Posted on 06/01/2003 9:27:17 PM PDT by lewislynn
June 1, 2003, 7:13PM
ON Friday, May 16, the word was out. A $350 billion tax cut was a done deal.
So why did the stock market sink that day? Why did it plunge the following Monday, losing 2.5 percent of its value?
One possible explanation is Treasury Secretary John Snow and his comments on the dollar. Another is concern about new terrorist attacks. But let me suggest a third possibility. Despite efforts to suppress it, word is getting around we can't afford a tax cut.
The story starts one night in January, only days after Treasury Secretary Snow had replaced Paul O'Neill. A cell phone rang as two men were leaving a restaurant in Santa Fe, N.M. The caller told Boston University economist Laurence Kotlikoff that six months of work by two economists was going to be deleted from the president's budget. The budget was due to be published in February. I know this happened because I was the second man: Kotlikoff was in Santa Fe working on a book project with me.
The material to be deleted from the budget document was an updating of generational accounting. O'Neill had requested an estimate of the government's true long-term obligations.
The estimate would include the formal debt of the U.S. Treasury plus equally serious government promises to provide retirement income and medical care. (Readers who think promises of Social Security and Medicare aren't as serious as U.S. Treasury bond promises should visit the nearest elderly person.)
The resulting information might easily have been lost in a document whose online girth is measured in megabytes.
Except for one thing.
The new accounting shows the United States is broke.
It shows the true obligations of government were 10 times larger than Treasury debt held by the public. It shows the present value of these unfunded obligations is a mind-numbing $43 trillion.
In a recent telephone conversation I asked one of the project economists, Jagadeesh Gokhale, why he thought his work was cut. Gokhale, a senior economist for the Federal Reserve Bank of Cleveland, was circumspect. He suggested the figures were a surprise to the new Treasury secretary.
Here's another interpretation: Snow's first task was to sell the president's tax cut. The sales job would be awkward if an official government document announced we were already $43 trillion in the hole.
The Federal Reserve, by the way, recently put the net worth of all households at $39 trillion. This problem goes way beyond taxing the rich, the poor or the middle class.
So the generational accounting figures disappeared from the budget.
But they did not cease to exist. In early March the other economist on the project, Kent Smetters, testified before the Subcommittee on the Constitution of the United States in the House of Representatives. Smetters, an expert in Social Security and Medicare, is at the Wharton School in Philadelphia.
Asked to comment on the Balanced Budget Amendment, Smetters was direct, saying, "I support practically any effort to make it harder for one generation to pass large fiscal burdens to future generations ... ."
Unfortunately, he noted, government cash accounting is a poor basis for a Balanced Budget Amendment. "The government reports that the national debt in 2003 was about $3.8 trillion in the form of government `debt held by the public.' But that number ignores massive imbalances in Medicare and Social Security programs and the government's other programs.
"When the liabilities associated with those programs are taken into account, the nation's fiscal policy is currently off-balance by over $43.4 trillion in present value, a number that is not reported in standard budget documents," he said (italics added).
The American Enterprise Institute will soon publish a pamphlet, co-authored by Jagadeesh Gokhale and Kent Smetters. The draft copy does more than lay out the size of the government's unfunded liabilities. It shows how much the current generation is benefiting at the expense of the next.
It shows, for instance, that past and current generations of Social Security recipients will receive $8.7 trillion more in benefits than they will pay in employment taxes.
Republicans and Democrats have distracted us with unending battles between haves and have-nots for decades. Over the same period they have bankrupted the country.
Perhaps that terror, not the terrorism of al-Qaida or currency traders, may explain the odd market decline after a tax cut that was supposed to make stocks soar.
Questions about personal finance and investments may be sent to Scott Burns, P.O. Box 655237, Dallas 75265; e-mail can be sent to scott@scottburns.com. Burns' Web page is www.scottburns.com.
I just skimmed this on my way to bed, but that line caught my eye. It is actually old accounting, ask Jim Traficant. I don't have it handy, but he said the same thing on the floor of the House years ago.
Then cut spending.
This is real. Our fiat currency has no value. None. It is a paper promissory note against the real assets of the United States. But those assets are already totally encumbered by "unearned benefits".
Unearned benefits (Social Security, Medicare, Medicaid, welfare, etc.) are already bankrupt massive Ponzi schemes. Because the world's financial system is pegged to the stability of the US Dollar and the US Dollar has no worth, the entire world financial system is a house of cards.
All of this will cause a massive world-wide financial meltdown. It will be triggered by something that causes a loss of confidence in our fiat money (US Dollars).
When, not if, this loss of confidence occurs, the house of cards will come tumbling down.
Think this is unduly alarmist? This is exactly what happened when the Japanese bubble burst. It's currency was backed up by hyper-inflated real-estate prices in Japan. Reality set in and their currency imploded.
Not that any pol WANTS a solution (think about it), but the solution(s) are fairly straightforward, if someone cares to implement them.
Raise SS eligibility age by 4 months for each passing year until it reaches 72. No early eligibility -- phase it out over 5 years. Phase the COLA out over 5 to 10 years. Cease SSDI benefits for dopers and alcoholics immediately (or as fast as possible). Cease this idiocy of SS 'crazy checks' for children being treated for the (highly overdiagnosed) ADD and ADHD 'syndromes', and related scams.
Make the welfare reforms of 1995-1996 permanent. Install rigourous rules concerning identifying the fathers of children born out of wedlock that would otherwise qualify for a subsidy, including mandatory DNA testing. No tickee, no shirtee. Yes, tickee, then daddy goes to work on a non-optional basis. There are lots of streets that need sweeping, among numerous other tasks.
Prosecute ALL Medicaid fraud, including jailing doctors who participate, and revoking their license to practice -- and make them pay restitution.
Ultimately, of course, the way to get American health care back on track is to reverse the 'insurance' based nature of the system back toward the grocery shopping model (what was the last time either the gov't or an insurance company bought your bananas, right?)
OK, site trolls and other big gov't types, flame away.
Ahh, buy a restaurant?
Buy a boat?
Get married?
How much time do I have? :-)
The Federal Reserve, by the way, recently put the net worth of all households at $39 trillion. This problem goes way beyond taxing the rich, the poor or the middle class.
All the land, natural resources, and water rights the government owns isn't enough to collateralise the government debt, that is why they are so busy regulating people off their land, then confiscating it.
That's hilarious. I can't afford not to be robbed blind. Gotta love this guy.
That's about the worst suppression effort I have ever witnessed then, because the phrase "we can't afford a tax cut" is being echoes by everyone even remotely connected to the Demoratic Party.
This apparently includes the author of the screed in question, who is spewing the Demoratic Party line like a poorly trained parrot.
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