One of my pen pals is Michael Murphy, the Washington State treasurer. Mike is currently serving in his third four-year term and has thirty-three years in public treasury management at both the state and local level. He just dropped me this line about a revealing meeting he had with one of the leading privatizers of Social Security on Capitol Hill.

“Last week, the National Association of State Treasurers met in Washington, D.C. During the week, we met with members of our states’ delegations and heard from federal officials on the administration’s plans for Social Security.

We heard from both sides of the aisle as well as from senior administration officials. One session (on May 24, 2005) was given by Congressman Jim McCrery, 4th District, Louisiana. Mr. McCrery is the Chairman of the Subcommittee on Social Security.

Mr. McCrery described the “fiction of the Social Security trust fund” and referred to it as “feeding the beast.” It was not initially clear what he meant by the expression of “feeding the beast.” I will get to that point later.

He expressed an interest in supporting the administration’s plan for personal accounts. The personal accounts would be 4% “carved” out of the current 12.4% payroll tax (combined levy on employees and employers). Since Social Security has been and is a pay-as-you-go plan, that change would cause cash flow problems to pay for benefits. One part of his solution is to have “benefit restructuring” as well as “some short term debt.”

It was abundantly clear from his speech that “benefit restructuring” meant reducing benefits. Yes, there is no doubt that the administration’s plan is to reduce your benefits.

It was not clear, though, how he would define short term debt. So, I asked. He said, “15, 20, maybe even 30 to 35 years.”

Not wanting to misquote him, I followed up: “if it was his view as a member of Congress that short term debt could be as long as thirty-five years.” He replied that, in the context of the 75 year focus of the Social Security plan, thirty-five years was short term.

Had I not asked the question, any reasonable person would have concluded that short term actually meant short term. In our business, short term borrowing means no more than 12 months. You can imagine my surprise that the Chairman of the Subcommittee on Social Security would be so imprecise and misleading.

Most Americans pay into this system and these same people have an expectation of receiving a Social Security benefit in their later years. I certainly do. To refer to the U.S. Treasury having some “short term debt” to help with future cash flow is more than misleading – it’s just wrong!

Another person asked why the tax was only on those persons who make less than $90,000. As many of you probably make less than $90,000 per year, you may not be aware that once a person’s wages go over this amount the federal government gives a raise by not taxing for Social Security.

Mr. McCrery answered that it was to help small business owners. This answer left the entire room of State Treasurers scratching their heads. We don’t know of many small businesses that pay their people over this amount. Mr. McCrery answered further that we’ve just got to stop “feeding the beast.”

Hmmmmm, it’s now we’re figuring out what he meant. There is no real trust fund for our aging population, the national deficit will grow substantially larger and he wants to reduce benefits.

At this juncture, another person (concerned with this remark about “feeding the beast”) challenged the Congressman that it was inappropriate to refer to this long revered program as “feeding the beast.” Isn’t Social Security intended to be a safety net for the aged and infirmed?

At this point, Mr McCrery pointed his finger at this gentleman and said, “It’s people like you that will cause the downfall of this nation. Look at Europe and their tax structure and it is people like you that will cause the downfall of this country.”

Can you believe the arrogance? Since I’m a registered voter in the State of Washington, I won’t have an opportunity to express my displeasure of this member of Congress at the polls. I think, though, it is clear that if this is the kind of leadership that is guiding the Social Security discussion, we can have no expectation of a good result.”

That’s Mike’s close-up view of the jackals in Congress who want to trash Social Security. Be afraid. Be very afraid.