Welcome to the start of the New Year.
Lets start off on the right foot, with something incendiary and infuriating: The terrific John Crudele of the NY Post cuts thru the government obsfucations on the deficit: Beltway Bandits’ Storm: $615b Deficit Snow Job
December 28, 2004 — WHAT would you think if I told you that 2004’s federal budget deficit was really $615 billion, which is about 30 percent bigger than you’ve read in the newspapers? Now, what would you think if the Secretary of the U.S. Treasury told you this?
After you look at the government numbers I will present at the end of this column you’ll see that President Bush is absolutely correct in saying that the Social Security system’s finances need to be reformed immediately — although I disagree that privatization is the solution.
Two weeks ago, the U.S. Treasury posted on its Web site a financial statement for the country that was compiled in the same way companies are required to keep their books.
You can find it at here http://www.fms.treas.gov/fr/04frusg/04frusg.pdf
The Web address alone should provide some hint as to how inaccessible this information is.
And, as best I can see, the Treasury didn’t issue any big press release publicizing this information.
But don’t think the government is suddenly becoming forthcoming with
information. This fiscal report, using Generally Accepted Accounting
Principles (or GAAP), is now required by law.
The news was slipped out just before the holiday season and the release date was at least three months ahead of schedule.
In the journalism business these are all signs that someone doesn’t
want the public to know something. So, just what could that something
I’ll let John Snow tell you in his own words, contained in report’s
prelude that is titled "A Message from the Secretary of the Treasury."
"In the fiscal year 2004, government revenues were $1.9 trillion . . .
The net cost of the government’s operations was $2.5 trillion . . .
Total revenues less operating costs resulted in a net operating cost of
slightly more than $615 billion," Snow states.
I took some words out to make it understandable. Now, allow me to translate: the government ran a deficit of $615 billion.
In the missing parts, the Treasury Secretary correctly said that this
was an improvement from the $668 billion deficit that the government
ran in 2003. He correctly added that this was the first gain in revenue
in four years.
Notice that Snow took great pains to avoid using the term "deficit."
But even a kid with a paper route understands that when the "net
operating cost" — as the Treasury Secretary calls it — exceeds
revenues, that’s the definition of a deficit.
You can be forgiven if you thought that Washington’s budget deficit was
"just" $412 billion in the last fiscal year because that’s the number
the government puts out in the big press release. And that’s the figure
that the media plays up.
How can there be a $203 billion discrepancy in the numbers?
It mostly has to do with Social Security costs and cash vs. accrual
accounting. The $203 billion gap (between the $615 billion "net
operating cost" and Washington’s officially publicized $412 billion
budget deficit) is the amount of Social Security money that the
government collected and used for its everyday operations.
If you are looking at Snow’s statement, turn to the table on page 11, entitled "Overall Perspective."
Look at the last line called Total Assets minus Total Liabilities &
Net Responsibilities. The liabilities grew to $45.9 trillion at the end
of 2004, compared with liabilities of $34.8 trillion at the end of the
In other words, what the accountants call the net present cost of
unfunded future obligations grew by a massive $11.1 trillion in just
the past year. That’s why Social Security as well as Medicare needs to
be fixed — NOW.
Pathetic . . .
Beltway Bandits’ Storm: $615b Deficit Snow Job
New York Post, Dec 28, 2004
Download PDF of report (04frusg.pdf)
Coincidence that the Post removed this story? Probably not. Google News has the original lead, but clicking from their link goes to the same place yours goes: oil prices.
Overall this is an aspect of the whole SS crisis that worries me. According to what I’ve heard if the general budget is used to pay back it’s borrowing the ss fund should remain sound through the late thirties.
I don’t know to what extent he speaks for the right, but Greenspan has stated that he doesn’t think it’s necessary for the general fund to pay back the money. Sadly this is consistent with some philosophies being implemented, pay general expences out of wages under a certain amount.
Just as we cut taxes on certain income concentrated among the wealthy,
– If we wanted to help the middle class save, then taxes on dividends/interest could be cut for under a certain amount, so that isn’t the goal.
– Just as capital gains could be kept low for a certain lifetime maximum, say start with a million and increase it periodically.
– Just as the inheritance tax could be applied to a higher amount with rates starting lower than currently until they finally rise to today’s rates for large estates…
However this is not the approach. While wage earners make some gains from todays tax cuts, the system is being adjusted for when these become as Milton Friedman claimed delayed tax increases with interest. They will be paid from wages. Labor is not truly productive, “capital” is even when invested in an enterprise built a century ago that doesn’t recieve a dime of current stock transactions.
The thing I don’t understand is that Republican’s don’t seem to fear that when the consequences of this unfold; that taxpayers will hit the wealthy with vengeance. Or that things like increased federal borrowing overseas will hit the dollar harder than it would have got hit otherwise, thus decreasing individual wealth (at least by international standards which are increasingly important) by more than the savings in tax cuts.
I am disinclined to believe that the crisis which will face us- and which may be so extreme that it forces people besides Greenspan to propose disavowing the money owed to ss- is some sort of plot to destroy Roosevelts “socialist” legacy.
But the conspiracy buffs do have some logic on their side. Except it seems to me the consequences will be opposite to the Republican’s intended direction. Because we have a population trained in indulgence and when they see the high costs put upon them they will find a useful minority to blame. And with some actual justification that will be the rich.
So is George Bush secretly a commie instigating the revolution? Where is tail gunner joe when you need him?
– David Bennett