This is the result of another Ronald Reagan Alan Greenspan scheme to enrich their wealthy friends.
What do you do when you want to screw only the working people of your nation with the largest tax increase in history and hand those trillions of
dollars to your wealthy campaign contributors, yet not have anybody realize you've done it? If you're Ronald Reagan, you call in Alan Greenspan.
Through the "golden years of the American middle class" - the 1940s through 1982 - the top income tax rate for the hyper-rich had been between 90 and
70 percent. Ronald Reagan wanted to cut that rate dramatically, to help out his political patrons. He did this with a massive tax cut in the summer of
The only problem was that when Reagan took his meat axe to our tax code, he produced mind-boggling budget deficits. Voodoo economics didn't work out
as planned, and even after borrowing so much money that this year we'll pay over $100 billion just in interest on the money Reagan borrowed to make
the economy look good in the 1980s, Reagan couldn't come up with the revenues he needed to run the government.
Coincidentally, the actuaries at the Social Security Administration were beginning to get worried about the Baby Boomer generation, who would begin
retiring in big numbers in fifty years or so. They were a "rabbit going through the python" bulge that would require a few trillion more dollars than
Social Security could easily collect during the same 20 year or so period of their retirement. We needed, the actuaries said, to tax more heavily
those very persons who would eventually retire, so instead of using current workers' money to pay for the Boomer's Social Security payments in 2020,
the Boomers themselves would have pre-paid for their own retirement.
Reagan got Daniel Patrick Moynihan and Alan Greenspan together to form a commission on Social Security reform, along with a few other politicians and
economists, and they recommend a near-doubling of the Social Security tax on the then-working Boomers. That tax created - for the first time in
history - a giant savings account that Social Security could use to pay for the Boomers' retirement.
This was a huge change. Prior to this, Social Security had always paid for today's retirees with income from today's workers (it still is today). The
Boomers were the first generation that would pay Social Security taxes both to fund current retirees and save up enough money to pay for their own
retirement. And, after the Boomers were all retired and the savings account - called the "Social Security Trust Fund" - was all spent, the rabbit
would have finished its journey through the python and Social Security could go back to a "pay as you go" taxing system.
Thus, within the period of a few short years, Reagan dramatically dropped the income tax on America's most wealthy by more than half, and roughly
doubled the Social Security tax on people earning $30,000 or less. It was, simultaneously, the largest income tax cut in America's history (almost
entirely for the very wealthy), and the most massive tax increase in the history of the nation (which entirely hit working-class people).
But Reagan still had a problem. His tax cuts for the wealthy - even when moderated by subsequent tax increases - weren't generating enough money to
invest properly in America's infrastructure, schools, police and fire departments, and military. The country was facing bankruptcy.
No problem, suggested Greenspan. Just borrow the Boomer's savings account - the money in the Social Security Trust Fund - and, because you're
borrowing "government money" to fund "government expenditures," you don't have to list it as part of the deficit. Much of the deficit will magically
seem to disappear, and nobody will know what you did for another 50 years when the Boomers begin to retire 2015.
(visit the link for the full news article)