(Or stealing from the poor to give to the rich.)
Ronald Reagan won in 1980 by demonizing Carter’s (Democrats) profligate spending habits that created federal deficits. He was going to “balance the budget.” In the ten years from 1980 to 1990 the US National Debt rose from $0.93 trillion to $3.23 trillion. Some of the money borrowed to support that $2.3 trillion in new debt came from raiding government trust funds, but most of it was borrowed from the public. GWB is doing even better than his spiritual and real fathers; he’s increased the National Debt by $1.6 trillion in three years (2001 was the last Clinton budget; therefore, GWB’s track record is only three years as of this writing). The “loans” from US trust funds now total $3.1 trillion with the remaining $4.4 trillion held by individuals, institutions and foreign and international governments/institutions/individuals (22.7% in 1998). And nobody thinks it’s strange that with the US trust funds growing that now we’ve got a problem with Social Security.
This is like all of us putting our savings in Banco Arbusto. Once they have our cash, Banco distributes dividends to their wealthy friends, using our cash. However, the bank has no equity and therefore, creates deficit equity (investor debt) with those distributions (don’t worry about this part because the world is filled with investment suckers who will fix this at a later date). Your bank also likes to throw lavish parties for their friends and buy lots of cutting edge and very pricey high tech toys from them. Since we haven’t given them enough of our cash to pay for this, they borrow money from their friends. And every year, Banco Arbusto levies a fee on our accounts to meet the interest payments to their friends for loaning Banco Arbusto money that Banco Arbusto gave them from our deposits.
At one time this was not so easily accomplished. Americans didn’t like federal deficits and the surplus funds in government trust accounts were small. The 1983 Social Security Act set up the dynamics that created the SSI piggy-bank-book. It took a while for the piggy-bank-book to have some serious money in it (and GWB is now shaking every nickel he can out of that pink-piggy-bank-book). Had Reagan not raised so little in general revenues and squandered so much on a bunch of military junk, the advantages for the GOP of the 1983 SSI reform would have kicked in earlier instead of really only beginning in 1987. (Might have even given Bush pere a second term.) At that point the National Debt began to be funded more by obligations owed to trust funds and less to the “public” and borrowing less from the world means that interest rates will be under less pressure and the cost of borrowings more manageable. (Federal interest expense peaked in 1998 at $364 million and was down to $319 million in 2004 even though the total debt rose from $5.5 trillion to $7.4 trillion (thank you Unka Al and all you SSI contributors who forgot that those cheap interest rates mean that GWB can borrow money from all of us for less.). By 1997 only 30% ($1.6 trillion) of the National Debt was owed to trust funds and by 2004 that number is 42% ($3.1 trillion) out of a total National Debt of $5.4 and $7.4 trillion, respectively, and the trust fund accounts will continue to grow for a couple more decades.
The genius of creating the SSI surplus from which the US government can borrow to fund current operations (as opposed to cutting the military budget or raising general taxes) is a twofer – not only are there funds to borrow from at will but the interest costs are also paid with IOUs instead of cash, and due to the magic of compound interest, the trust funds are growing faster and faster. Even the architect of the 1983 SSI reform recognized that this had been a gross miscalculation: “Sen. Daniel Patrick Moynihan (D-N.Y.), who was instrumental in putting together the 1983 Social Security Reform Act that has given rise to today’s trust-fund surpluses, has since disowned his own handiwork. Remarking on Congress’s failure even to attempt to achieve an on-budget balance, Moynihan has noted that these trust-fund surpluses have simply allowed Congress to tax less and spend more than it otherwise would. Trust-fund accounting, he concludes, amounts to "thievery." (The late Sen. John Heinz (R-Penn.), asked whether Moynihan’s description of the trust funds was accurate, is said to have replied, "Certainly not. What is going on is not thievery. It is embezzlement.")” ss org
Here’s where we are now and where we’ve been the past few years.
Date ……....Debt - Public …Trust Fund Debt … Total
12/17/04---$4.42 trillion ---- $3.10 trillion ------ $7.52 trillion
9/30/04----$4.31 trillion ---- $3.07 trillion ------ $7.38 trillion
9/28/01----$3.34 trillion ---- $2.47 trillion ------ $5.81 trillion
9/30/97----$3.79 trillion ---- $1.62 trillion ------ $5.41 trillion
The breakdown on the intergovernmental funds for the past three years is the following:
TRUST FUNDS LOOTED to balance the budget (in billions)
Social security----1,170 --- 1,330 --- 1,500
Medicare ------------ 239 ----- 264 ------ 291
Military Pension---- 157 ------ 166 ------ 174
Civilian Pension----- 543 ------ 576 ------ 611
Unemployment ------- 89 ------- 66 -------- 50
All Other -------------137 ------ 134 --- --- 129
-- Total ------------2,335 ---- 2,536 ---- 2,755
The total National Debt as of 1981 (for approximately the first 200 years of this nation) was $1 trillion dollars. Then after the GOP had finally figured out how to game Keynesian economics, we let them take over and prove once again that they cannot be trusted with our money.
Banco Arbusto has now figured out who those “investment suckers” who will be. Instead of the trust fund beneficiaries being the holders of US debt (the promise to pay future benefits to us), and continuing to have the same rights to the assets of Banco Arbusto as those holding the public debt instruments (T-bills), Banco Arbusto is going to turn us into the “Ownership Society.” Before the big crush of baby boomer retirees begin to turn in those “notes” for payment, they will convert our “notes” ($1.5 trillion as of 2003) into shares of common stock. We will become the proud owners of Banco Arbusto. Perhaps they will also manage to sell the lower level civilian employees on this great investment opportunity for a few hundred million dollars. Then we’ll be like all those long-term employees of another fine US enterprise who watched the value of their retirement accounts in company stock grow and grow until Bigger Banco said, “Enough. No more loans and pay up now.” Ownership is a bitch when equity is less than zero. As when Enron went down, we can expect to see Joe Lieberman (or his evil-twin successor) standing up for us and demanding public hearings for about a minute and a half before he and his colleagues slink out of Dodge as fast as they can before the mobs begin to storm the Capitol.
Yes, we have a problem and that starts with P and that rhymes with B and that stands for Bush.