Social Security/Economic Downturn Fix

What is a practical fix for a trust fund that has run out of money? ( The answer is relatively simple. Be honest with the American people! Our president needs to end the charade being perpetuated upon the American public in regard to the solvency of the Social Security trust fund. He should reveal in detail what occurred to the trust fund money, instead of attempting to chip away at the federal government’s obligation to pay benefits. He should do the honorable thing and keep the promise the nation made to the American worker when it comes to Social Security benefits. By keeping its promise to the American worker of providing full retirement benefits based upon the obligation of the program, the federal government lifts the economy out of the worst downturn since the Great Depression. The cost to the federal government had the trust fund not been mismanaged would be zero as the dollars necessary  to sponsor this deficit neutral Job Creation Plan would be available. Baby-Boomers as stated, by taking decreased monthly payments offset the impact of partial distributions to the fund,  as over the life of the fund, the up front payments are recovered.  Additionally , the increased tax revenues to the treasury due to the infusion of up to $800 million dollars a day into the economy will provide more offset.

The obvious first step would be to recommend that the fund’s proceeds cease to be a part of the regular operating budget of the federal government. The task of fulfilling this recommendation may not be completed immediately as the federal government may have to be weaned off the proceeds from our payroll taxes to the Social Security trust fund. Nevertheless, a plan to do just that should be set in motion. Once that task is completed, a plan to restore the money which was “mismanaged” should be instituted. Obviously, it will be a long-term plan.  Any fund restoration plan should allow retiring Baby-Boomers to take up to $40,000.00 from their Social Security principal.  Giving Baby-Boomers the option of taking a partial distribution of their Social Security principal is a “win-win” for boomers, the economy  and the federal government  because  of the added tax revenues created from jobs the boomers will generate as they spend this money.

Additionally, the president and Congress should 1) remove the cap on retirees earnings; 2) allow boomers who are retiring at 62 years of age to take partial distributions of up to 6.5% of their Social Security principal leaving 93.5% of their remaining pension proceeds to be received monthly, and 3) push the requirement to sign-up for medicare to 66 years of age to match the full retirement age of Social Security. To add additional revenues  to the economy, 4) allow high income earners above $350,000.00, to take up to a one time $100,000.00 partial distribution from their private pension funds unencumbered by taxes. Finally, 5) all partial withdrawals whether from Social Security or private pensions funds should not be taxed, creating the incentive to put this money to work. Essentially the Social Security program and private pensions plans become effective vehicles through which Congress and the president can add needed revenue to our economy, creating jobs and ending this economic downturn.


2 thoughts on “Social Security/Economic Downturn Fix

  1. Every dollar of the $2.6 trillion in Social Security surplus revenue, that was generated by the 1983 payroll tax increase, was “borrowed” or “stolen” by the government as it came in and spent on wars and other government programs. The only thing in the trust fund is non-marketable government IOUs. For the past two years the government has had to borrow money from the outside world just to pay full Social Security benefits. The amount that will need to be borrowed in the future will become larger and larger. That is why so many politicians want to cut Social Security benefits.

    I have spent more than a decade trying to expose the awful truth about Social Security. The government and major senior organizations are deliberately misleading the public to believe that the trust fund contains real assets when it does not contain anything of real value. To download a Free copy of my book, “The Looting of Social Security,” please visit my website at

    Allen W. Smith Ph.D.
    Professor of Economics, Emeritus
    Eastern Illinois University


    1. Thank you for your comment. I agree with you the federal government is borrowing money from the outside to pay what benefits are not covered by incoming payroll tax money. I agree the Social Security Trust Fund is made up of non-marketable IOU’s, which are cashed in order to generate funds to pay benefits. I too have done some research. However you and I also agree that benefits are being paid. The Davis Plan does not propose to impact the fund negatively, but positively. Its objective is to enhance the fund. What better way to expose the abuses of the Social Security Trust Fund, than to adopt and market a logical stimulus plan geared to creating jobs without adding to the deficit. This approach forces the politicians to clean-up the Trust Fund in order to accomodate plan. You see there is nothing illogical about the Davis Deficit Neutral Stimulus Plan. There is however, a problem with the way the Social Security Trust Fund is being managed. As the unemployment rate begin to rise, this becomes the logical way to proceed. You see, our objectives are same, to see the Trust Fund rehabilitated. The rehabilitation of the Trust Fund will not occur unless the beneficiaries of the Trust Fund begin to actively use it. Yours and my objective should be to promote the Davis Deficit Neutral Stimulus Plan forcing the useage of the Trust Fund, thus forcing the politicians to clean-up the “Fund.”


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