Anatomy of the debt limit ogre

Washington Times ^ | Monday, February 18, 2002 | Bruce Bartlett

[JohnHuang2]

In a few weeks, Congress will have to raise the public debt limit. The Treasury Department estimates it will run out of borrowing authority some time in March, jeopardizing the timely payment of government bills, including Social Security benefits. It goes without saying that Congress will, in the end, raise the debt limit. However, the debate is likely to be more contentious than usual this year, as Democrats seek to blame last year's tax cut for rising federal debts.

[JohnHuang2]

Quote of the Day by Thane_Banquo

[meenie]

Bruce Bartlett is right in some respects but sadly lacking in others. He is right in the point that debt held by private interests outside of our government has declined percentage-wise. However he misses the point that government internal debt is basically broken promises made to the public.

The transportation fund for example is the result of increased gasoline, airline ticket taxes, etc. that were sold to the public in the guise of better highways, airports, and a better transportation system. The social security system is the real bug-a-boo in the accounting process.

If the money is not used from this fund to reduce the public debt, our children and grandchildren's future retirement benefits are going to be placed in jeopardy as well as terrible tax rates to keep it going. It is not a disaster to cut back on highway expenditures but the promises made to the average wage-earner is going to be hard to ignore.

To be blunt, the debt limit still provides a means for the average citizen to check the responsibility of their representatives in Washington. An increase in the debt limit still tells the public that their congresscritters are still robbing Peter which will have to be paid by Paul in the future. This is not the actions of responsible people.

In the private sector, individuals hope for the accumulation of wealth to leave to their children as a means of providing a better future for them. The government goes the bass ackwards route of saddling the future with debt and taxes while disguising present spending to deflect criticism and win the next election.

[George Frm Br00klyn Park]

     First, an increasing share of the debt subject to limit is held internally in government accounts. Second, more and more of the government's total indebtedness is not subject to the debt limit. These facts raise serious questions as to whether the debt limit serves any useful purpose in this day and age.
     It is important to understand that the formal debt limit applies to the gross federal debt. This includes debt held by the public plus that held in trust for Social Security, highways and airports, and other purposes. These latter debts are held within the government itself and do not require the Treasury to borrow from the general public. In effect, the debt held in trust is economically meaningless. The only measure of federal borrowing that matters is how much the federal government takes out of private financial markets, which may "crowd out" businesses and other borrowers.
     In recent years, the portion of the gross debt held by the public has sharply declined from 75 percent in 1990 to 57 percent last year. The reason is mainly growth of debt held in "trust." This is simply a fancy term for making an accounting entry on the government's books that says general revenues can pay certain bills in the future.
     The hard truth is that the Social Security "trust fund" bears no resemblance to those that exist in the private sector. There is no ownership right and benefits are unrelated to assets. The much-discussed Social Security trust fund is just an accounting device, nothing more. It is like a "debt" that a husband owes to his wife or children. It may be important to them, but it has no meaning outside the family.
     This obsession with the Social Security trust fund has serious consequences, however, which is to divert attention from the federal government's growing off-budget debt. Much of this is accumulating in what are called "government-sponsored enterprises" or GSEs. These include entities such as Fannie Mae, which borrow vast sums on their own authority, but with an implicit government guarantee. At the end of October, these agencies had outstanding debts of more than $3.1 trillion.
     To put this government debt in perspective, the debt held by the public was just $3.3 trillion. However, this really overstates the figure because the Federal Reserve held $534 billion of that. Since the Fed is part of the government, that debt is essentially meaningless, leaving a net debt of $2.8 trillion. Thus GSE debt effectively exceeds the national debt.
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02/14/2002 $5,945,006,500,796.26 from The Debt To the Penny
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FISCAL Year Total $ 134,050,617,520.41 from Interest Expense on the Debt Outstanding
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Guys, First the "Policy Analyst and a nationally syndicated columnist {Bruce Bartlett}." tells US that, "the debt held by the public was just $3.3 trillion.", then that, "However, this really overstates the figure because the Federal Reserve held $534 billion"of that "public debt", and then that, "the Fed is part of the government!!!

AND, he tells US, "The much-discussed Social Security trust fund is just an accounting device, nothing more. It is like a "debt" that a husband owes to his wife or children. It may be important to them, but it has no meaning outside the family."
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So, he tells US that the federal reserve holds "public" debt, while being "part of the government. Then, he separates the private sector taxpayer {who pays ALL the bills including those owed by government} from liability of governmentdebt.

Then, he tells US, "It is like a "debt" that a husband owes to his wife or children."!! Which is totally in reverse of reality when the "father" {government} in this case has borrowed from his wife and children, AND the children's children for generations to come!

But, Maybe he is right. Since, in Bruce Bartlett's esteemed opinion, the money that "government" owes "government" is of no matter, then it should all be taken off the "books" altogether. INCLUDING the debt held by the government body called the federal reserve.

And,NONE of this addresses the "outstanding debts of more than $3.1 trillion." held "off budget" by "government-sponsored enterprises" or GSEs." Including entities such as Fannie Mae"!!!!

It seems the government showed Enron and Global Crossing how to do "bookkeeping". The numbers from the Treasury dept's "Public Debt", and "Interest on the public debt" show NONE of the numbers used by Mr. Bartlett.

Maybe, if we eliminated the debt altogether, politicians, economists, and policy analysts would no longer have to obfuscate, and in general make liars out of themselves when speaking and/or writing about it. But then, perhaps Bruce Bartlett {senior fellow with the National Center for Policy Analysis and a nationally syndicated columnist.} is simply "mistaken in his ramblings. Peace and love, George.