[Unable to display image] A Surplus of Lies How Our Elected Officials Turned a Budget Deficit Into a Budget Surplus by James M. Jarrell An article appearing in the March 1, 1999 edition of Barron’s exposed the great myth currently being perpetrated within our political circles. The myth that a budget surplus actually exists for the fiscal year 1999. Few items in life have given evidence to the true similarities between present day Democrats and Republicans than this. Although each group may beg to differ, they love to spend taxpayer money attempting to solve the problems of the world while at the same time garnishing the adoration of their constituents. "That’s simply not true" they would say. But unless they just simply don’t understand the policies and procedures used to calculate the budget, what other conclusion are we to draw after reading the Barron’s article. Simply put, whether they are Democrats or Republicans, they love to spend taxpayer money. Now they have found a fix to their addiction without having to incur the subsequent wrath of their supporters. How ingenious it is to falsely claim that a surplus exists, when in actuality it does not. How resourceful it is to manipulate the media to perpetrate this fraud. Then they can easily justify more spending based on this triumphant lie. After all, why would a voter disagree, if we have a budget surplus. Of course, some Republicans want to cut taxes and give this money back to the taxpayers. This sounds very appealing, but the problem is, there is not a surplus to return. So any tax cut would actually increase the budget deficit. Therefore, the proposed tax cut becomes a way to return money to the voters, thus appeasing their selfish desires, without having to cut one ounce of spending. As the Churchlady used to say, "How convenient!" Well maybe you haven’t read the Barron’s article and maybe I’ve left you a little confused. I mean, how could our politicians in Washington devise such a unique scheme to garnish votes while spending more money and increasing the deficit, all the while claiming that a surplus exists. Well let’s start from the beginning. Back in 1967, the President’s Commission on Budget Concerns developed a concept in which all off-budget entities would be included in the overall Federal Budget program. The government has used this unified budget concept in its calculations since 1969. This was partly developed to hide the monumental spending taking place under Lyndon Baines Johnson’s Great Society. This allowed the Federal government to cover deficits with surpluses and revenues from other off-budget government projects. Off-budget programs are required by law to maintain their own records of transactions. Therefore, these items are not included in the overall Federal budget. However, the unified budget concept allows our politicians to combine the reporting results from these segments together with the overall Federal budget to produce a consolidated number. These numbers are simply netted together to produce the final budget surplus or deficit. There have been a number of off-budget programs since 1969 which have been used to off-set budget deficits. Currently, two remain, Social Security and the United States Postal Service. The Postal Service was made an off-budget entity in 1989 and Social Security was designated as such in 1985. However, of the two, Social Security continues to produce the largest surplus. Now what’s the problem you might ask. The problem exists in the fact that the Federal Budget has run a deficit since before 1970, including the current year. The reason the politicians are stating we have a surplus is because they are off-setting the budget deficit with the off-budget surplus from Social Security and the Postal Service. But as Barron’s rightly points out, the Social Security funds are temporary. Ultimately, they are liabilities to the Federal government. So basically, the politicians in Washington are using the money from unpaid liabilities in off-budget entities to conceal a budget deficit. And when a surplus is declared, they state that these funds will be used for new projects or be returned to the taxpayers in the form of tax relief. Yet, these funds are not available for this. Simply put, they are borrowing this money to pay for new spending projects or to finance tax cuts. Let’s throw in some numbers to help get a better picture. Let’s say that the Federal government has a $121 billion surplus in Social Security funds. Now this is money that it owes to the taxpayer’s for Social Security benefits. Then our noble politicians decide to use this money for road construction on Federal highways. What are we left with. Well, we still have a $121 billion liability and on top of that we also just spent another $121 billion to build Federal highways. And where does that leave us? With total spending of $242 billion. So you say, well let’s return this surplus to the taxpayers. That sounds like a good conservative notion. But let’s recall that Social Security is in drastic shape. The retirement of the babyboomers within the next 30 years is threatening to bankrupt the entire system. Returning this money to the taxpayer will only make the situation more drastic. These funds are earmarked for future Social Security claimants. So in other words, to return this surplus to the taxpayer in the current year would be to create a bigger deficit in future years. Why save for later, when you can spend now and get votes. This year’s current budget deficit rests at $19 billion excluding Social Security and the Postal Service. However, adding back these entities creates a surplus of $107 billion. But as stated in the previous paragraph, these funds will be spent in future years. Therefore, the true budget deficit should be $19 billion and therefore, no surplus exists to spend. The fact that our elected officials have attempted to fool the American people into believing that there is a surplus in order to gain votes is simply despicable. This should raise the ire of all American taxpayers. In fact, no true budget surplus is expected to exist until around the year 2001. Interestingly enough, in accordance with the Gramm-Rudman-Hollings Act of 1985, the budgets of off-budget entities and on-budget entities were to be kept separate. However, as Barron’s states "this was done in the technical sense, but politicians continued to refer to Social Security and the government budget in combined terms . . .". Furthermore, the policy enacted by the Gramm-Rudman-Hollings Act was reinforced by the Budget Enforcement Act of 1990. However, our elected officials continue to utilize the alternate way of presenting the budget to the American public. Interestingly enough, the national debt has continued to rise due to the raiding of these Social Security surpluses. As Barron’s states in a follow-up article dated March 15th: "The difference between the full national debt and the privately held portion of the debt is approximately $1.8 trillion held in federal accounts including civil-service retirement, Medicare and Social Security. This $1.8 trillion consists of IOUs issued by the government. Those IOU’s are essentially how the Washington politicians have been able to give the appearance of having a surplus when the government is in reality spending more than it is taking in." The Washington Post also noted: "Even as deficits declined, the accumulated national debt continued to grow. The current total tops $3.7 trillion . . . But it does not count the amount the government has borrowed from its own accounts, such as trust funds for the Social Security and Medicare programs, civil service and military retirement plans, unemployment insurance and transportation funds. Adding in those IOUs boosts the total debt to more than $5.5 trillion – or more than $20,000 for every American" So we have politicians who declare from the "rooftops" that we have a budget surplus while our national debt continues to grow. Now does this make sense to you? So there we have it. That government surplus we’ve heard so much about is a phony. There is no surplus, but in actuality there is a $19 billion budget deficit. The actual surplus we’ve heard so much about comes from a surplus within Social Security which has been used to offset the actual budget deficit. The Federal Government borrows against this money to finance new spending or tax cuts. But as these funds are used, our national debt continues to increase. What we are witnesses to here is the sad state of American politics on display. Politicians desire power and the only method to keep this power is to appease the American people. This is the reason why public opinion polls are consulted so frequently. In order to stay in power, politicians must do, not what’s in the best interest of the people (for what the people want is not necessarily in their best interests) , but what will garnish their votes. Sounds much like bribery. Well, the American people have been bribed by the promise of a budget surplus which can be used to fund social programs or which will be returned to the taxpayer in the form of a tax cut. We have been victims of a false bribe in order to garnish our votes of support. How disgraceful it is that our politicians would stoop to such a level to win public support. Do the politicians of this country believe us to be stupid-minded individuals, unable to figure out simple accounting concepts? It would appear that way. Well, it’s time for the American people to answer and hold our elected officials accountable for this bit of deception. Or shall we pass on our deficits to our children’s future as a lasting legacy of a society addicted to debt. Sources: 1. Barron’s. March 1, 1999. Pages 25-26. 2. Barron’s. March 15, 1999. Page 26. 3. WashingtonPost.Com. January 30, 1999. Located at http://www.washingtonpost.com/wp-srv/politics/special/budget/budget.htm Copyright 1999. James M. Jarrell.
