1967 scam: add social security to budget revenues, reduce Vietnam deficit

From a history of social security:

In the Social Security Act of 1935 the income from the payroll tax was to be credited to a Social Security “account.” Benefits were to be paid against this account…In the 1939 Amendments, a formal trust fund was established and a requirement was put in place for annual reports on the actuarial status of the fund. Specifically, the law provided: “There is hereby created on the books of the Treasury of the United States a trust fund to be known as the ‘Federal Old-Age and Survivors Insurance Trust Fund’…The Trust Fund shall consist of the securities held by the Secretary of the Treasury for the Old Age Reserve Account…

In early 1968 President Lyndon Johnson made a change in the budget presentation by including Social Security and all other trust funds in a “unified budget.” This is likewise sometimes described by saying that Social Security was placed “on-budget.”

This 1968 change grew out of the recommendations of a presidential commission appointed by President Johnson in 1967, and known as the President’s Commission on Budget Concepts. The concern of this Commission was not specifically with the Social Security Trust Funds, but rather it was an effort to rationalize what the Commission viewed as a confusing budget presentation. At that time, the federal budget consisted of three separate and inconsistent sets of measures, and often budget debates became bogged-down in arguments over which of the three to use.

As an illustration of the problem, the projected fiscal 1968 budget was either in deficit by $2.1 billion, $4.3 billion, or $8.1 billion, depending upon which measure one chose to use. Consequently, the Commission’s central recommendation was for a single, unified, measure of the federal budget — a measure in which every function and activity of government was added together to assess the government’s fiscal position…

by 1986, Social Security was technically off-budget, but it was still being used in the deficit calculations. Absent other legislative change, this would have continued until 1993. However, in the Omnibus Budget Reconciliation Act (OBRA) of 1990 the law was changed to stop the use of the Trust Funds for any function in the unified budget, including calculations of the deficit. One sub-part of OBRA 1990 was called the Budget Enforcement Act (BEA), and it was this sub-part that specified this change in the law.

The BEA budget treatment of Social Security basically remains the law to the present day. Specifically, present law mandates that the two Social Security Trust Funds, and the operations of the Postal Service, are formally considered to be “off-budget” and no longer part of the unified federal budget.

Confused yet? Don’t be. The normal way a “trust fund” works is that you put money away today and sequester it so it will be avilable at some future time. That’s never been the way the SSA works, despite all the shenanigans above: these trust fund œbalances are nothing more than a bookkeeping device. They do not consist of real economic assets that can be drawn down in the future to fund benefits. In other words, the Social Security trust fund contains nothing.

Both sides of the aisle have been very happy to mislead or defraud the voters for generations because it’s all such good fun as long as it lasts.

The President’s Commission on Budget Concepts of 1967 was a complete scam. The Commission consisted of 15 senior government insiders and a civilian figurehead. It’s main achievement was changing the system to count social security revenues — big positives then — as revenue, so the Vietnam War would be less of a drain.

Leave a Reply