short congress will have to raise the funds. They will either have to Cut Spending (ROFLMFAO), raise taxes the corresponding amount (likely) or borrow the money (even more likely). One way or another the taxpayer is on the hook for that amount. OR

2. The bonds ARE there, and when the shortfall happens the Social Security administration tries to cash them in, the treasury has to have cash, but it isn’t there so HOW does the Fedzilla pay them?

Despite what many people seem to think, the government has no money that it does not first take from a producer; the Taxpayer is on the hook. So instead of a trust fund waiting for you when you retire, you just get a promise that your children and grandchildren will be taxed to take care of you in your old age.

So the ultimate answer is it is Insurance and a Tax, whatever it takes to separate you from your money and keep you quiet about it. To top it off it is the largest line item in the Federal Budget, which is the largest budget in the world, so in a real sense it is the largest confiscation of wealth in the world.

[*]As quoted in "The Social Security Fraud," by Abraham Ellis, pp 58–59 (FEE, Irvington-on-Hudson. New York, 1996.