The Elephant in the Room

Elephant in the roomWe’ve all heard the mind-numbing numbers:  $14 trillion of national debt that will grow to $20 trillion by 2010, but is it real?

Technically, and by the political definition, yes. It is the cumulative difference between actual revenues and spending. But by any reasonable accounting standard, our definition of national debt is hoax. More precisely, it is a political hoax within a hoax.

Almost two-thirds of the national debt is owed to us – mostly to our own government and its agencies. So when the pundits of doom talk about the impending explosion of interest on the national debt, one should smirk, a bit. We have systematically plundered Social Security, Civil Service and Military retirement funds (and other trusts) – like corporate America, we are never going to pay our pensions back, we’re going to change the rules. The Federal Reserve has purchased trillions of our national debt (quantitative easing) – in effect, it has already been paid by devaluing our currency. We have also allowed “banks” to go to the Fed money window for trillions of dollars at almost no cost that they have turned around and used to buy huge amounts of our debt making incredible profits – paying them back is little more than accounting.

Only about one-third of our national debt is owned by American and overseas investors. Were the Fed sponsored debt already paid with imaginary dollars subtracted from the $14 trillion, we owe far less than than the 76% to GDP ratio we hear so often. It would be more like 25% – an amount that would rank us among the most solvent countries in the world.

How did we get in this situation? You know. The Bush, now Obama, tax cuts for the rich when combined with the unfunded wars, the bailout of Wall Street and the stimulus bill, total almost all of it. To their credit, the Dems, in passing the “Affordable” Health Care Act and losing the mid-terms, will save a couple of trillion in the next decade, but we trillions on the table as bribes to health insurance companies and big pharma to get the bill passed. The surplus to debt happened in less than ten years. It could be undone in less than 151.

Except… for the non-debt debt – the elephant2 in the room – our unfunded liabilities. It would take, perhaps, $100 trillion to fully fund our pension and veterans obligations while continuing to fund Medicaid and other off-the-book obligations. A $38 billion cut, which almost forced a government shutdown, is stomping on ants while the elephants are jumping over the wall. Silly politics. Televised sport and nothing else. Look for the reruns to begin airing in a few days.

The only responsible way to address the real debt, is to get politicians out of our accounting and health care3. Treat Social Security, Disability and Medicare as tax financed programs – without a cap, not pretend trust funds. Require all tax cuts, breaks and subsidies have a sunset provision that forces a new and separate vote to continue. Stop treating earned and unearned income differently. Plug the loopholes. Send all corporate lobbyists to Guantanamo subject to military tribunals. Pass legislation limiting political contributions so they can only be made by individuals. Require competitive bidding for all government contracts. Give the states access to the Fed money window. Get out of the wars, slash the Pentagon, NSA/CIA budgets, require a two-thirds vote in Congress to wage war and support the UN to be the world’s peace keeper. Pass immigration reform to get the 20 million here undocumented, to pay legal taxes and Social Security and have access to better paying jobs. Create a Roosevelt-like works program that offers an alternative to long-term unemployment. Require two years of community or military service for our young people and offer college as a reward. Invest in a national system of medical clinics, private or public, to implement much of Medicaid. Do something. Don’t just cut something. The systems, political, economic and accounting, are unsustainable and broken.

 

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1 By going back to historically low top rates, getting the hell out of the wars, requiring those too big to succeed without taxpayer funds to fail and getting people back to work. Duh.
2 Yes, it is ironic that the elephant is the symbol of the GOP.
3 I know, I know, I know, you are thinking, what the hell does he want to go and write about this for? Ignorance is bliss. Leave it to Nobel prize winning economists and people running for office to make this stuff up. Just couldn’t help myself.

4 thoughts on “The Elephant in the Room

  1. Monica Smith

    Sometimes it seems like the people we sent to Washington as stewards of the land all grew up with daddies who threatened to cut their allowance, if they didn’t come home on time. So, cutting spending is supposed to make people (somebody) behave? But, fact is, spending is the only thing money’s good for. And, though some people are into lending, what they really want is to borrow somebody’s money so they can spend what they don’t own. So, go ahead, be a big spender. Being a big spender is the only way to let other people be big spenders, too.

    Reply
    1. Lee Leslie Post author

      Could be daddy’s punishment, and we deserve it -- money does, after all, buy the type of freedom we Americans believe in most. Could also be a state’s right thing because states seem so much easier to subvert, and for less money per dollar stolen. Could be just meanness -- making them feel powerful when they cause others pain -- or just a control issue. Could be about the hundreds of trillions, perhaps many hundreds of trillions in the derivative bubble (makes our national debt seem trifling) that’s not likely to be taxed at all anywhere. Could be that they actually believe any of this when the Fed and their G8 siblings have so manipulated the currency markets with fiction that our government, even the Republican House, is powerless to do anything meaningful. Could be that we’ll be talking about this for the election cycle, not because it is the most important issue, but because they think it will elect our next government. Just makes me remember the Carville sign during Clinton campaign: it’s the economy, stupid. I suppose if they aren’t going to get people working, they’ll try and get them believing that not spending will get us all back to work. Hope they sort it out soon. Thanks for weighing in.

      Reply
  2. Gita

    I didn’t pay too much attention yesterday when Standard & Poor’s warned that it might downgrade the United States’ credit rating unless the deficit were cut. I mean, I figured so what? How does this apply to me, a poor wage slave? Now I am asking myself, should I be more or less scared about all this? I decided on “less,” and went out into the yard and measured it to see how much corn I could grow for the ethanol market. Just in case, you know, that they take away Medicare and Social Security to pay off the debt.

    Reply
    1. Lee Leslie Post author

      I wouldn’t be too worried about the S&P downgrade. I believe it was a wonderful reaction, if not ironic, to the release a few days ago the about time, 650-page bipartisan Senate report on Wall Street and the Financial Crisis (great reading: http://levin.senate.gov/newsroom/supporting/2011/PSI_WallStreetCrisis_041311.pdf), in which S&P and Moody’s were listed among the “root causes.” That said, the warning was about the politics of the deficit and seems on target. IMHO, the Republicans in the Senate are starving for attention and will attempt to hold the debt limit hostage.
      On Meet the Press, Alan Greenspan said it well, “Why do we have a debt limit in the first place? We appropriate funds, we have tax law, and on reasonably adept at arithmetic can calculate what the debt change is going to be… The Congress and the president have signed legislation predetermining what that number is. Why we need suspenders and belts is something I’ve never understood…”
      Good luck with the corn. More likely, I’ll just join a rebel group and storm a gated community.

      Reply

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