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Tuesday, July 20, 2010

How They Did It
Posted by Jill | 5:54 AM
When even stock investor sites are talking about the Great Scam that Ronald Reagan and Alan Greenspan perpetrated on the American people, one that too many Americans are ready to vote to perpetuate, things are at a sorry pass indeed:
There are some brilliant pundits who believe cutting retirement benefits will fix our economy. How will that work exactly? Pay old people less money, don’t cover their medical care and what happens? Then they need money. If they need money, they need to work and if they need to work they increase the supply of labor, which reduces wages and leaves all 308,367,109 of us with less money. Oh sorry, not ALL 308,367,109 - just 308,337,109 - the top 30,000 (0.01%) own the business the other 308,337,109 work at and they will be raking it in because labor is roughly 1/3 of the cost of doing business in America and our great and powerful capitalists have already cut their manufacturing costs by shipping all those jobs overseas, where they pay as little as $1 a day for a human life so now, in order to increase their profits (because profits MUST be increased) they have now turned inward to see what they can shave off in America.

[snip]

As Allen Smith says: "Ronald Reagan and Alan Greenspan pulled off one of the greatest frauds ever perpetrated against the American people in the history of this great nation, and the underlying scam is still alive and well, more than a quarter century later.  It represents the very foundation upon which the economic malpractice that led the nation to the great economic collapse of 2008 was built.  Essentially, Reagan switched the federal government from what he critically called, a “tax and spend” policy, to a “borrow and spend” policy, where the government continued its heavy spending, but used borrowed money instead of tax revenue to pay the bills.  The results were catastrophic.  Although it had taken the United States more than 200 years to accumulate the first $1 trillion of national debt, it took only five years under Reagan to add the second one trillion dollars to the debt.  By the end of the 12 years of the Reagan-Bush administrations, the national debt had quadrupled to $4 trillion!"

Both Reagan and Greenspan saw big government as an evil, and they saw big business as a virtue.  They both had despised the progressive policies of Roosevelt, Kennedy and Johnson, and they wanted to turn back the pages of time. They came up with the perfect strategy for the redistribution of income and wealth from the working class to the rich.  If Reagan had campaigned for the presidency by promising big tax cuts for the rich and pledging to make up for the lost revenue by imposing substantial tax increases on the working class, he would probably not have been elected.  But that is exactly what Reagan did, with the help of Alan Greenspan.  Consider the following sequence of events:   

1) President Reagan appointed Greenspan as chairman of the 1982 National Commission on Social Security Reform (aka The Greenspan Commission)

2) The Greenspan Commission recommended a major payroll tax hike to generate Social Security surpluses for the next 30 years, in order to build up a large reserve in the trust fund that could be drawn down during the years after Social Security began running deficits.

3) The 1983 Social Security amendments enacted hefty increases in the payroll tax in order to generate large future surpluses.

4) As soon as the first surpluses began to role in, in 1985, the money was put into the general revenue fund and spent on other government programs. None of the surplus was saved or invested in anything.  The surplus Social Security revenue, that was paid by working Americans, was used to replace the lost revenue from Reagan’s big income tax cuts that went primarily to the rich.  

5) In 1987, President Reagan nominated Greenspan as the successor to Paul Volker as chairman of the Federal Reserve Board.  Greenspan continued as Fed Chairman until January 31, 2006.  (One can only speculate on whether the coveted Fed Chairmanship represented, at least in part, a payback for Greenspan’s role in initiating the Social Security surplus  revenue.)

6) In 1990, Senator Daniel Patrick Moynihan of New York,  a member of the Greenspan Commission, and one of the strongest advocates the the 1983 legislation, became outraged when he learned that first Reagan, and then President George H.W. Bush used the surplus Social Security revenue to pay for other government programs instead of saving and investing it for the baby boomers.  Moynihan locked horns with President Bush and proposed repealing the 1983 payroll tax hike.  Moynihan’s view was that if the government could not keep its hands out of the Social Security cookie jar, the cookie jar should be emptied, so there would be no surplus Social Security revenue for the government to loot. President Bush would have no part of repealing the payroll tax hike.  The “read-my-lips-no-new-taxes” president was not about to give up his huge slush fund.

The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day.  The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers.  But the trust fund is empty!  It contains no real assets.  As a result, the government will soon be unable to pay full benefits without a tax increase.  Money can be spent or it can be saved.  But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything. 

That is how the largest theft in the history of the world was carried out.  300M people worked and saved their whole lives to set aside $2.5Tn into a retirement system that, if it were paying a fair compounding rate of 5% interest over 40 years of labor (assuming an even $62Bn a year was contributed), would be worth $8.4Tn today - enough money to give 100M workers $84,000 each in cash!  The looting of FICA hid the massive deficits of the last 30 years in the Unified Budget. Presidents and Congresses were able to reduce taxes on the wealthiest Americans without complaint from the deficit hawks, because they benefited. The money went directly from the pockets of average Americans into the pockets of the rich.

Now that it is time to repay those special bonds in the Trust Fund, we are inundated in opinion pieces in the leading newspapers and magazines complaining about Social Security and its horrible impact on the budget.  Government finances have been trashed by foolish tax cuts, unpaid wars, tax loopholes for corporations and the very wealthy, the failures of economists, the greedy search for greater returns in financial markets and the collapse of moral values in giant businesses but Social Security is supposed to be the problem that needs fixing…

Social Security is not "broken" the money is in the Trust Fund. But the people who manage the finances of the United States don’t want to repay the bonds held by the Trust Fund. They want to default selectively against average people, their fellow citizens, who paid their taxes expecting to be protected in their retirement.  Refusing to repay the $2.54 trillion dollars in bonds held by the Social Security Trust makes the US look like Greece, just another nation unable to govern itself coherently. The people who manage US finances come from the financial elites, the best that Wall Street and enormous corporations have to offer. Selective default exposes them as charlatans. The claims of the economics profession to expertise are puffery. Their theories about the benefits of tax cuts are proven false. Their mathematical proofs about free markets collapse in the real world.

And if you're young and you think this doesn't affect you, or you've already assumed (as believe me, many of us did as soon as Reagan started looting the Treasury for his rich friends) that Social Security won't be there for you, and you think that you'll just have to save for your elderly years (since there's no such thing as retirement anymore) yourself, well, you won't have anything to save. Because what do you think happens when we all have to work until we drop dead?
So, what is this all about? It’s about forcing 5M people a year who reach the age 65 to remain in the work-force. The top 0.01% have already taken your money, they have already put you in debt, they have already bankrupted the government as well so it has no choice but to do their bidding. Now the top 0.01% want to make even MORE profits by paying American workers even LESS money. If they raise the retirement age to 70 to "balance" Social Security - that will guarantee that another 25M people remain in the workforce (less the ones that drop dead on the job - saving the bother of paying them severance).

What’s next? Is it fair to say that children can’t work in a struggling family business? Isn’t it to everybody’s benefit that kids should be allowed to help out at the family store? That will be the next step towards turning America into a 3rd World country. The seemingly innocent concept of "letting" kids work will deprive another 5M people of paying jobs - throwing them out into the labor force as well and driving labor costs down even further.

Now, I don't mean to just pick on the Republicans. After all, it was none other than lame duck Democrat Chris Dodd who has pretty much put the nails in the coffin of any hope that Elizabeth Warren might be appointed to the Consumer Financial Protection Agendy. Yes, THAT Chris Dodd, who never met a bankster campaign donation he didn't like. And Barack Obama, in his futile efforts to get white Republicans to like him, has long been perfectly willing to sell Social Security down the river in his quixotic quest.

The bottom line, folks, is that we're screwed. We were screwed the day we allowed a two-bit actor to become president and tell us that women on welfare are driving Cadillacs and that ketchup is a vegetable. We were screwed the day giant corporations took over the media and started shaping the news in their own interest. We've been screwed for thirty years and many of us didn't even know it. And those of us who did have been screaming into the wilderness for all thirty of those years, and no one listened. They aren't listening now, either. It's so much easier to blame a bunch of poor, deluded people running across the border because they're uninformed enough to still think there's opportunity here, that the dice aren't loaded.

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2 Comments:
Blogger casey said...
Hello Jill,

This is accurate as far as you have taken it but it goes further back in time to FDR as the Rethugs always wanted to put the masses back in their place (aka servicing their betters). This was a long time acoming. What they did was use their money and power for generational change. For those at the top the investment was worth it as they have consumed almost all of the surplus that we have during the last 30 years. This con will continue until one of two things occur. Nothing left due to fighting over what scraps are left or a revolution as the rest of use finally wake up from the collective nightmare.

Blogger Jeff said...
If you haven't, read The Shock Doctrine by Naomi Klein, and Empire's Workshop by Greg Grandin. Hell, I'll send you my copy (long as you return it).

Remember:

"If Potter gets hold of this Building and Loan there'll never be another decent house built in this town. He's already got charge of the bank. He's got the bus line. He's got the department stores. And now he's after us. Why? Well, it's very simple. Because we're cutting in on his business, that's why. And because he wants to keep you living in his slums and paying the kind of rent he decides.

Joe, you lived in one of those Potter houses, didn't you? Well, have you forgotten? Have you forgotten what he charged you for that broken-down shack? Here, Ed. You know, you remember last year when things weren't going so well, and you couldn't make your payments? You didn't lose your house, did you? Do you think Potter would have let you keep it? Can't you understand what's happening here? Don't you see what's happening? Potter isn't selling. Potter's buying! And why? Because we're panicky and he's not. That's why. He's picking up some bargains.

Now, we can get through this thing all right. We've got to stick together, though. We've got to have faith in each other."