Focus 580; The Looting of Social Security: How the Government is Draining Americas Retirement Account

In the first hour today we'll be talking about Social Security and its future. One of the things that has been known for a long time is and we know it by looking at demographics there's going to come a time probably within the next five to 10 years when there will be a lot of folks in this country the people that we call the baby boom generation retiring and they will start to expect benefits to be paid to them from Social Security now as far back as the early 1980s. It was recognized that this was going to happen and the Congress decided that something should be done about it to make sure that the money was there to pay those benefits and in 1983 there was an increase in Social Security taxes. The idea was to create a surplus so that at about 2010 when the baby boomers start to retire there would be money to pay them and also a little bit after that some years after that there was a provision enacted basically that said was this said the government couldn't touch that money was supposed to be specifically for that purpose. And a lot of Americans believe that there it does indeed exist in Washington somewhere. A bank account that all of the Social Security money goes into and that

benefits will be paid from. However that's not the case. And this morning we'll be talking about that with our guest His name is Alan Smith. He's an economist he taught economics for more than 30 years two college students he retired in 1988 as professor of economics at Eastern Illinois University to become a full time writer and we'll be talking about some of the information that you will find in a recent book that he's authored It's titled The looting of Social Security. The subtitle is how the government is draining America's retirement account Carroll and Graf is the publisher it's available in paperback not terribly expensive. And the point that he makes in is in the books is that despite the fact that the government was not supposed to spend the contributions of the people into Social Security that it has from that day that is from the 80s until now the government has continued to spend that money a little bit more on our guest Alan Smith. He has authored a number of books.

His first understanding inflation and unemployment was published in 76 he's also written a high school textbook understanding economics. His other books include demystifying economics. The book that makes economics accessible to everyone and also another title The Alleged Budget Surplus Social Security and voodoo economics. That book published in two thousand along with the other one. Demystifying economics he for a period of years in the early 90s wrote a syndicated weekly newspaper column on the economy and has also published articles on the economy in the Denver Post. Philadelphia Inquirer the St. Louis Post Dispatch. He's talking with us this morning by telephone and as we talk questions are welcome from people who are listening the number here in Champaign Urbana 3 3 3 9 4 5 5. And also we do have that toll free line that means if it would be a long distance call for you use that number. We'll pay for the call 800 to 2 2 9 4 5 5 is that number. And then the local number for people in Champaign Urbana where we are. That's 3 3 3 9

4 5 5. Well Dr. Smith Hello. I love Dave and thanks for talking with us today. It's my pleasure to be with you. Maybe we should go back I guess to start at nineteen eighty three this year when it was recognized that. There was going to be this this very serious demand on Social Security where we knew that we were going to have a lot of people retiring so back in the early 80s that that was recognized. They passed an increase in Social Security taxes in order to try to create a surplus to make sure that there would be enough money to pay the benefits. Let's let's start there would be and yes so that resulted from a 1982 presidential commission known as the Greenspan Commission. It was headed by me Alan Greenspan also co chaired by former the late Senator Patrick Monahan of New York.

And this is a presidential commission to study so security long term funding problems and make recommendations. They soon concluded that when the baby boomers began to retire there would be no way to fund that last a. Use a bank account if they prepay a portion of it and get it. Big fun a big surplus there. So then when we went through this problem of the baby boomers we get big and that. So in 1983 Congress and acted in the law the recommendations the president signed them. And as of today that the increase and 1983 increase and so scary taxes has generated 1.5 trillion dollars that is supposed to be in the SO Security Trust on available to fund the baby boomer retirement. And there's not a nickel there it's all been spent on other things that get said Oh as I said I think what is a basic kind of assumption that I think people have.

They have this idea that there is some kind of as I said in Washington somewhere there's some sort of special bank account that's got the name of Social Security on there and the idea is that the benefits that they that that is that the money that comes out of their paycheck that goes into Social Security goes into this account and then benefits to retirees are paid out. That account for the fact of the matter is there is no such account. The money that people that comes out of their paychecks to to go to Social Security just goes into the general revenue pool with other sources of writer revenue the federal government has and then out of that are made the payments so they're actually the idea that there is some sort of fund some sort of special account is just not true. Well there is such an account. It's just empty. The Social Security trust fund as it implied this is where the money is supposed to be held. And they will show on their books their records that they have 1.5 trillion dollars in assets. The problem is these assets are essentially

worthless government IOUs. What the government does is when they borrow that money they issue a special it's called a special issue government security it's not like other securities that can be bought and sold in the bond markets. It is something that the federal government must repay on its own I mean it has no there's no way they can get any money from unless the government decides I'm going to repay that. So they put in these pieces of paper or bookkeeping. Entries and it shows that they have 1.5 trillion. The AARP that I'm having quite a fight with right now and I'm a member of their AP. They are misleading their membership either from rules lack of information or other most of these they are telling the members of AARP and all of their literature and on their website that there's plenty of money to fund full benefits. That's so scary to the year 2042. And they are using for that basis

these assets. But the vast. I like to describe and if a bank robber was robbing a bank vault he took time before he left to right out. No this is how much I talk. Just in case you want to know. That's what these government IOUs are. They are simply bookkeeping records of how much the government has taken out of the fun. But no provision of any kind has been made for replacing that money. And there simply is not going to be any way. Short of massive tax increases our massive borrowing that the government will be able to pay at and this means in 2018. Right now the Social Security fund because of that tax increase is still running big surpluses. They're supposed to going into that fund but is not in the year 2018. So Security revenue will be less than the benefits and so from 2018 on there will be deficits and they will be unable to pay FULL be in effect after 2018 unless they can

dig into their bank account big end of this fun. And the only way they can dig into that is if the government comes up with the money. Well that's I guess that raises a slightly different kind of question about whether or not the government intends to fulfill the commitment to pay the benefits promised. I'm assuming that nobody thinks that the government is going to default. It's just a matter of how is how they're going to come up with the money where they're going to go to get the money when the time comes to pay. But this is the whole promise is I'm engaged in discussions on AARP message boards and so as you saw Surely our government wouldn't a fault. Surely they will pay it. It's not a question of will or will not it's the question are can or cannot the amount of money for example take the year 20. 35 this comes out of the recent 2004 so Security trustees report and the year 2035 the federal government to pay back

the interest they owe plus enough on the principal to pay full benefits has to come up with seven hundred and forty seven billion dollars out of the general fund just to pay the keep So security afloat and I think the year 2035 the next year becomes 900 something billion. And so I don't think that anybody can first see we've had these big tax cuts when they were not affordable. We've been brainwashed in American TV for the last 25 years that they can have their cake and eat it too. And. Nothing is worse than a tax increase and nothing better than a tax cut. How will they get the American public to support massive tax increases to come up with that kind of money. That's the question I keep bringing up. I see them defaulting simply because I don't see an alternative. The let's talk about the budget Enforcement Act of 1990. Yeah as

I understand it now what this this did was it's said to the government you can't take money the money that exists in Social Security you can't use that as a part of figuring out what your budget is how much money you've got what you owe. In spite of that fact though governments have continually used that money counted as as money in the bank that they had when they were making their calculations about you know what they owed and what they had. I guess one of the you know the questions is that if if that had not been allowed to be in that calculation the way this legislation 1900 said then what would things have looked like the deficit. It would if if we if we had never counted the Social Security surplus and went all the way back to 1990 what what would the deficit actually look like. OK the deficit they're reporting this year only in

round numbers that we're going to have roughly a deficit of about 500 billion which is astronomical and I was selfish that's not the correct figure correct figures about 650 billion because they take the so Security surplus will be in the neighbor 150 160 billion this year and they subtract that from their general budget deficit and come out with this phony figure. That's why Senator Hollings. Was the one who pushed through so hard at the 1990 Act because he had been for years speaking out on how atrocious this was fraudulent and so they thought if we got a law that things would change while it was passed and George Bush Sr. signed the law and nothing changed they. It says for example that they can't even use that and reporting the surplus or deficit that cannot be taken into consideration.

And nobody ever hears of the deficit figure of 650. So it's just been 10 violates the law in terms of the floor on what was supposed to happen with that money. The problem is that the law as it's now stands and it certainly could be changed but the law says that all any surplus money from Sosa surety has to be invested in the government IOUs in government securities. OK the intent was that they would go out and vest them and IOUs that already exist that held by the public. These are bought and sold in the market and they would pay down the national debt during this period since 83. Which means if they had done that the national debt which is 7.1 trillion would be 1.5 trillion last year and the government would have spent 1.5 trillion last during that time period. If they had followed the law and they followed the

intent of the commission was instead the government saw this is just like new spending authority. So it's the use of a down the debt they disc you Malays nude that they do this every year. They use that for a general budget as it's been used for everything from. Well true. Probably national defense and everything had just gone into the general fund. But the really atrocious thing that is so disturbing to me now under George Bush it is being used so Security money is being used to fund these massive tax cuts that go mostly to the top 5 percent of our population. That sort o is the only place any money is available he has run deficits and all other programs and to tell the American people we need these massive tax cuts. He is using Social Security money paid by working Americans it's a very regressive tax because there's a cap on it and he's taken money out of the pockets of working Americans and giving this to the very very rich people. If the American people knew that if

I could get that on a billboard in every lawn every highway and we could really get that. If the American people knew that Bush's tax cuts are being funded by working Americans by looting our So security money there just be an outrage. But you know it's hard to get that message out. I have a couple callers and I promise these folks I get to them let me just ask a basic kind of question because the the fact that there we are headed towards a crisis or potential crisis with Social Security has been recognized. People have said well there's a number of things that either we could do or maybe. We have to do including raise the age at which you can get benefits. Put a cap on what sort of benefits you can get. Possibly also an increase in Social Security taxes once again is if you did maybe if you did all of those things would it. How much would that help when it came time to pay this this big bill that's coming in for a totally different problem and this is why it's so hard. The idea

of privatizing or this is a smokescreen. The problem is that if that money is paid back if that 1.5 trillion where their they so Security fund is solvent and able to pay 100 percent of benefits until the year 2042. And at that point are long before that you can have reforms in the kinds of things you're saying to get us beyond 2014 too. But it is now because of the lutenist 2018 that we have the crisis and the first step has to be to replace that 1.5 trillion and stop additional Smain of Social Security money after that is accomplished. Then we do need to make some of these reforms for the long term. And I gather that you don't support the idea that has been proposed. Mostly I think by Republicans the idea that you. Younger people now coming into the workforce and coming into Social Security should be able to take some portion of their

contribution and self-direct that into some limited range of choices. But probably it would end up going into some kind of mutual fund and private in a sense privatizing at least in part the system. You know I would not support it I don't much of what they should be able to do in theory it sounds like a good idea. The problem is that the fund is headed toward broke toward bankruptcy and the moment you start taking you say OK you don't have to pay all your taxes this year you can take some of that and put it in private investment that just suddenly cuts off the flow of income and brings the Dooms Day a lot closer to us right from a practical standpoint. They don't have enough revenue coming in now and to actually cut revenue. You know AARP is very opposed to that. And I say in theory it's probably a good idea to work something that sort out but you can't do it you have to do that in addition

to what we now have. You can't divert some of the money that's insufficient already into another direction. We have a couple callers will get right to them. Let me just introduce Again our guest. We're talking with economist Allen Smith taught economics to college students for over 30 years. He retired in 1988 as a professor of economics at Eastern Illinois University to become a full time writer. He's the author of a book on the subject here we're discussing it's titled The looting of Social Security and it's published by Carroll and Graf. If you're interested in economics you might also look for his 2000 book demystifying economics. The subtitle is The book that makes economics accessible to everyone. 3 3 3 9 4 5 5 here in Champaign Urbana toll free 800 to 2 2 9 4 5 5 Those are the numbers start off here with a caller in Champaign County and line 1. Hello Heidi. I agree with your critique of the profit. You know leading by the current administration and actually by previous administrations too

I think this current administration is losing more than just Social Security but Social Security is perhaps the biggest area to loot or something. But my my criticism is on a number of levels I think this idea of privatized. Is this really lunacy I think that the Social Security system should be a government social security system and I also think that by looking at it as simply a pension plan that's part of the distortion we see. One of the things people point to all the time are the demographics that there will be so many fewer workers supporting each you know retiree in the future. Well if you're sort of looking focusing on that one is focusing on that and looking at and not looking at the rest of the economy what's going on in this jobless recovery is productivity is going way up and I think there should be a way for products for this productivity enhanced economic system to to fund the Social Security amount that's talking about general revenues and corporate taxes and things like that

which are anathema to perhaps both sides right now but it's really where the wealth is being created in the spring and it's not just by workers it's by what the workers have produced over time which is the SPR. Productivity gains so they should. This is the way I think it should be. The equation that simple minded equation about there are fewer workers working. But I'm also one of that's sort of a general system of systemic kind of question. But I also wanted to reference your ex-colleague. Mark Weiss brought in his colleague Dean Baker from the Center for Economic Policy Research and their book about I forget the exact title of it but basically there are they assert that even by the calculations that are in hand and a lot of those need to be analyzed. But I mean we're talking about a problem in I guess 36 years 35 years 30 you know four years who knows what kind of private productivity gains I'm not. That's not a Hail Mary argument to say that we really I think this is being used to this

kind of dire circumstance arguments being used to say well we have to privatized and scaring young people scaring old people. So I think there's a there's a lot of things going on here and it's pretty a non question and I don't think Oh I think I have to go back to what I was doing so I'll just listen to you to your answer on the air. And I forgot the title of the book but it's available through the EPR dot net including their other web available analysis about Social Security which they've been pretty. Prolific about writing about. It's a heretical kind of point of view that it's not really as bad I mean of course alluding and not priorities or military Keynesianism is awful etc. etc. but it's an interesting argument that isn't heard that often though I have to credit folks for having both of them on in the last year or so I think. Anyway I think I will listen. Well you can take that in whatever direction you want. OK well I guess I would have difficulty find much to disagree with the

gentleman. I agree with most of what he said Mark Wise Rod was a friend of mine. His office is right across the hall from mine. He used to talk about the kinds of acts. I haven't read his book as such. But I think there's a lot of truth in the notion that people are using scare tactics. Let's face it the conservatives have hated so security from day one Barry Goldwater wanted to get rid of him. Ronald Reagan won the maid of voluntary. It is absolutely a program that the conservatives want to get rid of and they are using the scare tactic. And this notion of privatizing as a solution is crazy because that doesn't change the demographics. The long term problem is he pointed out is there are fewer and fewer people working to support those people who are retired especially to the baby boomers

retire. But there is nothing magic about that says that we have to stick with Vika associated payroll tax as the only source of fun in that. And if we do that we can raise the cap the cap is now $87000 And I think it's the that for was us last year. So a person who makes a million dollars they pay 87000. Taxes on the rest of us just totally exempt. So that's one of the things that can be done in terms of reforming raising the cap there. There are various other sources. But let me just say make one point clear is that we hear an awful lot about the negative aspects of big government. And that's probably true but I don't have one bit more confidence in big business than I do in big government. Enron and the others can be examples. The

fact that they would privatized that wouldn't do it. It's making the assumption that privately it can be done better or more efficiently. I think what one of the things is they're striving for the votes of all the stockbrokers and so forth. Imagine the bonanza if suddenly all this additional money is available for private investment. That's part of the motivation of the plan. I agree. First of all the privatization from my personal standpoint is not desirable it never was the program has operated since the 1930s and it's operated pretty well most of the time. What we need to do is a little fine tuning on the system. It is very hard to look that far down the road as AC suggests that there's all kinds of things that can happen. And so I'm not very concerned about the actions they vary but I'm not nearly as concerned about the long term problem that happens after

2042. There are things we can do to resolve that. What I'm concerned is a something that most able don't know about and that is 1.5 trillion dollars of their money has been stolen I use the word stolen because it's borrowed if the government pays it back if the government never pays it back and I don't see how the government will now I don't think there really is an intention on the part of current peopling government. This is the reason that Alan Greenspan set out the alarm you know we're over committed. I guess I would agree with almost everything you said along those lines and point out that most people think that if they hear the figures of along the lines of the long term run the problem I'm dealing with my book deals with something that most people don't know about and that is this going to create problems as early as 2018 and the money has been taken from the associated fund. Let's talk with another caller this next person is in Urbana line one.

Hello. Yeah hi. Thanks for talking about this topic. It seems like almost nobody talks about it intelligent and really and really tells people what you know how the country's finances are. It's to me it just seems. The the US finances religious just or just seem terrible. It's hard to describe how bad they really are. You know politicians talk about once of all your You'll hear them talk about the deficit when we have a deficit and maybe we have more. And maybe in five years we'll cut the deficit in half. And I just don't understand that because they never talk about the debt. I mean the you know when when I think I really have a feeling that when politicians say we'll cut the deficit in half in five years I really think a lot of people a lot of people listening of listening to that think that they're saying we're going to cut the national debt in half in five years and that that couldn't be

farther from the truth. The. Deficit is just the amount of money that we're borrowing more and more every year and we're going to be more in debt the total the federal debt right now is seven trillion dollars and the United States population is is about 300 million people. That is about 20 to 25 thousand dollars for every man woman and child in the country. And if you if you do it by for like a family of four with with a couple of surviving grandparents that's like the federal debt is like one hundred one hundred fifty thousand dollars per family. And yet and yet you know the politicians talk about cutting the deficit in half as though as though that's going to solve our financial problems. No. Blow up. Deal with all of that in fact it was when I first started writing it was more emphasis on this federal financing on the national debt and so forth but then the Social

Security part came in as an important aspect let me just put things in a little perspective for people because I have been trying to shout from the mountaintops on this national debt thing. In 1981 shortly after Reagan took office the debt ceiling which is the limit I can go in and they just keep ratcheting it up was not one trillion dollars yet it was shortly after Reagan took office that the national debt reach one trillion dollars for the first time. That means that all the presidents from George Washington through Jimmy Carter and almost 200 years of our history accumulated one trillion dollars. Well Reagan added a second trillion in five years. By the time Reagan Bush 12 your period was over it was four trillion so in those 12 years of Reaganomics that so many people want to claim IS SUCH A GREAT.

Thing at this most disastrous thing ever happen to the American economy and American budgets in those 12 years of Reagan-Bush the national debt went from 1 trillion to 4 trillion quadrupled. OK since that time it has gone up by another three point one trillion it's actually. I would urge a mother who will want to keep track of the U.S. Treasury Department has a website called that debt to the penny. And I just went on there a couple days ago to carry on as of last Friday the national debt was seven point one three one for him. So we you know I'm I'm always slow. You know I know a 7 Trillion and I will soon be going to a trillion really of increase in about a 23 year period of going from one trillion to seven trillion dollars is just absolutely believe all it boggles the mind. And what's worse is that George W. Bush

is now running deficit. Of approximately 500 billion a year or a half a trillion which means in two years every two years he says much of the national debt as all those other presidents did in 200 years and they are better just because the gentleman was talking about the confusion and there is a lot of confusion. The deficit is just the difference between what the government spends and what they take in a given year. For example this year they're saying that we have a deficit of 500 billion. That means that they'll spend 500 billion more than they take him but it's actually more than that. If you use true accounting the deficit each time you in order to pay for that you have to add to the debt the debt has been cumulating stance the beginning of our history and that debt does not go down it was supposed to go down this 1.5 trillion or so security money was supposed to be used to pay down the debt so that when we got to this point we could borrow it back

to keep the Social Security fund solvent. So I just I just can't emphasize strongly enough a user is no way you can communicate to the general public we're headed toward a fiscal train wreck. I'm right. Now I'm working on a proposal for a new book with my publisher and the working title I'm working with right now is the bankrupting of America started with American government I was a Scot of it and then I start looking at consumer debt and so forth. We cannot continue at the level and I think anybody would realize that if you take 200 years to get a trillion dollars and now you're adding a trillion dollars every two years. We're headed toward a calamity. And I guess you know I just want to scream that I want everybody to see that. And if he said now and they all say somewhat We're going to cut the deficit that have well you have to go back and look George W. Bush said there will be no return to deficits under my administration we won't have

any deficit. And now he's saying we'll cut it in half in five years. You take that as a grain of salt. Well I appreciate the come out of the car let me just real quick because we've got some other callers here as I'm I'm sure that there probably are columnists or at least people in Washington D.C. who would make the argument that debts and deficits don't matter and that in the long term. What we can rely on in the face is the fact that the United States is too big to fail. You know there's just no in the United States is so big economy so big government so big that that that they sort of want to pat us on the head and say Look everything's going to be OK. So you're what I hear you saying is that is not the case. No and I I think the vast majority of economists would agree totally with me there are very few economists worth their salt would say what you're saying. Let me just point out that at the time of the last big tax cut Bush the night of the 2003 cut 400 of the nation's top economists including pecan who'd won the

Nobel Prize in Economics signed a statement of protest pleading with the government not to take this irresponsible to put a full page ad in The New York Times explaining to the American people this Bush tax cut was not anything to help the economy it was going to make it much worse and leading and then Bush got on the stomp around the kind of vote for my tax cut. That's a vote for jobs and just totally ignored if 400 of the top people in the Pentagon took a position would he go contrary or in the medical field or anything else. This problem is not the creation of economists economists have been. I don't know that the government decision making. Let's talk with another caller next is someone in Charleston. Why number four. Yes two points. It's kind of folklore but Roosevelt who you know helped bring Social Security into existence was accused of looting it

for the benefit of World War 2 is that correct. They may very very well of both pro-and from up there wasn't very much in it at that point I mean we actually did not have in my mind the figures back that far but before the 1983 tax increase we had seven years of deficit. And so security so security has never had any sizeable surplus and it and I don't think he could have looted very much if he did. And if he did that was probably paid back. So I don't know I haven't heard that one I've heard a lot of things about FDR and so security but I haven't heard that one. But generally we have not had any sizable surpluses in the SO Security fund until this 1983 legislation which was to take care of the baby boomers. And so the opportunity to loot hasn't been hurt.

I can second point is the it's obvious to me that capitalism is interest in this and therefore I'll date. It is an unworkable anymore as a economic system despite now I think it's called kinds in is and is in the veins in asm. Yes getting the ass to prime the pump and make it work some more. Well since the US already consumes 48 percent of the world's goods and thirst for more. And dragging all the natural resources and converting that into money. It's obvious that if there are limitations to that and that we should be thinking of a new paradigm whereby human society can surely continue to continue to evolve for all the world. And so long as the strangulation that capitalism provides I mean it's just.

Look at what's happening in Iraq now. And that's over money that while that's not you know all those euphemisms that we should and others have put up. But it's the preservation of capitalism and it's system and the people who benefit by that. And I'll just drink often and wait for an answer. Thank you. Oh OK. Well first of all I'm afraid I'm going to have disagree with the scholar his sentiments and what he's saying there's a lot of truth but it's not the fault of capitalism as an economic system itself a fault of how it's man implemented. Capitalism is the most productive the most the fish on the way for any economy to operate. But it has to be so many people talk about Adam Smith in The Wealth of Nations published in 1776. How capitalism is supposed to work. That kind of capitalism I think the gentleman would be happy with.

I think the goal as I think he'd be happy with the results of that kind of capitalism what we have today is not the pure type of capitalism where you have many many buyers and many many sellers in common and nobody is in a position to take advantage of anybody else. So it's not the basic system itself but the implementation of it is things like compassionate conservatism that is neither concern nor compassion. If you think in terms of the conservatives in the past one of the things they've been most known for is balancing the budget not running big deficits. There are a lot of fiscal conservatives today who are just outraged with Bush. There's no conservatism at all with regard to his fiscal policy. And I have not seen him of any compassion any of his programs but boy it makes a nice sound doesn't it. Cheney was just usenet a couple days ago and a compassionate nation and

so forth. The problem is with the implementers with the people and the way it's being implemented. Our guest in this part of focus 580 is Ellen Smith. He taught economics to college students for many years. Hiring in 1988 is professor of economics at Eastern Illinois University. He retired to become a full time writer and one of the things that he says he's particularly interested in is economic illiteracy and wants people to know more about and understand better economics. He's the author of a basic book that you might want to take a look at it's titled demystify economics. The book that makes economics accessible to everyone. He's also authored this book that we're talking about here this morning which is titled The looting of Social Security how the government is draining America's retirement account. It's published in paperback by Carroll and Graf. If you're interested in looking at the book you can head up to the bookstore and find it. Questions are also welcome here we have about 15 minutes left. A little bit less maybe. And we have some other callers here and we'll go next to line number two

and a caller in Urbana. Hello. Yeah I just wanted to mention the name of that book the first caller was trying to get that by Mark Weisbrot and Dean Baker that the security the cloning crisis. And then I had a couple I had I was going to call her and originally about what the first caller talked about that the more you talk about Social Security being. Bankrupt and all that the more it gives power to the people who want to privatized but actually I think I'd rather talk about something else and that is the I don't know if you were there the whole thing about the whole thing that's going on here is that a lot of the you were talking about how conservative the Solong want to get rid of Social Security.

Somebody ought to really make it more graphic I mean when. When somebody like on The Sopranos show on HBO where we're where the mob boss tries to get his percentage that's essentially what the entire financial sector is trying to do for the rest of us. I mean right now I pay taxes to a institution that does not take a profit and they give me protection and they've got police people like Tony Soprano will muscle in on that by creating a problem and that way they get the percentage and that's exactly the same thing that the whole entire financial sector is trying to do and when you point it out you're your guest pointed out that there would be such a windfall if if if you went privatized you know they're just they're just salivating about that. I mean they

are Adelie because people point to the security and say that's socialism. And you know what it is and it's good. And people like it. And it's been and again referring back to the first collar people the Stuart what Social Security does to the family and it's basically kind of a family insurance thing that house people were where people are good old people where they're where they are. Were there death in the family. You know it's done a lot more than that and I just act like you know some savings account so I don't know. I just wanted to. Well let's get to where we're getting it. You know I saw Let's get a response from. OK. Yeah I agree with a lot of what he said and certainly this privatization is not some kind of a new

concept I mean that's just always been around by people and they are indeed trying to use scare tactics. But before I want to take a short digression here make sure I get this. And as a result of reading my book a group of citizens. Started a national coalition called the Coalition for so security restitution actually to people out in Idaho. Welcome to Boise Idaho bookstore and saw my book and after reading that I got in touch with me and asked if I could help support them and so forth and they are really working hard and they have a website and I would like to see as many listeners as possible that at least visit that website and see what they got and it is w w w re store Social Security dot org restored so security dot org. They are growing rapidly they get involved and it's all volunteer. The two people who started it don't make much money they're musicians by

profession part of the time but they have a lot of knowledge of economics and so on. So I would just challenge everybody who's listen if everybody who is listening would just go away if you have access to the Web to restore So security dot org and just look at it now they've got places on ARAA to sign petitions write your congress and all kinds of other things. But I'm. Trying to help them as much as I can because I have to get people to become aware that. So that's a lot of things you'll find there is the very thing that. The mansion. There is no basic problem with Social Security today except for the looting. As I said until the year 2042 the Social Security fund would have sufficient funds to pay 100 percent of benefits and then they'd have enough to pay 70 percent of benefits for a long time after that. Yeah it has to be fixed before 2040 too but I'm sure I'm looking at the crisis in 2018 when we don't have

enough revenue coming in to pay the benefits. And the problem. Then is where are you going to get the money it's supposed to be there in that trust fund. He mention insurance or that that is before you should really try. I like to think of those security taxes insurance contributions that's essentially what it's always intended to be a program where you pay premiums then and most people think that it goes into an account and you get these printouts your name and how much you got in and so forth. Well that's the way it was supposed to work the way it actually works is this year they'll take the revenue that comes in Social Security and pay all the benefits that are due and all the rest the money will be used by the government for other things. And so there's nothing that's paid in this year that will still be around next year let alone 10 years from now. People who retired 20 years ago are being paid out of this year's revenue. And so that is something that is actually being

operated like a giant illegal Ponzi scheme or pyramid scheme. And you know how those things always are and so the big thing that I want to emphasize because people immediately think what you're talking about this long term reform problem that's not what I'm talking about now although I'm worried where that I'm talking about the money that is supposed to be in the bank the money that's there that our federal government has borrowed in it are they borrowed very lightly because embezzled or stolen is a better word and it's happened in every president since the sons first came about in 1983 so it's not just a Republican thing. Clinton was involved and the first Bush and Gore but right now it's being used to fund these tax cuts and I think that is obscene. We have one more call or at least one time to go. I'm in line number one this is Urbana. Hello. Hello. As long as your topic was. Economic illiteracy I believe. I'd like to bring up a matter of definition.

We refer to conservatives today and liberals and we don't seem to be cognizant of the shift in the meaning of the term conservative. Before 1960 perhaps almost all conservatives were Southern Democrats who were very few of them in the American political system. What Roosevelt had labeled conservatives were really traditional liberals in the Republican Party men like Taft and Dirksen here in Illinois. And what is coming into the political stream is true conservative ism and it is a very different economic outlook from what probably were lazy fair liberal. OK. Yes here are the terms liberal and conservative don't mean much at all anymore that we can depend on that everybody sees them differently. I think you have to look at it in two in two ways. And

that is fiscal conservatism or liberalism and social conservatism or liberalism. I hate we consider myself to be a fiscal conservative. They need to balance that budget they need. I am a fiscal conservative but I am a social liberal because I believe in doing something to give some equal opportunity to the masses in this country. And so the term and the liberals used to be a good word. And Rush Limbaugh primarily along with others have over the last several years just turned it in all you have to call somebody a liberal and it's a dirty word. And I want to know what's so nerdy about compassion ism I mean liberalism in my mind is trying to provide equal opportunity is trying to abide by the principles of our Constitution our Declaration of Independence our founding fathers would turn over in their graves every one of them if they knew what is

going on and being sold as American ism today. I think you make a useful distinction I think. All right. We're at the point we're almost out of time I guess I just one point I want to underscore to too in response to the situation that you've outlined if indeed we we said today we started doing what in 1900 essentially we said we were going to do. And that is taking the Social Security money that is supposed to be going into Social Security and truly setting it aside putting in the in the lockbox that phrase that we heard so much of four years ago and said we're no longer will we use that to as a way of balancing the budget. And we will not spend it for anything other than what it's intended for. Then would that be would we be OK. Would we have the money there. Pay the benefits. Well there's two steps we. That's the first thing we have to do and the second thing is to repay the 1.5 trillion Sorry been looted and that could be set up what I would

advocate is I'd like to see the government come out tomorrow with a moratorium say enough is enough we're not going to spend anymore so Security money for non-SS those greater purposes. But we've already spent 1.5 trillion set up some kind of legislation. It has to be an installment plan over a period of several years to repay at all make it legal and binding that 1.5 trillion has to be repaid. And they have to stop looting. And President Bush said that he would not touch he said this new state of the Union address after he was president he wouldn't touch those security. And most people I think believe that so long might have seemed like a silly idea of what it was doing was calling attention to a problem that was perceived four years ago and is not perceived today. Most people think that's all been thing Carol. Well we will have to leave it at that because we've come to the end of the time again if people want to read on the subject they should look for the book that we've been talking about it's titled The looting of Social Security

by our guest Alan Smith. It's published by Carroll and Graf he's retired professor of economics from Eastern Illinois University Dr. Smith thank you very much for talking. Thank you David for having me.