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Social Security Parallels Detroit's Pension Heist

Friday, October 4, 2013 18:18
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Democracy and Power 103: Government Money

In general, the art of government consists in taking as much money as possible from one party of the citizens to give to the other.
—Voltaire (1764)

Politician transfer money from productive people to favored special interest groups.

Social Security Parallels Detroit’s Pension Heist

Many politicians and complicit bureaucrats have raided Detroit’s pension fund for their political gain.  The rulers bestowed municipal employees bonuses, hardship payments, perceived investment windfalls and other convenient political artifices.   Called the “13th check,” the money was often dispensed just before Christmas, and thought of as a “good’ thing to do.    One bureaucrat explains, “People were having a hard time, living hand-to-mouth, and we thought we would give them some extra.”

Sadly Detroit’s pension fund is now bankrupt.  Horrifically, some people will be financially hurt by past political malfeasance.  Currently, those effected by the bankruptcy are waiting for a bankruptcy judge to decide if  the promised pensions will be paid along with the fate of the bond holders and other investors.

The lesson in governance is very important:

Whenever there is a pot of money, politicians will seek to raid the money for immediate perceived needs and political advantage.  Certainly, this is not solely a problem specific to Detroit.  Sadly, this is a politician problem, perpetrated by Republicans, Democrats and Independents.

Social Security parallels the Detroit Pension Heist:

Social Security has also been raided for other government programs – i.e. schools, roads, welfare, and a variety of other government functions. Unlike Detroit’s nefarious raids, Social Security was intentionally set up to be raided.   It’s Congress’ dirty secret. 

Social Security is a pay-as-you-go system.  The 15.3% tax (employer and employee pay equally) goes straight to the federal government.  The government takes the money and pays for everything from bombing Libya to paying politicians salaries. 

Now, on to the fictional side.  Government issues a bond promising to repay the alleged “Social Security Trust Fund.”  Guess who gets to repay the government bond, which will pay for future Social Security benefits?  Tomorrow’s workers.  Poof, the money is gone and our grandchildren are deeper in debt.  

Again, the governance lesson  is very important: 

Whenever there is a pot of money, politicians will raid the money for immediate, perceived needs and political advantage.  Certainly, this is not specifically a problem in Detroit.  This is a politician problem  -  perpetrated by Republicans, Democrats and Independents. 


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