Back then, the issue was so big that it helped spark the formation of the Tea Party. But we’ve gotten accustomed to monstrous deficits, (the feds will just print the money, right?). So those who fret about debt may seem to some like worrywarts, a bunch of old fuddy-duddies. Americans now care more about jobs, the economy, and ISIS beheadings of Americans than about the federal debt. The debt, however, could crush America.
The problem with balancing the budget is that the federal budget is a fraud. The fraud really ramped up in 1969 with the adoption of the so-called “unified budget.†Under the unified budget, there is the “on-budget†side and the “off-budget†side, (they’re listed in that CBO table). The on-budget side is said to be discretionary. It is the side of the budget for which appropriations are made, where all spending must be accounted for. The off-budget side of the budget is said to be mandatory. This is the part of federal spending that is not subject to the budget process, where spending is “automatic,†where spending “must†be done. The off-budget side is where we find entitlements, and that’s where Congress must go if they’re ever to get control over spending.
There is one simple change to federal spending and budgeting that would force Congress to take the action needed to protect America from the runaway spending of one type of entitlement and it is this: require all entitlements that have their own dedicated taxes, like the payroll tax that funds Social Security and Medicare, to operate solely off of those taxes. Such entitlements would then become entirely separate from the rest of federal spending; revenues from dedicated taxes would not be used to pay for other programs. Every benefit would be paid for with revenue coming directly out of dedicated taxes.
That simple change need not stipulate any other changes, such as raising taxes, cutting benefits, and means-testing. But it would force some kind of action, for if the money hasn’t come in, the checks won’t go out. Medicare providers and retirees would have to wait for the tax revenue to come in.
Since 2010, Social Security has been cash-flow negative. That means the revenue from the payroll tax isn’t enough to pay benefits. So, monies are transferred from the “trust funds†back to the Social Security Administration to pay for benefits. In A Summary of the 2015 Annual Reports, the SSA reports: “The Trustees project that this annual cash-flow deficit will average about $76 billion between 2015 and 2018 before rising steeply.â€
The funds being paid back to the SSA to cover benefits are being borrowed. Yet Democrats persist in telling us that Social Security doesn’t affect the deficit. If my remedy were enacted, we’d see an immediate improvement of $76B in the overall deficit; the feds wouldn’t have to borrow to pay back that $76B.
The change I’m suggesting is a hard sell. That’s because government would have to admit to a massive fraud; they’ve been lying to us for decades about the nature of federal finance. But remember that requiring Social Security and Medicare to operate solely off of cash-flow from their dedicated taxes is what’s supposed to happen anyway when the so-called “trust funds†run dry. But the “trust funds†are frauds. Most of the “content†of the Social Security “trust fund†isn’t from surplus revenue from the payroll tax … it’s from “interest.â€
That “interest†is also a fraud. When money is borrowed in normal financial transactions, the borrower uses the borrowed funds to buy something, which has a marketable value, and which can be repossessed by the lender. If the SSA had used the payroll tax surpluses to buy, say, commercial real estate to rent out, they’d have an additional source of revenue. Conservatives wouldn’t like such an intrusion into the private sector, but at least the surpluses would have been invested. Instead, the surpluses were spent in the years they occurred on everything from homeland security to agriculture subsidies to earmarks for cowboy poetry festivals.
There’s another type of entitlement, programs that are not funded by their own dedicated tax, such as Medicaid and the ObamaCare subsidies. Such programs are pure welfare and their spending presents a different problem for Congress. From page 3 of the CBO report:
Quote
Federal spending for the major health care programs accounts for a much larger fraction — more than 60 percent — of the projected growth in mandatory spending: Outlays for Medicare (net of premiums and other offsetting receipts), Medicaid, and the Children’s Health Insurance Program, plus subsidies for health insurance purchased through exchanges and related spending, are expected to be $104 billion (or 11 percent) higher this year than they were in 2015.
That $104B in increased healthcare spending happens to be almost exactly the size of the increase in the projected deficit for 2016. The CBO “boosted its projections of federal outlays for Medicaid to reflect higher-than-expected spending and enrollment for newly eligible beneficiaries under the Affordable Care Act.†The red ink will be even worse if more states expand Medicaid under ObamaCare.
Spending for Medicaid and ObamaCare subsidies isn’t budgeted; it’s automatic; it just happens. If all the new Medicaid patients under ObamaCare have hepatitis C, AIDS, the Zika virus, Ebola, and sprained ankles, they’ll all get treated, the feds will borrow the money. It’s an entitlement, he explained.
If America elects a decent president this November, one of his/her first orders of business come 2017 will be urging Congress to balance the budget as soon as possible. But Congress will never balance the budget if they don’t get control over the “automatic†spending of entitlements. We need to dispense with the very ideas of “entitlement†and “mandatory†spending. All federal spending, including welfare like Medicaid and the ObamaCare subsidies, should come under the budget process. Americans can have as big a damned welfare state as they want as long as they pay for all of it themselves each and every year.
It seems to me that Trump has talked about the debt.
Astoundingly a whole lot of voters do not appear to care.
The deficit is never mentioned by the MSM unless a Republican is POTUS.
Caliph Baraq proved you could buy re-election with entitlements paid for with borrowed money.
If it wasn’t for the “Deficit” the ENTIRE ECONOMY would have collapsed a very long time ago. Currently the deficit is about 8%, we have a gdp of 35 roughly at best, that means we only LOST 5%. without the deficit we would have LOST 8%
There is not a single quarter in the last 30 years with a positive GDP if you SUBTRACT the Budget Deficit from the equation.
Welcome to world of credit money (fiat currency) and fractional reserve banking.
This may seem grossly insane, until you realize that most members of the G-20 and EU behave in much the same way, and understand their precarious situation. The ratio of external debt to GDP is about 75% for the G-20 and 170% for the EU. I picked twenty three world countries at random and came up with a ratio of about 35%.
A central banker from this exalted group might think they have a solution other than printing more money to keep their political keepers happy, but they know they must also survive during the resulting chaos as all countries seek similar solutions. They see the daunting specter of disaffected holders sending 10's of billions of dollar denominated bonds and their own bonds to the marketplace when there are no buyers unless prices are severely discounted. They are also frightened by the image of a devastated U.S. economy, because feeding the insatiable desires of U.S. consumers has been a mainstay of their prosperity. I imagine something like the final scene in "The Good The Bad and The Ugly". The members of the G-20 and the EU are standing in a circle with open graves behind them. They are all contemplating how they are going to successfully outdraw the 40 plus members and survive the resulting mayhem, which Lee Van Cleef's character did not. The only thing needed now is a typical expression of human frailty to commence the cascade to catastrophe.
Personally I think we are going to get creamed.