I have taken much time to research this issue as it is one of the most misunderstood. It is so, because we…the public, are mentally indolent and will not seek out the truth for ourselves, ever content to accept contrary political assertions by those of highly questionable character and motivation/s. Please do yourself a favor and read this. I have added bold font and underlining to note key points. It does not take all that long to read, but when you’ve finished you will know which politicians are lying to you.

The original Social Security Act created an "Old-Age Reserve Account" in the Treasury. Each year, an amount deemed sufficient to pay that year’s benefits would be appropriated to the Account. This; therefore, defined Social Security as just another accrual and disbursement Treasury Dept account with no unique guarantees and/or restrictive covenants. As you will see all that will change will be the “perception” that politicians wished to give the general public. Appropriations unneeded for benefits would be invested in federal debt instruments, including unmarketable debt issued for this purpose, earning 3 percent. Social Security’s tax rate was to rise gradually, to create a reserve big enough so its interest would help defray future costs. Tax collections would begin in 1937; benefit payouts, in 1942; thus the fund would start accumulating.

Criticism arose. Winthrop Aldrich of Chase National Bank argued that the reserve would be a fiction; the government would just be issuing itself promissory notes. In his famous Milwaukee speech on Social Security during the 1936 presidential campaign, "Alf" Landon likened the reserve to a father taking deductions from his kids’ wages to invest for their old age, "investing" them in "his own IOU," and spending the money, leaving his kids nothing but IOUs, making Social Security’s forced savings "a cruel hoax." It would appear that fate cast old Alf in the role of the Nostradamus of Social Security. Social Security tax dollars, President Franklin Roosevelt retorted, "are held in a Government trust fund solely for the social security of the workers." Such was the original intent. Intent; however, doth not make it factual reality.

After the election, the attacks kept coming. General Hugh Johnson, former head of the National Recovery Administration, and journalist John T. Flynn, pointed out that unlike insurance companies, which invest their premiums to build a reserve to pay claims by their insured, the government would only be issuing itself IOUs. So…, the reserve was worthless. To pay future benefits, Americans would have to be taxed again. Defenders responded that the IOU talk was misleading. They opined that…are not all private instruments, such as stocks and bonds, really IOUs, their value depending on the resources and ethics of the issuing firms?

In 1939 FDR proposed amending Social Security. In the ensuing congressional hearings and debates, the reserve controversy exploded. Critics accused the Administration of "embezzlement" and reiterated that the reserve was just IOUs, so Americans would be taxed twice. No, no, no, defenders shot back; no embezzlement was happening, there wouldn’t be any double taxation, and the IOUs were the safest investment there was – government bonds. By now three years old, the acrimonious controversy was hurting Social Security’s prestige.

The 1939 Amendments created an "Old-Age and Survivors Insurance Trust Fund" at the Treasury. One may note the intentional descriptive Trust Fund, which was chosen obviously to assuage public concerns. Such was to turn out to be mere political double-speak and subterfuge. The record is clear that this was done to end the reserve fund wrangle. Testifying before the Senate Finance Committee on the Amendments, Social Security Board chairman Arthur Altmeyer, when asked what the purpose of the “Trust Fund” was, and stated, "to allay the unwarranted fears of some people who thought that Uncle Sam was embezzling the money."

Moreover, the texts of the original Social Security Act regarding the Reserve Account and of the 1939 Amendments regarding the Trust Fund are virtually identical. Section 201 of the original Act, "Old-Age Reserve Account," was replaced by a new Section 201, "Federal Old-Age and Survivors Insurance Trust Fund."(2) The only real change was the elimination of the specific annual appropriation transferring revenues to the Reserve Fund. Instead, a sum equivalent to Social security tax receipts "is hereby appropriated" to the Trust Fund for the fiscal year ending June 30, 1941, "and for each fiscal year thereafter." In other words, the money now goes into the Fund automatically. The only other new features were a Board of Trustees (Secretary of the Treasury, Secretary of Labor, and Chairman of the Social Security Board) to manage the Fund; replacement of 3 percent interest with the average rate on interest-bearing federal debt; and paying money from the Fund to the Treasury to defray Social Security administrative expenses.

Otherwise, the Trust Fund operated just like the Reserve Account. In fact it was the Reserve Account; the latter’s assets as of January 1, 1940 were transferred to the Trust Fund. The Account was, according to the Act, "an account in the Treasury," and the Trust Fund, per the Amendments, was "on the books of the Treasury," making the transfer a formality. Essentially, a shoebox full of bonds just got relabeled.

The evidence is clear: Social Security’s Trust Fund is a Treasury account, nothing more. The "trust fund" label was a public relations ploy to reassure the public that Social Security was trustworthy. It worked. The reserve controversy faded away.

Is the Trust Fund the real McCoy? Let’s see. A trust fund is money or other property held in a trust, a trust being "A fiduciary relationship with respect to property, subjecting the person by whom the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it." A trust must have a "settlor," who creates the trust and puts property into it; a "trustee" who manages it and holds legal title to the property; a "beneficiary," who has equitable title to the property, and for whom the trustee manages it; "terms of trust," spelling out the trust’s purpose, the duties and powers of the trustee(s); and, of course, property. (Charles E. Rounds, Jr. and Eric Hayes, Loring: A Trustee’s Handbook,) 8^th ed., pp. 1–2, 5, 79; Gilbert Thomas Stephenson, Estates and Trusts, 4^th ed., pp. 63–66).

Social Security’s trust fund does not have these defining features to say the least. The political “monnicker”, if you will, assigned was just that. In legal terms this account does not meet the standards of a trust fund. Citizens would do well to undertand this, despite the protestations and misdirection of todays politicians. They lie! And they know better.

Congress is not the settlor. A settlor puts his own property into the trust, which Congress did not do. And Section 201 of the Amendments did not even mention the Board of Trustees having legal title to any property. Down go two characteristics of a trust.

Also, Section 201 said nothing about property – because there isn’t any. In Flemming v. Nestor, the Supreme Court ruled that there are no accrued property rights to benefits. If you have no property right to benefits, how can you have property in the trust fund which supposedly pays them? Property in the trust fund implies a property right to benefits, and vice versa. A trust manages property on someone’s behalf. No property, no trust.

Suffolk University law professor and trust expert Charles Rounds aptly summed up: "Despite the term ‘trust,’ the Social Security system contains nothing that remotely resembles the common law trust. There is no segregation of assets, no equitable property rights, no private right of enforcement (all characteristics of the common law trust). It is merely a system of taxation and appropriation sprinkled with trust terms to hide its true nature."

Finally, consider how the Trust Fund operates. Social Security revenues go into Treasury general revenue and are credited to the Fund as unmarketable Treasury bonds. The Treasury pays benefits with general revenue, debiting the Trust Fund an equivalent value of bonds. Any remaining revenue finances general government, with an equivalent value of bonds in the Trust Fund as Social Security’s "surplus." (House Ways and Means Committee, 1998 Green Book, pp. 73, 75, 77). That’s a Treasury account in action, not a trust fund.

Social Security’s Trust Fund is bogus. Meaning the "robbing the trust fund" issue is phony, too. Yet seniors buy it. Last night one of my friends told me he’d tried to straighten out his 77-year-old uncle, but the old boy just wouldn’t believe him. Even my Mom fell for that "robbing the trust fund" baloney. Social Security’s propagandists have programmed many Americans, especially seniors, like Moonies. Deprogramming is imperative. (1)

History shows that Democrats were the ones who first who abused the supposed “Trust Fund” by appropriating it’s monies to other than original intended purposes and Republicans were the ones accusing them of invading the public’s “Trust Fund”. If there ever was a metaphor for the pot calling the kettle black we have it here!

Do you wonder why the original guarantee that your S/S retirement annuity would be free from taxation was to later become an abrogation of the public trust? Ask former Vice-President and Presidential candidate Bad Al-Gorerithms! It was his vote that did so.

Do you wonder who was responsible for initially invading, with a benevolence of largess theretofore unheard of, those funds that were intended to fund S/S pensions? Try the architect of the Great Society, Grandpa Lyndon Baines Johnson. Too great a temptation to fund a social welfare agenda and shill for the vote and thereby enslave a generation of minorities to a parasitic dependence upon their government fo their very salvation.

One need keep a proper perspective in understanding this Social Security debacle. Government is run by politicians. Such persons are dependent upon the public vote for their retention of power. Power is what it is all about. One party or politician demonizes another to negate them in the public mind. Since most politicians are lawyers, they do so skirting the edge of the law with little regard for ethics and morality. One need only reflect upon the courts ruling that it is “legal” for politicians to lie in their statements and campaign prospectus. Remember…, it’s all about The Power vested in them. The authority we cede them as members or heads of a myriad of congressional committees. These positions are doled out by congressional leadership as rewards for partisan loyalty and dedicated effort and subsequent result/s. They have naught to do with integrity and ability. It has all to do with power and the abuse of the public trust.

References:

(1) http://www.lewrockwell.com/orig3/attarian2.html