Social Security promise not kept
at cost of $1.8 trillion
BY DAVID CAY JOHNSTON
The New York Times: Feb. 29, 2004
A historical element was forgotten in the rush of news
surrounding Federal Reserve Chairman Alan Greenspan's opinion voiced
last week that Social Security benefits are going to have to be cut.
It dates back 21 years to events that catapulted Greenspan into
national prominence and led to his becoming Fed chairman.
Since 1983, American workers have been paying more into Social
Security than it has paid out in benefits, about $1.8 trillion more, so
far. This year Americans will pay about 50 percent more in Social
Security taxes than the government will pay out in benefits.
Those higher taxes were imposed at the urging of Greenspan, who
was chairman of a bipartisan commission that in 1983 said that one way
to make sure Social Security remains solvent once the baby boomers
reached retirement age was to tax the them in advance.
On Greenspan's recommendation, Social Security was converted
from a pay-as-you-go system to one in which taxes are collected in
advance. After Congress adopted the plan,
Greenspan rose to become chairman of the Fed.
So what has happened to
that $1.8 trillion? The advance payments
have all been spent.
Congress did not lock away
the Social Security surplus, as many Americans believe. Instead, it
borrowed the surplus, replacing the cash with Treasury notes, and spent
the loan proceeds paying the ordinary expenses of running the federal
Only twice, in 1999 and 2000, has Congress balanced the federal
budget without borrowing from the surplus.