Rare Medium

The ways our government deceives us about its financial condition are many and ingenious.  A public accountant’s assessment of the way “we” keep our accounts would be laughable.

I have always admired the way we refer to our Social Security Trust Fund as being rock-solid.  Most, no doubt, believe it is bulging with cash.  In fact, of course, the Trust Fund is a sham.  There is no money in the Trust Fund, because Social Security is a pay-as-you-go program – the taxes taken in are supposed to be paid out to beneficiaries in the same year.  The illusion of wealth in the fund is created by the fact that, for that past fifty years, baby boomers have paid far more in taxes than retirees have taken out.  Since Social Security is a pay-as-you-go program, the influx of cash has provided a tempting fund for Congress to spend, and they have.  In order to account for the fact that all of the money, over and above benefits paid to retirees, has been spent by our Congress people, the Treasury has issued bonds directly to the “Trust Fund.”  This means that when the boomers are retiring and requiring more cash than current workers are paying in each year, the System must sell its bonds to raise the cash or, more likely, return them to the Treasury for cash.  Since the Treasury has no cash, it will have to sell bonds to China to cover the payment.  But what if the Treasury has already sold so many bonds to China that China says “no thanks?”  The boomer retirees are flat out of luck.  So what’s this about some trust fund with all this money in it?  Baloney.

There are many other examples of Congress manipulating accepted accounting principles to hide information from us, but one of the most egregious is its budgeting process.  When politicians claim to be “saving money,” beware.  What they are really saying is that they are cutting expenditures that are already built into the budget for the coming years.  If the budget baseline is planned to grow 3% each year, for example, “cutting” spending by 1% simply means spending will grow 2% instead of 3%.  I am not aware of any year since this process was initiated by Congress in 1974 that the actual budget was cut, that is, planned expenditures were less than those of the prior year.  I doubt one exists, even in the most Republican of times.

This baseline budgeting concept is a fraud on the rest of us.  Why Congress can build automatic increases into the budget for future years is a mystery to me, but I am sure that most of us, when we hear our earnest politicians talk about cutting spending, believe they actually mean they will cut spending.  They do not.  They mean that future expenditures will be less than those already planned.  They mean that they will continue to run short of revenues and must borrow the money to fund the growth in spending.  Seems a little hypocritical for one to knowingly approve such practice and then complain when the President wants to raise the debt ceiling.  They know the debt ceiling must be raised the moment they approve this behavior.

This is confusing to most of us and reinforces the perception that, gee, running the government is a really complicated thing, and we’ll probably never understand it.  Another baloney.  We allow this behavior ourselves, and we must elect representatives who at least admit the nature of the problem and are willing to push for change.  Follow people like Mitch Daniels, the outgoing governor of Indiana, for refreshment when you get tired.  He would make a great president.