Budget Blues: Intragovernmental Addiction

No, I’m not Neil Simon and this isn’t coming to you from Biloxi. Africa-hot though it be. All sane persons, that doesn’t include mad dogs and Englishmen, are either in the shade or in the water. In a way, working on America’s budget, whether at this or any other time of year, is akin to making oneself do a hundred pushups – it’s difficult, tiring, but character building. And somebody’s got to do it. Right?

Flexibility, that’s the key. At least that’s what the Associated Press contends in this report:

WASHINGTON (AP) — Senate Republicans are showing far more flexibility than their tea party-backed House colleagues as Washington policymakers seek to steer the government away from a first-ever default on its financial obligations.


President Barack Obama also lauded the deficit-reduction plan put forward by a bipartisan “Gang of Six” Senate lawmakers, which calls for well over $1 trillion in what sponsors delicately called “additional revenue” and some critics swiftly labeled as higher taxes

That flexible bipartisan Gang of Six Senators will show those pesky Tea-Partying Representatives a thing or two! Perhaps the Gang would be better off if they learned a few things. Or, at the very least, owned up to what’s really going on in a swamp that’s better known as Washington D.C.

For example, why are we bumping up against the Debt Ceiling? The current limit is about $14.3 trillion and, as of July 19th according to the Treasury Department, U.S. debt held by the public stood at “approximately” $9,753,904,328,297.12. So what’s the problem? Oh, I forgot that mysterious class of debt known as “intragovernmental.” Currently, that’s at $4,588,994,138,771.95 which gives us a whopping total of $ 14,342,898,467,069.07, if Treasury got their arithmetic right. So that’s the problem!

But it’s all a fiction whether it’s statutorily correct or not. Intragovernmental debt represents moneys that were at one time collected, by statute, for one purpose, and then spent on something else, that is, whatever at the time happened to strike legislative fancy. Our congressional financial wizards started writing markers and continued writing them until we reached the current “gargantuan” figure, as Elle Driver would describe it:

If you think this is nonsense, you’re right. Can you loan yourself money, spend it, and still have it available for its originally intended purpose? Can the gov’ment? They only think they can. Or rather, they want you to think they can. They either have to collect more taxes, borrow more money from the “Public,” or crank up The Quantitative Easing.

The most notorious pea in this shell game is the so-called Social Security “Trust Fund.” Mr. Krauthammer did a nice job back in March of explainingthe “special issue” bonds that are the trust’s only asset:

Special they are: They are worthless. As the OMB explained, they are nothing more than “claims on the Treasury [i.e., promises] that, when redeemed [when you retire and are awaiting your check], will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.” That’s what it means to have a so-called trust fund with no “real economic assets.” When you retire, the “trust fund” will have to go to the Treasury for the money for your Social Security check.

Bottom line? The OMB again: “The existence of large trust fund balances, therefore, does not, by itself, have any impact on the government’s ability to pay benefits.” No impact: The lockbox, the balances, the little pieces of paper, amount to nothing.

Media Matters disagrees:

In his column, Charles Krauthammer called claims that Social Security is solvent until 2037 a “breathtaking fraud” and said that the Social Security trust fund consists of “little pieces of paper” that “amount to nothing.” In fact, the Social Security trust fund consists of U.S. Treasury securities that are backed by the full faith and credit of the federal government and are generally considered to be “one of the world’s safest investments.”

Well, not anymore. What about those looming downgrades by the rating agencies? Would our national credit rating be dinged because we refused to borrow more? Doesn’t one’s credit rating improve upon a reduction in the amount owed, not upon increase? Anyway, Social Security isn’t the only trust fund funded with worthless bits of paper. It’s just the largest.

There’s a whole bunch of them, including the Civil Service Retirement and Disability Fund, Military Retirement Fund, Federal Hospital Insurance Trust Fund, Federal Disability Insurance Trust Fund, et cetera, et cetera, et cetera. You can find the most recent official GAO report to the Treasury on the subject here. It’s on page 29 of the online “pdf” file. If our esteemed Congressional denizens ever fessed up to this fiction, I would be surprised if the additional post-9/11 Capitol Police regiments didn’t thereby prove a prudent forethought.

That’s all I can muster for this day. Back to my pushups. Yeah, right.

More to come.

Ciao, Dennis

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