February 07, 2005
Solution to Social Security Trust Fund Fraud and Actuarial Deficit Proposed by Author of 'The Looting of Social Security'
Economist and author Allen W. Smith, Ph.D., today released his proposed solution to the Social Security fraud problem and the long-term actuarial deficit. Smith's three-step proposal is outlined in this article, any guesses who he voted for?
1. President Bush should immediately discontinue his practice of spending the approximately $400 million in Social Security surplus that flows in each day, and he should instruct the Secretary of the Treasury to invest this money in marketable Treasury bonds.
2. The $1.6 trillion that has already been "borrowed" by the government and spent on other things must be repaid and invested in marketable Treasury bonds. Unlike Bush's proposal to borrow between $2 and $3 trillion to launch his privatization plan, borrowing the $1.6 trillion from the public and using it to pay off the debt to Social Security would not increase the public debt. The debt to Social Security would go down while the debt to the public would go up by an equal amount. If these two actions were taken, the Social Security trust fund would truly have the assets it will need to continue to pay full benefits until 2042. The Social Security Trustees could sell these marketable Treasury bonds in the open market as needed to supplement the declining payroll tax revenue without any additional action by the president or the Congress.
3. The above two steps would solve the short-term Social Security problem and leave only the actuarial deficit that will show up no earlier than 2042. That problem can also be fixed at this time with a single simple action. Remove the Social Security payroll tax cap of $90,000 per year so that those earning more than $90,000 will pay Social Security tax on their entire income just like everyone else. Those earning more than $90,000 have received such large tax breaks from the Bush income tax cuts, that they can certainly afford to pay the additional payroll tax.
Smith summarizes his view of President Bush's actions with regard to Social Security as follows:
"President Bush spent $509 billion of Social Security surpluses during his first term, and he continues to spend Social Security money for non-Social Security purposes each and every day while asking the public to believe that he really wants to 'save and strengthen' the program. His actions show no evidence that he truly wants to strengthen the system. They are more consistent with those of a person who wants to drive as many nails into the coffin of Social Security as possible. Now he is trying to drive a giant spike into that coffin to make sure the system, as we know it today, cannot survive in the long term. It is time for President Bush to be honest and truthful with the American people."
Allen W. Smith, who has been crusading for economic education and sound government fiscal policy for nearly three decades, holds a Ph.D. degree in economics from Indiana University. He is Professor of Economics Emeritus, Eastern Illinois University. The author of several books, including "The Looting of Social Security: How the Government is Draining America's Retirement Account," (Carroll & Graf, 2004) and "The Alleged Budget Surplus, Social Security, and Voodoo Economics," Dr. Smith has appeared on CNBC, CNNfn, and more than 100 radio talk shows to discuss Social Security.
CONTACT: Barbara Rugel (863) 206-4431 or Allen W. Smith (863) 206-4292;
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Allen W. Smith, Ph.D.
Source: Allen W. Smith
Posted by Tom Troceen