Thursday, May 24, 2012
Phony accounting tricks aside, the real deficit is $5 trillion
Washington does not regard your money as a "legal obligation."
by John Hayward
This week, America enjoyed the comedy stylings of the brilliant satirist Rex Nutting, who created an entirely fraudulent chart purporting to “prove” that Barack Obama spent less than his predecessors. It was an incredible success, duping countless liberals - including the entire lineup of MSNBC hosts - into making absolute fools of themselves by taking it seriously. They didn’t notice Nutting doing things like writing the bulk of Obama’s “stimulus” heist off as “Bush spending,” or swapping out actual monies spent and replacing them with old projections and estimates.
It was a laugh riot that can only force Sacha Baron Cohen, creator of the “Borat” character, to kneel in admiration of the true master of his comedy art. Borat never managed to punk so many people all at once. For a brilliant deconstruction of this hilarious hoax - demonstrating exactly how Nutting was able to make such a broad swath of the American chattering class forget the patently obvious truth that Barack Obama spent more in three years than Bush did during both of his terms in office - check out the infographic at the Political Math blog.
The Nutting fraud is a comedic exaggeration of the sort of funny accounting Big Government routinely uses to hide its bulk. The truth is that we’ve been disastrously insolvent for decades. Obama slammed his foot on the gas pedal, but the cliff he’s got America speeding towards was there all along.
On Thursday, USA Today released a sobering analysis that shreds one of the oldest accounting tricks used by Big Government acolytes: pretending that mountains of entitlement liability don’t really exist. This is sort of like figuring out your household debt by adding up your credit cards, but ignoring your mortgage and car payment.
Using these tricks, we commonly delude ourselves into thinking the federal budget deficit was a mere $1.3 trillion last year. The horrifying truth is that it was more like $5 trillion. Yes, FIVE trillion dollars. USA Today got this number by doing nothing more than applying the standard accounting practices of every business in America to the federal budget:
Under those accounting practices, the government ran red ink last year equal to $42,054 per household — nearly four times the official number reported under unique rules set by Congress.
A U.S. household's median income is $49,445, the Census reports.
The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits. Yet companies, states and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules.
The deficit was $5 trillion last year under those rules. The official number was $1.3 trillion. Liabilities for Social Security, Medicare and other retirement programs rose by $3.7 trillion in 2011, according to government actuaries, but the amount was not registered on the government's books.
In other words, the federal budget is literally beyond the ability of Americans to finance. Fairly divided between all citizens, it would consume virtually the entire household budget of a typical family. The only way Washington can pretend it’s running a paltry $1.3 trillion annual deficit is to pretend it’s not responsible for paying future entitlement benefits, while simultaneously raiding Social Security funds to pay for other programs. Remember Barack Obama’s little “payroll tax cut?” That’s coming right out of Social Security, folks. It’s not even thinly disguised – it’s a straight-up, direct raid on the Social Security funding stream.
How does the government get away with this? USA Today put that very question to liberal:
Jim Horney, a former Senate budget staff expert now at the liberal Center on Budget and Policy Priorities, says retirement programs should not count as part of the deficit because, unlike a business, Congress can change what it owes by cutting benefits or lifting taxes.
"It's not easy, but it can be done. Retirement programs are not legal obligations," he says.
You understand what he’s saying here, right? None of your sacred “Social Security benefits” belong to you. Not one dollar of that money is your “property,” contrary to the lies you’ve been told for decades. Leftists are becoming increasingly comfortable with admitting it’s all the government’s money, and you receive your benefits at their pleasure. Remember, when Barack Obama was trying to scare Americans into giving him more money to spend, he openly speculated that Social Security checks might stop coming if Washington was not allowed to plunge further into debt.
You know what would be a “legal obligation?” A retirement fund with a private financial institution. They wouldn’t be allowed to alter the terms of the arrangement at their pleasure, cranking up taxes or refusing to pay benefits at the agreed-upon date. They would also be required to account for your money in precisely the way Washington does not, and would go to jail for the kind of bookkeeping that enables the federal government to pretend it’s only running a trillion-dollar deficit.
To read another article by John Hayward, click here.
Posted by Brett at 2:45 PM