I spent the past year trying to understand why Washington is not explaining to voters the grim dilemma they face in closing the annual trillion dollar deficits. Maybe Washington fears if American’s were told the TRUTH, there would be a pandemic of anxiety disorders. Before you laugh, let me explain. You may want to find your heart medication now!
CONGRESS CAN’T BALANCE THE BUDGET
Using the White House’s own budget (http://www.whitehouse.gov/omb/budget) released in February, Congress cannot close this year’s $1.3 trillion budget deficit, even if they shut down Washington DC, every department, agency, and employee, including the Department of Defense…every cent.
Option 1 – Adios EPA! Bye-bye military! Farewell federal employees! Good-bye Congress! So long Federal Government! After making those ‘modest’ cuts, Washington has almost enough tax revenue to pay the interest on federal debt, and continue printing the checks for Social Security, Medicare, Medicaid, Unemployment, and the other non-discretionary programs.
Option 2 – We all offer to pay 50% more in taxes… income taxes, payroll taxes, estate and excise taxes… every tax. Please call your representative if you want to volunteer. As of today, neither Congress, nor Obama nor Romney has recommended either option or a real solution to close the deficit.
When I produced the YouTube video “United States Budget Dilemma” to illustrate this problem, I didn’t expect it would attract over 2.9 million viewers and bring national focus to the problem. To put it mildly, Americans are frightened! Sadly, the video doesn’t even come close to revealing how broke our nation really is. Do some research for yourself and you will find the real shortfall “the deficit” is actually much worse than what is being discussed in public forums. The $1.3 trillion deficit AND $16 trillion debt is not an honest representation of our nation’s dismal fiscal condition. Now, where is that heart medication?
THE REAL DEFICIT
The United States operates on a cash basis, unlike the accrual accounting standards required in businesses. Corporations are required to report all promised future obligations for benefits, pensions, and healthcare costs. The most recent United States Financial Report estimates Washington has promised trillions more in entitlement benefits than it will receive in tax revenues. On September 15, 2012, syndicated columnist Scott Burns reported in his article “Will the real federal deficit please stand up?” that the 2012 deficit is closer to $10 trillion if it included what has been promised for Social Security and Medicare. Economists say the true financial condition of our country is far, far worse than is represented in public discussions. The difference between what the Federal Government has promised and what it will actually collect in tax revenue is called the fiscal gap. Scott goes on to report that economists estimate that this fiscal gap is now $222 trillion….a multiple of our gross national product that far exceeds any of the figures that are causing the economic crisis in Greece, Spain, or Italy. It doesn’t take a math genius to understand that the United States is on an unsustainable fiscal path. Now you might need to find a heart defibrillator and some anti-depressants!
RAIDING THE RETIREMENT FUNDS
In the 1960’s, President Lyndon Johnson adopted a Unified Budget that combined the General Fund, Social Security Fund, and Medicare Fund. The revised budget enabled Johnson to use the surplus from Social Security and Medicare to reduce the deficit caused by the War on Poverty and the Vietnam War. He and every president thereafter raided all the surpluses in Social Security, Medicare, Military/Federal employee Retirement and Health Trust funds, and used them to operate the Federal Government. They replaced these surpluses with IOU’s, in the form of Treasury Notes, that now must be paid out of a bankrupt General Fund. Budget table 7-1 (Federal Debt by year) reflects the last time United States paid down debt was 1969. 43 years ago! Page 210 of the White House Budget projects the General Fund to add an additional $7 trillion in deficits during the next decade. Not even the odds makers in Vegas can even tell us when the United States General Fund will operate at a surplus again, or when it will be able to reimburse the $5 trillion it borrowed from those trust funds. When Washington reports that the Social Security Trust Fund is solvent until 2036, they conveniently fail to explain that it is only solvent until 2036 if they first replace the $2.7 trillion surplus, we paid, and they spent. All the payroll taxes collected for future Social Security and Medicare benefits are gone… as is military and federal employee pension/health trust funds.
This would be like Wal-Mart using employee pension/health contributions as revenue for daily operations and then placing an IOU in their employees’ 401K. The big difference is that Wal-Mart operates with a profit, doesn’t have $16 trillion debt, and doesn’t project another decade of trillion dollar losses. While the use of that $5 trillion is illegal in the business world, Washington proudly reports this trust fund invasion in their budget. See page 76 and 77 (Economic Budget Analysis, Table 6-5, Debt Held by the Government)
AN HONEST PERSPECTIVE
Don’t fret America. Washington vows we don’t want to go backward. Page 246 of their “unapproved” budget (Summary tables-Table S-15) estimates in 10 years, by 2022, our gross federal debt will be a measly $25,949,000,000,000. That is $26 trillion! No problem. If we can start paying down the debt “a dollar a second”… (which we aren’t even trying to do)… it will be totally paid off in only 822,837 years. Oops, I forgot the interest and the fiscal gap. Forget the defibrillator… we’ve got a flat line. All we can do now is let our grandchildren deal with it.
So why are politicians in Washington keeping this from American voters? Perhaps politicians understand we would “fire” them. It is time we fix the problem
H. Mason – retired International Accounting Manager