By: Ed Henry

You’ve all heard about the crisis facing Social Security. It’s the basis for the entire debate over how and why to change the system now. We are told that at some time in the future, distant and not so distant, Social Security will have to rely on its trust fund in order to pay full benefits promised to retirees. Unless changes are made now, the supplemental retirement system will be progressively deeper and deeper in doo-doo until it finally, according to George Bush, goes broke or at least cannot pay more than eighty percent of benefits.

Since the whole Intragovernmental Holdings (IH) portion of the national debt is composed of 143 trust funds in the same boat as the Social Security trust funds, holding nothing but “special obligation” Treasury bonds, all we have to do is look at one of the other entitlements already in trouble.

The Federal Employees Retirement System (FERS), the second largest trust:

The following tables are taken directly from the U.S. Treasury's Monthly Statement and provide a running account of activity month to month and year to year. Annual interest is paid against the previous year's closing balance and half is paid in December, half in June. The interest rate is taken from the Bureau of Public Debt and is the average for the year. As a result, there may be small discrepancies in the amount of interest paid the trust with no money involved but by simply depositing more bonds.

Pay particular attention to the month of September, the close of the government's fiscal year. The influx of bonds does not come from interest or employee contributions that are reflected in the continuous flow of monthly deductions from paychecks recorded under "receipts." But no one will admit where it does come from.

My deep throat informs me that the influx of securities in September of every year is due to the government’s efforts to keep FERS solvent by simply dumping more bonds into the account. They only put in enough so as to not be too obvious but enough to make up for the withdrawals and increase the trust fund each year.

This is backed up by the fact that there is no payback to the General Fund of the Treasury where the money to make up for the monthly shortfalls is taken. If the funds were real or anything other than the “special” nonmarketable bonds, what President Bush calls “worthless,” you would expect some payback to the General Fund. Instead, it’s all credited to the trust.

And where does the General Fund of the Treasury get the money?

From taxpayers of course. The government has only three sources or combination of sources for revenue (1) taxes (2) borrowing from investors like China , Japan , and others willing to loan us money, and (3) cutting programs or robbing Peter to pay Paul.

In other words, we are paying benefits to federal employees who don’t contribute enough to their own lavish retirement plan. In fact, month by month we are paying substantially more than what the millions of current government employees pay into their own retirement system.

You will not find this happening with Social Security where just within the past five years America ’s workers have contributed $434 billion more than was necessary to pay all benefits to the retired and disabled. Where there have been surpluses that the Beltway Bandits do not want you to know about.

Do you hear anyone within the District of Corruption talking about reforming FERS? Are they talking about raising premiums, cutting benefits, or extending the age of retirement for federal employees? Why not? The system is already in the red.

As the original Deep Throat said; “follow the money.” I hope you are finally recognizing the true value of these accounts (fictional trusts) and markers (fictional securities) to the government. They are the tools of a monstrous fraud that leads to double taxation.

In other words, if the government can do this with their own employee's retirement pension, then they could do it with Social Security and there's no need for debate, argument, or any change. Just dump more bonds in the account when they baby-boomers retire and let the American taxpayers cough up some more of their hard earned cash. This is not a joke is it?

If you want to know the identity of my deep throat, call me in thirty-three years. That's a joke.

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Ed Henry is the founder of TUFF, the Taxpayers Union, and a regular columnist for Ether Zone.

Ed Henry can be reached at

Ed's FREE pamphlet-"To The Moon, Alice" the national debt, your Social Security, and the Pay-It-Again Sam scam.

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Published in the June 2, 2005 issue of  Ether Zone.
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