Government Lies?

[Tyrone Slothrop]

I didn't write any of this. The surplus is discussed
about a little less than half way down.


"I place economy among the first and most important
virtues, and public debt as the greatest of dangers.
To preserve our independence, we must not let our
rulers load us with perpetual debt."
-Thomas Jefferson- 
--------------------------------------------------------------------------------

Why should you care? Because your future is at risk!
Wonder why we can't send anyone back to the moon? Why
support for schools is drying up? Why there are no
more big public works projects? Or why big
corporations are about to take over national parks and
other services? Support for highways, conservation,
police - all are dwindling, and You ain't seen nothin'
yet! 
The recent "bipartisan budget agreement" makes good
political theater. It will help some politicians keep
their jobs. It won't stop our slide into oblivion.  

OK - we've got our "Balanced Budget Agreement". Many
leading Democrats and Republicans alike hail it as a
"great step". The Deficit is down, the economy is in
great shape, etc.. etc.. do you really buy that? 

You do, if you accept easy answers and vague promises.
Yes, we can have a good economy - for a while. We
learned that from Presidents Reagan, Roosevelt and
others. All you have to do is break out the ol' credit
card . Just like you at home; you can have a new
stereo, a nice car, a great computer, even a boat - of
course you might have to pay for those items sometime,
but you can enjoy them in the meantime. 

Well that's what our country has been doing for the
past sixty years. We've been living on borrowed money,
and our government is bankrupt. So bankrupt that it
can't hope to even begin paying off the huge
five-plus-trillion dollar debt - so it borrows more to
cover its payments. That means more interest payments,
and a downward spiral into ever-deeper debt.
Eventually, we'll pay - the credit cards will come
due. And the longer we put if off, the worse it will
eventually become. 

When Congress and the President reached the Balanced
Budget/Tax Cut deal, they could have dealt with Social
Security - but that would have been painful, so they
put that one off. They could have dealt with Medicare
and Medicaid - instead, they used a band-aid solution.
In doing so, they kept "off the table" the three most
expensive and most rapidly-growing spending programs
in the country. Where do you think that will end? 

Consider this: Entitlements - direct government
payments to individuals, like SS, Medicare, Medicaid,
etc. - make up nearly half of all federal spending.
Interest payments on the debt we've already accrued
makes up nearly half of what's left. If you don't pay
the interest, you default and the world economic
system collapses. We've already decided we're not
going to substantially cut entitlements. That means
that in order to balance the budget, we've got to make
all the cuts out of the one-quarter of the budget
that's left. It's not going to happen. Even the
politicians who passed this deal, when pressed, admit
that there are some issues which "must be dealt with
in the future". 

 No kidding. Medicare is doubling in cost every ten
years. Yet when some Republicans tried to cut down the
rate of increase - not actually cut the spending, mind
you, just slow down the rate of increase - we heard
cries of "Gridlock" from Clinton and the Democrats.
The Republicans refused to authorize an increase in
the national debt unless something was done to at
least partially curb those huge entitlements. That
shut down the government for a while. The Democrats'
cry that the Republicans were obstructionists took
hold. The fiscally conservative GOP members backed
down. 

I suggest to you that Gridlock is better than movement
in the wrong direction. But we broke that Gridlock,
and we're now free to go ever deeper into debt. 

Not that we wouldn't have anyway. Even those
conservative Republicans were afraid to step on the
Big Kahuna of government spending - Social Security.
Social Security, right now, runs a "surplus" - the
fund takes in more than it gives out. But that
"surplus" is an illusion, one which will bite us - big
time - early next century. 

First of all, it doesn't really exist. That's because
the surplus - which exists only on paper - is
"borrowed" by the rest of the government budget to
make it look like the deficit is smaller than it is
(part of the creative bookkeeping of our "Balanced
Budget Deal"). So that extra money you and I pay from
each paycheck (FICA) disappears into the National Debt
Hole. 

Second of all, that now-nonexistent "surplus" is there
for a reason - it, and much more, will be needed!
Right now, more people pay into Social Security than
receive SS payments. Thus the paper "surplus". By the
year 2015, that situation will reverse. In order to
keep SS solvent, that "surplus" will reverse and have
to be used to meet the payments. Two problems with
that: 

It isn't there. It's long-since been robbed to make
the deficit look smaller - as per our current
so-called "bipartisan budget agreement".

Even if it was   there, it wouldn't be nearly enough.
When the Baby Boomers start drawing Social Security,
they'll create a fiscal earthquake such as the world
has never seen. Where will the billions they demand
come from? And even if the government borrows yet more
money to pay them, what will happen to the generation
after them? 
So the entire Social Security system is headed for a
train wreck, and the politicians know it. But it gets
worse: 
Once that mythical "surplus" is gone - even on paper -
how will the politicians reduce the deficit, even on
paper? All pretense and myth will be gone. The
deficit, already skyrocketing, will take off
completely out of control. There will be no paper
"surplus" to make it look smaller. The system will
disintegrate. Not that that's not already happening;
it will just happen a lot faster. 

Aren't we already seeing signs of it? Aren't we
already seeing complaints about taxes being too high,
public services being cut back, fewer government
projects, less environmental protection, selloff of
public lands, closure of fish hatcheries,
privatization of government services, etc? 

If you're like most people, right now you're thinking:
"Well, OK, but first they should cut spending on [name
your favorite target]." Because, after all, [name your
favorite interest group] didn't deserve it, and they
can't afford to be cut, because [name your favorite
reason]." 

Such thinking is exactly what's sinking us. When
you're facing extinction, you do what's necessary to
survive. Of course not all the cuts will be fair. Of
course it will be painful. Wouldn't it be painful to
you, to try to dig yourself out of a deep personal
debt hole? Why is the government any different? Twenty
years ago, we could still afford to talk about equity,
fairness, and ways to ease the burden. Today we're
talking survival. And failure to survive will be far
more severe than any individual pain felt by budget
cuts. 

Some people ask where I get my figures. For the most
part, they come from the government itself. You can
look them up at your local library - ask for the
"Budget of the United States". Other references are
linked in this article. 

Others ask, "who do we owe all this money to? Don't we
just owe it to ourselves?" 
Some of it, yes. For example, if you buy a U.S.
Savings Bond, or if the retirement fund you're in
invests in government paper, you own some of it. Many
businesses own government debt. Foreign countries and
businesses also own it. If the government defaults,
you lose the money owed you. So do all those other
businesses and governments. The global economy
collapses. Chaos reigns. Since that's not an
acceptable alternative, the government must
continually borrow more, and more, and more, to pay
the debt it already owes. Each time it does so, the
government deteriorates more, the environment suffers,
the economy declines, and big corporations gain more
and more control of the world. 

Finally, a distinction between "Deficit" and "Debt".
The Deficit is the amount we go into the red each
year. The Debt is the accumulation of all those
deficits. Thus, even if we manage a small (mythical)
surplus in the next year or two - say, a billion
dollars - the overall Debt remains. Unfortunately, the
projections of a small surplus by 2002 admit that
we'll sink back into increasing deficits starting in
2003. We're using the current SS fund surplus to cook
those books: What happens when the baby boomers age,
and SS starts running huge deficits? And even those
cooked-book estimates are based on the most optimistic
pictures of our national economy, an economy which
must keep booming at an ever-increasing rate. If we
should have a recession, it's disaster. But of course
it's disaster anyway, unless we simply cut spending.
Is that so difficult to figure out? Cut Spending ! You
would do it, if you were too far in debt. But our
government tries to find other, more "creative" ways,
to handle the problem. 

So far, they haven't worked too well. But as I said at
the top of this article, 
You Ain't Seen Nothin' Yet . 

--- Terrance <lycidas2 at earthlink.net> wrote:
> 
> 
> Paul Mackin wrote:
> 
> > 
> > Not sure where Terence is taking this but my point
> was simply that the
> > special pension fund and the special unemployment
> fund to be derived from
> > taxes on payrolls was a scheme devised by the
> Franklin Roosevelt
> > administration to provide for an obivious need for
> what has proved over
> > the years to be a very successful and necessary
> program.  
> 
> Who knows where I was taking it, but you are quite
> correct.
> My point, if I had one,  was not to question the
> success or
> the need for the S.S. system. "Government Lies?" was
> the
> subject. That's what I wrote about. I don't know
> why. I have
> no idea why we would want to discuss the S.S. System
> or the
> U.S. government budget here. 
> 
> http://www.newadvent.org/cathen/09469a.htm


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