Robbing Peter to pay Paul-but where's Mary?

by David Grand
January 28, 2009

I know that sounds silly. But whenever I hear that expression, it reminds me of that popular, folk-singing trio, Peter, Paul and Mary, back in the 60's.

Fact is, that saying actually came into use after the Great Fire of London in 1666, when money was taken from St. Peter's Church to pay for repairs to St. Paul's Cathedral, with Catholics and "foreigners" falsely blamed for starting the fire.

And in recent times, it's become a metaphor for shifting money from one pot to another.  A good example of which would be the way states have dipped freely into their shares of the of the 1998 landmark tobacco settlement (of $206 billion spread over 25 years), on things that have nothing to do with public health or smoking.

Between 2000 and 2006, only 30 percent of the $61.5 in installment payments divided among the states was, according to the Government Accountability Office, spent on health care and less than 4 percent for anti-smoking efforts (much to the consternation of the U. S. Center for Disease Control and Prevention).

States defend their actions by simply saying, that "no strings were attached to the settlement reached in 1998." Maybe so. But to me, that's taking money under false pretenses, and being as sneaky as a rat in a hotel kitchen.

But when it comes to diverting funds, state governments look like rank amateurs at the game, compared to the way the federal government has, over the last 16 years, siphoned off surpluses of the Social Security Trust fund for other than their intended purpose.

In FY 2007, $175 billion was drained from the fund, which represented every penny of the new surpluses paid by workers with their FICA payroll deductions.  To cover its tracks, they've reportedly papered over raiding the fund by placing an IOU in it, which IOUs totaled $1.968 trillion at the end of FY 2007.

Now, President Bush claimed in his public relations efforts to sell his Social Security Privatization scheme in 2005, that "in the year 2042, the entire system would be exhausted and bankrupt." But his proposed plan never got off the ground, let alone make it up a vine to die on.

Jim Cramer, CNBC's 'Mad Money' host, apparently shares that gloomy forecast, calling the trust fund "the largest Ponzi scheme in history, operating in the same way as Madoff's $50 billion scam."

Columnist Paul Mulshine, of the New Jersey Star-Ledger is also of the same mind, saying that "it's entirely unfair to Madoff to compare the Ponzi scheme he ran to the one run by the U.S. government."  For Madoff " at least made an attempt to invest the money he got from early investors to give the returns he promised, while the government never tried to make the Social Security system work by investing in the market." (Good they didn't, what with today's collapsing market.)

Others, however, dispute the claim that the program is doomed to fail. To quote a Washington Post editorial of  2/5/05: "In 2042 enough money will be coming in to pay 75-80 percent of promised benefits; and that even with this reduction, new retirees will still receive more money, in inflation-adjusted dollars, than today's beneficiaries." I hope that's right for our children and grandchildren's sake. It's bad enough that they will inherit a national debt that would choke, not one, but a herd of horses, without their also losing the benefits Americans have enjoyed under that entitlement program since 1937.

PS: Looks like Mary is better off being left out of the picture.