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Saturday, July 13
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Washington's black ink turns red

By Bob Deans, Palm Beach Post Washington Bureau
Saturday, July 13, 2002

WASHINGTON -- The White House said Friday the federal government is
on track to spend $165 billion more than it takes in this year.

That would be the largest one-year swing ever from black ink to red and the
biggest budget deficit in seven years -- $59 billion more than President Bush
forecast just five months ago.

The administration blamed the plunging stock market for most of the
deterioration in the $2.1 trillion budget, citing sharp reductions in shareholder
profits and the taxes individuals pay on them.

"We've had a real whipsaw that was hard, I think, for anybody to foresee in
advance," White House budget czar Mitchell Daniels told reporters Friday in
a preview of a full midyear budget assessment his office plans to release on
Monday.

The numbers will show the federal government $165 billion in the red for the
budget year that ends Sept. 30, Daniels said. That compares with a budget
surplus last year of $127 billion and a surplus of $236.4 billion the year before
that.

Daniels said those strong surplus numbers were caused in large part by the
capital gains taxes individuals paid on stock market earnings. Those taxes
were a big reason why federal revenues climbed nearly 40 percent between
1995 and 2000, he said.

"That was more clearly tied to the stock market run-up than we knew at the
time," said Daniels, director of the White House Office of Management and
Budget. "Now we are seeing the mirror effect."

Now, when individuals sell off stocks, they often have little or no profits upon
which to pay taxes. Worse, from a tax revenue perspective, when they sell at
a loss, those losses are deducted, up to a point, from taxable income.

The result: federal revenues from such taxes are projected to tumble this year
to about $50 billion -- about $121 billion less than they brought in last year,
said Daniels.

Just last February, when Bush presented his 2003 budget proposals to
Congress, he projected a budget deficit this year of $106 billion.

At the time, the White House attributed the deficit to three things: an
economic slowdown; new spending to help deal with the damage of the Sept.
11 attacks, wage a global war on terror and beef up homeland defense; and
the effects of last year's tax cuts -- amounting to $1.3 trillion over ten years.

The economy, though, has done better than Bush predicted. It's now on track
to grow at about 2.6 percent this year, according to numbers Daniels released
Friday. That's about 2 percentage points above February's projections.

The economy grew at a lusty 6.1 percent annual rate during the first three
months of this year, though there are signs it has cooled considerably since
then. On Friday, there was good economic news: retail sales gained 1.1
percent in June, owing chiefly to consumer spending on clothing and
automobiles, a turnaround from a 1.1 percent decrease in May, the
Commerce Department reported.

Daniels said the economy will likely grow at a 3.7 percent rate next year,
improving corporate profits and bringing the deficit down to $109 billion. He
said the federal budget could be back in the black -- with a $53 billion surplus
-- by 2005, but only if Congress holds down annual spending growth to the 4
percent Bush has proposed.

In recent years, he said, spending has increased by an average of 7 percent a
year. If that continues, he said, the government could compile $2 trillion in
deficits over the coming decade.

Feudalism: You have two cows. Your lord takes some of the milk.

Fascism: You have two cows. The government takes both, hires you to take care of them and sells you the milk.

Communism: You have two cows. You must take care of them, but the government takes all the milk.

Capitalism: You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell them and retire on the income.

Enron Capitalism: You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt-equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred through an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The Enron annual report says the company owns eight cows, with an option on one more.

How Big Is the Government's Debt? "When these obligations are combined with the debt held by the public, the total burden equals $33.1 trillion, or 10 times the official debt measure. This "total debt" is more than three times the size of the nation's total output in 2001, and amounts to $116,381 for every man, woman and child in America."

American coup d'état: Joseph Farah bounces Federal Reserves' bogus check

THE FEDERAL RESERVE SYSTEM: A FATAL PARASITE ON THE AMERICAN BODY POLITIC

"If the American People ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children will wake up homeless on the continent their fathers occupied. The issuing of money should be taken from the banks and restored to Congress and the people to whom it belongs."
Thomas Jefferson

O'Reilly Tearing up The Fed

THE MOB ON WALL STREET

"The burden of debt is as destructive to freedom as subjugation by conquest."
Benjamin Franklin

SECRETS OF THE FEDERAL RESERVE
On September 30, 1941, before the same Committee, Governor Eccles was asked by Representative Patman:

"How did you get the money to buy those two billion dollars worth of Government securities in 1933?

ECCLES: We created it.

MR. PATMAN: Out of what?

ECCLES: Out of the right to issue credit money.

MR. PATMAN: And there is nothing behind it, is there, except our Government’s credit?

ECCLES: That is what our money system is. If there were no debts in our money system, there wouldn’t be any money."

On June 17, 1942, Governor Eccles was interrogated by Mr. Dewey.

ECCLES: "I mean the Federal Reserve, when it carries out an open market operation, that is, if it purchases Government securities in the 167 open market, it puts new money into the hands of the banks which creates idle deposits.

DEWEY: There are no excess reserves to use for this purpose?

ECCLES: Whenever the Federal Reserve System buys Government securities in the open market, or buys them direct from the Treasury, either one, that is what it does.

DEWEY: What are you going to use to buy them with? You are going to create credit?

ECCLES: That is all we have ever done. That is the way the Federal Reserve System operates.

The Federal Reserve System creates money. It is a bank of issue."

At the House Hearing of 1947, Mr. Kolburn asked Mr. Eccles:

"What do you mean by monetization of the public debt?

ECCLES: I mean the bank creating money by the purchase of Government securities. All is created by debt--either private or public debt.

FLETCHER: Chairman Eccles, when do you think there is a possibility of returning to a free and open market, instead of this pegged and artificially controlled financial market we now have?

ECCLES: Never. Not in your lifetime or mine."

The Declining Dollar

How Big Is the Government's Debt?
"When these obligations are combined with the debt held by the public, the total burden equals $33.1 trillion, or 10 times the official debt measure. This "total debt" is more than three times the size of the nation's total output in 2001, and amounts to $116,381 for every man, woman and child in America."

"With the decline of society begins, indeed, the bellum omnium in omnia war of all against all, which some philosophers observing to be so general in this world, have mistaken it for the natural, instead of the abusive state of man. And the fore horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression."
Thomas Jefferson to Samuel Kercheval, 1816. ME 15:40

Return of the 'Audits From Hell'

Former Critics of IRS in Congress Now Clamor for Tough Enforcement
Sen. Charles Grassley, Chairman, Senate Finance Committee:

Oct. 1, 1997:

"The management culture at the IRS has led to institutional arrogance and abuse of taxpayers. Substantial changes must be made to eliminate the 'we-versus-them' mentality at the agency."

March 25, 2002:

"I'm amazed at the creativity of those who like being Americans but dislike their American tax obligation. Since tax cheats are endlessly creative, the IRS has to be just as creative to catch the crooks."

7 Years Of Hell At Hands Of IRS

Uncle Sam's Audit Gap

Government Fails Fiscal-Fitness Test