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Posted by Warren Mosler (208.49.176.241) on 14:15:25 12/02/07
Feds' budget tricks hide trillions in debt
>
> Every year, tens or even hundreds of billions of dollars are quietly added
> to the national debt -- on top of the deficits that we hear about. What's
> going on here?
BURNS DOESN'T GET IT.
>
> By Scott Burns
>
>
>
> When it comes to financial magic, the government of the United States takes
> the prize. Sleights of hand and clever distractions by purveyors of
> line-of-credit mortgages, living-benefit variable annuities and
> equity-indexed life insurance are clumsy parlor tricks compared with the Big
> Magic of American politicians.
>
> Consider the proud trumpeting that came from Washington at the close of
> fiscal 2007. The deficit for the unified budget was, politicians crowed,
> down to a mere $162.8 billion.
>
> In fact, our government is overspending at a far greater rate. The total
> federal debt actually increased by $497.1 billion over the same period.
>
> But politicians of both parties use happy numbers to distract us. Democrats
> routinely criticize the Republican administration for crippling deficits,
> but they politely use the least-damaging figure, the $162.8 billion. Why?
> Because references to more-realistic accounting would reveal vastly greater
> numbers and implicate both parties.
NO, BECAUSE THEY ARE RIGHT AND BURNS IS WRONG.
>
> You can understand how this is done by taking a close look at a single
> statement on federal finance from the president's Council of Economic
> Advisers. The September statement shows that the "on-budget" numbers
> produced a deficit of $344.3 billion in fiscal 2007. The "off-budget"
> numbers had a surplus of $181.5 billion. (The off-budget figures are
> dominated by Social Security, Medicare and other programs with trust funds.)
CORRECT. NET GOVT SPENDING IN THE NON GOVT SECTORS IS WHAT 'COUNTS.'
INTERGOVT TRANSFERS OF ANYTHING ARE OF NO ECONOMIC CONSEQUENCE TO THE
REST OF US. THEY HAVE NO CURRENT YEAR IMPACT ON AGG DEMAND.
>
> Combine those two figures and you get the unified budget, that $162.8
> billion. In the past eight years we've had two years of reported surpluses
> and six years of reported deficits. Altogether, the total reported deficit
> has run $1.3 trillion.
>
> But if you examine another figure, the gross federal debt, you'll see
> something strange. First, the debt has increased in each of the past eight
> years, even in the two years when surpluses were reported. Second, the gross
> federal debt, which includes the obligations held by the Social Security and
> Medicare trust funds, has increased much faster than the deficits -- about
> $3.3 trillion over the same eight years.
THEY ARE CORRECT, AS ABOVE, BY NOT INCLUDING TRANSFERS OF SECURITIES
FROM ONE GOVT AGENCY TO ANOTHER.
>
> That's $2 trillion more than the reported $1.3 trillion in deficits over the
> period. Can you spell "Enron"?
PASS ON THE COMEBACKS AND GO ON TO THE TEXT.
>
> In other words, while our reported deficits averaged $164 billion over the
> past eight years, government debt increased an average of $418 billion a
> year. That's a lot more than twice as much.
>
> How could this happen?
HOW CAN A RESPONSIBLE NEWS SIGHT PUBLISH THIS NONSENSE???
>
> Easy. The Treasury Department simply credits the Social Security, Medicare
> and other trust funds with interest payments in the form of new Treasury
> obligations. No cash is actually paid. WHY SHOULD IT BE???
The trust funds magically increase in
> value with a bookkeeping entry.
THAT'S ALL THE $ IS IN ANY CASE- A BOOKKEEPING ENTRY. GET OVER IT!
It represents money the government owes
> itself.
RIGHT, WHICH HAS NO CURRENT YEAR EFFECT ON THE REAL ECONOMY. IT
CHANGES BUYS OR SELLS OF REAL GOODS AND SERVICES.
>
> So what happens if we take out the funny money?
WHAT DOES 'TAKE OUT' MEAN? SIMPLY TRANSFERRING FROM ONE ACCOUNT AT
THE FED TO ANOTHER. MORE ENTRIES. CAN'T BE ANYTHING MORE. THAT'S
ALL THE $ IS.
>
> When the imaginary interest payments are included, Social Security and
> Medicare are running at a tranquilizing surplus (that $181.5 billion
> mentioned earlier). But measure actual cash, and the surplus disappears.
WHAT IS 'ACTUAL CASH???'
>
> In 2005, for instance, the Social Security Disability Income program started
> to run at a cash loss. 2007 is the first year that Medicare Part A (the
> hospital insurance program) benefits exceeded income.
>
> The same thing will happen to the Social Security retirement-income program
> in six to nine years, depending on which of the trustees' estimates you use.
> During the same period, the expenses of Medicare Part B and Part D, which
> are paid out of general tax revenue, will rise rapidly.
POINT???
>
> Despite this, the Social Security Administration writes workers every year
> advising them that the program will have a problem 34 years from now, not
> six or nine years. In fact, the real problem is already here. It will be a
> big-time problem in less than a decade.
DEFINE 'BIG TIME.' GOVT GOING TO BOUNCE CHECKS?
IF THE GOVT RUNS DEFICITS IN THE OUT YEARS THAT ARE 'TOO LARGE' THE
EVIDENCE WILL BE INFLATION, NOT SOLVENCY. IF HE THINKS THERE'S A
POTENTIAL INFLATION ISSUE FINE, BUT HE DOESN'T, OR HE WOULD HAVE SAID
IT.
>
> Count on it.
>
COUNT ON MORE OF THIS NONSENSE.
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