Phantom wealth cannot possibly fund unprecedented retirement and healthcare promises.
The narrative that Social Security, Medicare and pension funds invested in stocks and bonds can fund the retirement of 65 million people is a misleading fantasy. The sad reality is we can’t fund the enormous expense of retirement/healthcare for 20% of the populace out of our national earned income, and the savings that have been set aside are either fictitious (the Social Security Trust Fund) or based on phantom wealth created by speculative asset bubbles in stocks, bonds and real estate.
I explain the fraud of the Social Security Trust Fund in detail in The Fraud at the Heart of Social Security (January 17, 2011).
In the bogus “Trust Fund,” the cash has been siphoned off and spent on Federal government outlays. The Fund holds no cash. Instead, it has been given IOUs “backed by the full faith and credit of the United States,” the non-marketable securities.
Now what happens when the Social Security system redeems $100 billion of those securities? the Treasury goes out and borrows the $100 billion on the global bond market, and taxpayers are on the hook for the debt and the interest on that freshly issued debt.
This isn’t that difficult to understand, but let’s go through it again:
In a real Trust Fund, taxpayers pay in their cash, and the surplus cash is invested in marketable bonds–not IOUs, but real assets that pile up in the Trust Fund just like savings in a savings account. That cash is then withdrawn later, as needed, via the sale of bonds purchased with the cash. Taxpayers (employees and employers) pay nothing above and beyond their payroll taxes to fund Social Security.
In the fraudulent “Trust Fund,” taxpayers’ Social Security taxes have been squandered on other Federal expenses, and they have to pay interest on Treasury debt which is borrowed to pay their SSA benefits. In other words, taxpayers pay twice: once via Social Security taxes, a substantial 12.4% of all wages, and then they pay again to borrow cash on the bond market to actually pay the Social Security benefits.
