SOCIAL SECURITY PART 7

WELCOME TO OPINIONS  BASED  ON  FACTS (OBOF)

          OVERVIEW                                Published Dec.28, 2010

          SOCIAL SECURITY PART 1    Published Dec. 30, 2010

          SOCIAL SECURITY PART 2    Published Jan. 10, 2011

          SOCIAL SECURITY PART 3    Published Jan. 17, 2011

          SOCIAL SECURITY PART 4    Published Jan. 24, 2011

          SOCIAL SECURITY PART 5    Published Jan. 31, 2011

          SOCIAL SECURITY PART 6    Published Feb. 07, 2011

          SOCIAL SECURITY PART 7    Published Feb. 14, 2011

SOCIAL SECURITY PART 7

BELIEVE ME you are never to old to learn.  This has been a real learning week for me. 

If you have been reading my pervious blogs you know that my answer to keeping Social Security (SS) solvent did not increase the National Debt.  My thought was that since the Special Governments Bonds, that have been placed in the SS Trust Fund when the Government took money out of the Trust Fund, were a part of National Debt, the Government could simply borrow money from the public market, pay off the Bonds in the Trust Fund and all would be cancelled out. 

In one of the previous SS parts, I said something to the effect that no one has told me that this plan was not workable.  WELL SOMEONE HAS and that someone is Dr. Allen W. Smith Ph.D.  You know from previous parts, that I have worked with Dr. Smith for sometime now and I have the greatest respect for him and his work.  He has said it so well, that I won't even try to paraphrase.  In his usual clear style, it is extremely interesting and I want you to be sure and read it. 

            Hi Floyd,

Thanks for your comments.  You are correct that the money owed to Social Security is counted as a part of the national debt, but it is in a different category.  As you can see from the information below, the $14 trillion total national debt is made up of approximately $9.4 trillion of "debt held by the public," plus approximately $4.6 trillion of "Intra-governmental Holdings".

 The Debt to the Penny and Who Holds It

Current	Debt Held by the Public	Intra-governmental Holdings	Total Public Debt Outstanding
02/10/2011	9,455,138,178,100.21	4,628,207,587,981.94	14,083,345,766,082.15

The $9.4 trillion of Debt Held by the Public is default proof.  It is in the form of public-issue, marketable U.S. Treasury bonds that are traded on world financial markets.  If the government were to ever default on any of that portion of the debt, it would create panic in financial markets around the world, and it would permanently tarnish the reputation and credit-worthiness of the United States government.  Therefore, we can be absolutely sure that the government cannot and will not ever default on any of its public-issue, marketable bonds.   

The Social Security debt is another matter.  The Congress and the President, together, have the Constitutional power to declare the Social Security debt null and void at any time. 

 One of the least known facts about Social Security is that, although the government does have a moral obligation to pay Social Security benefits to those who have earned them, the government does not have a legal obligation to do so.

In a 1960 ruling by the United States Supreme Court, the court ruled that nobody has a “contractual earned right“ to Social Security benefits. Section 1104 of the 1935 Social Security Act specifically states, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.”

According to the above strong language, Congress could do whatever it wanted to do with regard to changing or even eliminating Social Security. Some did not take the language seriously because they thought it was probably unconstitutional.

However, in 1960, in the case of Fleming v. Nestor, the Supreme Court upheld the denial of benefits to Nestor, even though he had contributed to the program for 19 years and was already receiving benefits.  In its ruling, the Supreme Court established the principle that entitlement to Social Security benefits “is not a contractual right.”

As a result of the 1960 Supreme Court ruling, the future of Social Security is totally in the hands of Congress and the President. They have the legal authority to amend any and all parts of the Social Security Act, as well as the authority to either increase or decrease Social Security benefits.

 Another problem is that, the more money the United States borrows from the outside world, the higher the interest rate it will have to pay.  In addition, the Chinese and others have expressed concern about the credit-worthiness of the United States. What happens if we reach a point where lenders are unwilling to loan as much money as we need to borrow?"  Since much of Social Security surplus revenue ended up in the pockets of the super rich in the form of income tax cuts, I think the looted money should be repaid from a special tax imposed on the rich who received the benefits.

N E W   B A L L  G A M E

I don't mean to make light of the seriousness of the SS problem by referring to it as a game.  It isn't, of course.  The heading is only a lead in to what I am now going to say. 

This is now new, because what I have been suggesting be done, is wrong.  I had not realized the different categories of the debt.  However, I have not been wrong, as far as what we all must do.  We still must write letters and make calls to let our legislators know, that we know, what has happened to the FICA money and that it must be replaced.  Money that hard-working people paid thinking they would get an insurance benefit at a given age.  Remember, FICA is FEDERAL INSUIRANCE CONTRIBUTION ACCOUNT.  How much more plain can you get, that this is an insurance program and should be treated as such. 

Congress can do whatever it wants to do, as Dr. Smith has told us above.  But we must let Congress know how their constituents feel.  Fortunately, our President has said that there is to be no change in Social Security.  I sure hope he sticks to that.  However, even that does not fix the problem for future years.      See you next week

Floyd