Politicians aren’t telling the full story on our national debt
By Hal Mason
I spent the past year trying to understand why Washington is not explaining the grim dilemma we face in closing the annual trillion-dollar deficits. Maybe Washington politicians fear, if they tell Americans the truth, a pandemic of anxiety disorders would result. Let me explain. You may want to find your heart medication!
✔ Congress can’t balance the budget
Using the White House’s own budget (http://www.whitehouse.gov/omb/budget) released last February, it is clear Congress cannot close this year’s $1.3 trillion budget deficit, even if it shut down the federal government — every department, agency and employee, including the Department of Defense.
That leaves us with two unrealistic options. The first is to say adios to the EPA, military, Congress, in fact, farewell to all federal employees, agencies and departments.
After making those “modest” cuts, the government would have almost enough tax revenue to pay the interest on our federal debt and continue printing the checks for Social Security, Medicare, Medicaid, unemployment insurance and the other non-discretionary programs.
The second option is that we all offer to pay 50 percent more in taxes — income taxes, payroll taxes, estate and excise taxes — every federal tax. Call your representative if you want to volunteer.
As of today, Congress, President Barack Obama and GOP challenger Mitt Romney have failed to recommend a genuine solution to close the deficit.
When I produced a YouTube video, “United States Budget Dilemma,” to illustrate this problem, I didn’t expect it would attract more than 2.9 million viewers and bring national focus to the problem. To put it mildly, Americans are frightened. Sadly, the video doesn’t come close to revealing how broke our nation really is. If you research, you will find the real shortfall is far worse than what is being discussed in public forums. The $1.3 trillion deficit and $16 trillion debt are not honest depictions of our nation’s dismal fiscal condition. Now, where is that heart medication?
✔ The real deficit
The United States operates on a cash basis, ignoring future unfunded promises. Corporations are required to report all future obligations for benefits, pensions and health care 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 Sept. 15, syndicated columnist Scott Burns reported that the 2012 deficit is closer to $10 trillion if it includes promises for Social Security and Medicare.
The difference between what the federal government has promised and what it will actually collect in tax revenue is called the fiscal gap. Burns also reported that economists estimate this fiscal gap is now $222 trillion, a multiple of our gross national product far exceeding any of the figures causing the economic crisis in Greece, Spain or Italy. Now you might need to find a heart defibrillator and some anti-depressants!
✔ Raiding the retirement funds
In the 1960s 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 and federal employee retirement and health trust funds. They replaced these surpluses with IOUs in the form of Treasury notes, that now must be paid from a bankrupt General Fund.
The White House budget reveals the last time the United States paid down the federal debt was 1969 — 43 years ago! Page 210 of the White House budget estimates $7 trillion more in deficits this decade. Not even the odds makers in Vegas can tell us when the United States General Fund will operate at a surplus again, or when it will reimburse the $5 trillion robbed from the trust funds.
When Washington politicians report that the Social Security Trust Fund is solvent until 2036, they conveniently fail to explain that it is only solvent if they first replace the $2.7 trillion surplus that we paid and they spent.
All of the payroll taxes collected for future Social Security and Medicare benefits have vanished, as have all the military and federal employee pension and health trust funds. Oh no — feeling some chest pain!
This would be like Wal-Mart using employee pension and health contributions as revenue for daily operations, then placing an IOU in its employees’ 401(k)s or health plans. The big difference is that Wal-Mart operates with a profit, doesn’t have $16 trillion in debt and doesn’t project another decade of trillion-dollar losses.
While the use of that $5 trillion taken from the trust funds is illegal in the business world, politicians proudly report this trust fund invasion in their budget as “Debt Held by the Government.”
✔ An honest perspective
Don’t fret, America. Politicians don’t want us to go backward. Page 246 of their “unapproved” budget (summary tables) estimates that by 2022, our gross federal debt will be a measly $26 trillion! No problem. If we start paying down the debt at the rate of a dollar a second, it will be totally paid in only 822,837 years. Oops, I forgot the interest and the fiscal gap. Forget the defibrillator — we’ve got a flat line!
There are ideas available, such as the Simpson-Bowles deficit reduction plan, that begin to attack these issues. It’s time we deal with the problem. Ask the candidates what they will do and vote this November.
Hal Mason is a retired IBM international accounting manager and former Mesa County budget officer who lives in Grand Junction.