O'Reilly: In the "Impact" segment, it's crunch time for tax cuts in Congress. One of the main arguments against the big tax cut is the solvency of Social Security, but are we paying for the government's sins?
Joining us now from Washington is Mike Tanner, the director of the Cato Institute's project on Social Security privatization.
Now in — and please correct me if I'm wrong because this is such a murky thing. The government has taken in trillions of dollars over the last 50 year in Social Security payroll taxes from the workers, from us. We just give — keep giving them money. Yet, instead of investing that money and getting a return, what have they done with it, Mr. Turner — Mr. Tanner?
Tanner: Well, in essence, it goes to purchase government bonds, and the money from the purchase of the government bonds becomes general tax revenue and is spent by the federal government on whatever it is the federal government does.
O'Reilly: All right. So let me stop you there. This is great. So they take the payroll money from all of us. They buy government bonds, which yield 5, 6 percent, in that range, right?
Tanner: Well, they only yield it in a technical sense because the government promises to pay itself interest.
Tanner: But it's not any sort of actual transfer of cash. It's all a bookkeeping function.
O'Reilly: But the actual money that they take out of the Social Security fund flows right into the general fund, and it's spent on Jesse Jackson's tax-exempt organizations and everything like that, right?
Tanner: Well, it's spent on whatever the federal government does.
O'Reilly: This is out — but this is crazy because if they had invested that money in anything for 50 years, all of those trillions of dollars would have brought more money back into the Social Security fund, right?
Tanner: Well, that's right. Now it's really only since 1983 that they've had large accumulated surpluses within the Social Security system.
O'Reilly: All right. So that's 18 years. We could have been making pretty good money, right?
Tanner: Well, that's right. It — but you don't — you've got to be careful. You don't want the government to be doing that investing.
O'Reilly: Oh, I don't want — I don't — all I — all I want...
Tanner: ... proposed that individuals do that investing...
Tanner: ... through private individual accounts like President Bush has proposed.
O'Reilly: Fine. We've got to stay away from that right now, but what I'm trying to say is that the — they're saying we don't have enough money for Social Security to cover the payments of the baby boomers, and the reason is that they have mismanaged that money, taken the money, and spent it on other things. They're are not telling us the truth.
Tanner: Well, you're absolutely correct in that that money is not really there. When they talk about a trust fund...
Tanner: ... they're talking about a collection of IOUs. Now even if every IOU in that trust fund is redeemed, Social Security will still be some $21 trillion debt.
O'Reilly: Right, but if they had...
Tanner: So this wouldn't solve the whole problem.
O'Reilly: ... invested the payroll tax that they have taken us for 50 years — and you say it only had a big surplus for 18 years — invested it 5in gold bars, in anything, they would have had money coming back in. That's — that's what the government is supposed to do, manage the money. We got — we need more from you guys."
Tanner: Well, in essence, that — that's exactly right. There is no savings or investment of any money in Social Security, neither the...
Tanner: The money is either paid out to beneficiaries, or it's spent by the government.
O'Reilly: So payroll tax — Social Security money is supposed to be available to you and to me and to everybody watching, was spent on the Citizenship Education Fund and all these other things.
Tanner: On everything the federal government does. No — none of it — when you pay $1 in Social Security taxes, you have to understand, none of that money is saved for your retirement bill in any way.
O'Reilly: For Social Security. All right. Bingo! Mr. Tanner. Thank you very much.
Tanner: It's a pleasure.
O'Reilly: I hope everybody understands it now.