-Caveat Lector-

SURPLUS! WHAT SURPLUS?
THERE IS NO SURPLUS
By JOHN CRUDELE

THERE is no federal budget surplus.

I'll say it again. There is no budget surplus.

Before you even get to the issue of whether the
'budget surplus' should be given back to
taxpayers as the wishful Republicans suggest,
or used to prop up Social Security, as the
desperately-impeached President Clinton said
in his State of the Union speech on Tuesday,
there is a small issue that needs to be taken
care of - there really is no budget surplus.

Issue No. 2. There is no way people can be
allowed to invest their Social Security money
in the stock market. That's because the
'money' -- as in cash you, I or the government
would turn over to a stockbroker -- also
doesn't exist.

All right, here I go again trying to explain
how our elected officials in Washington are
perpetrating a fraud by proclaiming that there
is a budget surplus.

Over the past year, the federal deficit -- which
is money owed by our government -- rose from
$5.486 trillion to $5.618 trillion.  Those are
government numbers right out of Barron's.

That means the federal debt climbed by $132
billion. Which means the federal budget DEFICIT
last year was $132 billion.  There was no surplus
of $70 billion, or any other amount, as
Washington is claiming.

When the economy weakens -- as it always
does -- the true deficit numbers will increase.

The surplus claim is wrong. It's a fraud.

Washington is able to pretend there is a surplus
because it has been raiding the Social Security
trust fund, which, you have to understand, isn't
a pile a cash sitting somewhere in the Treasury.
It's really a pile of government IOUs (Treasury
bills, really) Washington puts into Social Security
in exchange for the cash it steals.

And it is our cash that is being stolen. Anyone
who pays into Social Security is really unwittingly
buying IOUs from a government that might not be
able to pay in decades to come.

Right now the Social Security system is running
a surplus because more money coming in than
going out. It's demographics at work -- more
employees than retirees. That pleasant situation,
however, will not last long.

But this surplus belongs to people like me and
you, who'll need it to retire someday. So
Washington shouldn't pretend that it belongs to
the country and part of the budget.

The president wants this non-existent 'budget
surplus' pumped back into Social Security.

What does that mean?

Washington will steal $200 billion from Social
Security (turning a real $132 billion deficit
into a $70 billion surplus), so that it can
proclaim a budget surplus, then it will return
the excess money to Social Security from where
it was stolen in the first place.

Oddly, that's actually a preferable charade to
what the Republicans suggest. At least under
the president's plan the 'surplus' comes full
circle and ends up back in Social Security.

Under the Republican plan, you would give away
the 'surplus' and the money will disappear from
the Social Security circle all together.

The president, however, is wrong in backing a
plan to allow people -- in some form or
another -- to invest their money in the stock
market. But the endorsement is a shrewd maneuver
by a president in trouble.

Bill Clinton knew back in 1992 what voters cared
about -- the economy and jobs.

And it is the worst kept secret in American economic
history that the only thing keeping this country's
marvelous economy going is the stock market bubble.
It's just like Japan's wonderful economy before the
bubble burst a few years back.

Americans -- like the Japanese -- feel rich because
of the stock market. And even though companies are
laying off workers faster than they were during the
hard times of the early 1990s, Wall Street is keeping
people content.

I estimate that President Clinton has no better
than a 50-50 chance of remaining in office. Those
odds go down to 60-40 against his presidency once
witnesses are called before the impeachment trial
(some day I'll be able to tell you why.)

The president can maintain his high rating if the
stock market keeps the economy rolling along. But
like any other Ponzi scheme, the Wall Street bubble
can't continue unless fresh money keeps coming
into the market.

President Clinton's Social Security proposal would
provide a lot of fresh money to keep the market
going, which'll keep the economy perking, which
will keep Clinton's rating high.

It all works quite nicely -- except that the proposal
to allow people to invest their Social Security money
in the market is impossible to enact. Here's why.

As I said, there is no cash in Social Security.

So if I am allowed to, say, put $10,000 of my
Social Security money into the stock market, where
is the cash going to come from? Washington doesn't
have the cash.

And if it does raise cash that'll be put in the
market, who is going to supply the cash to pay
retirees?

Plus, liquidating Social Security's bonds would
send interest rates skyrocketing.

And when the stock market crashes, the Social
Security system will be in worse shape than even
the pessimists are predicting.

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