WASHINGTON, October 7, 1997 --  

Lock and load, fellow Generation Xers.  The latest battle over Social Security has begun. 

Last week, House Budget Committee Chairman John Kasich (R-OH) proposed spending future budget surpluses to shore up Social Security.¹ 
Sound reasonable enough?  Think again.  Kasich, an undeclared Presidential contender for the 2000 election, is trying to re-invent the relationship between taxation and Social Security.  If he wins, it will mean big trouble for younger taxpayers. 

Since the beginning of Social Security, the government has funded the program via a specific payroll tax. Many people mistakenly believe this money goes into individual accounts, or into a single "trust fund".  It doesn't.²  The government has long since spent all the money it has collected -- either on Social Security, or on other spending.  This will work fine, until 2012, when the Feds won't have enough revenue to cover Social Security payments.³ 

When this dark day comes, elected politicians will have two choices.  1) Refuse to pay out money at the exact moment when the enormous Baby Boomer voting block is beginning to retire.  2) Use general taxes from younger people to cover payments to the retiring Baby Boomers. 

Which do you think they'll do? 

The answer is so obvious that few analysts even bother to ask the question.  In 2012, general tax revenues will begin to fund the Social Security system, and direct generational income transfer will begin.  Politicians never admit this truth.  They hide it by saying payments will be covered by the fictitious trust fund. 

The perpetuation of the trust fund lie is the key to the confiscation of younger taxpayers' money.  Without the trust fund, there is no justification, and the politicians know it. 

Unfortunately for the Baby Boomers, this lie isn't big enough to save Social Security.  By 2029, all of the imaginary money in the trust fund will be gone, and there will no longer be any justification for funding Social Security out of general taxes.⁴  Official proposals have been made to fix Social Security -- specifically by the agency's Advisory Council last January.  None of the proposals, however, dared to propose direct generational income transfer, at least without hiding it behind the veil of the trust fund lie.⁵ 

That's where Representative Kasich's brazen proposal comes in.  Kasich is suggesting  that as soon as a budget surplus materializes, perhaps as early as the year 2000, the money will be funneled directly into Social Security to help finance retirement of the Boomers. 

This means that in addition to a 12.4 percent Social Security payroll tax, theoretically being counted toward your future benefits (yeah, right), additional general taxes will be taken to keep the system alive exclusively for older generations.  That's the key.  Kasich isn't even bothering to lie to us anymore. His plan is incredibly bold because it isn't sugar-coated.  He just wants to take the money. 

Kasich's plan is easy to swallow for older taxpayers because it doesn't call for a tax increase.  Its relative palatability is what makes it so dangerous.  Once general revenues are directed toward Social Security, a beachhead will have been established that will be extremely easy to expand -- with additional taxes, if necessary. 

What could justify such drastic action? 

"When we talk about Social Security, we're talking about the public debt," Kasich said.⁶ 

No, Congressman, we're not.  A debt implies consent between borrower and lender.  I'm not fool enough to consent to a ridiculous pyramid scheme like Social Security. 
 

Notes: 

1.  National Public Radio, Morning Edition, October 3, 1997 
2.  The Social Security Trust Fund consists of an account holding a huge number of government bonds -- so many that they can't be cashed.  These bonds are federal IOUs which were exchanged for cash in order to finance the deficit. 
3.  Cato Institute, March, 1997 
4.  Heritage Foundation, August 6, 1997 
5.  Social Security Administration, Advisory Council Report, January 6, 1997 
6.  National Public Radio, Morning Edition, October 3, 1997