Slick Willie's Smoke and Mirrors Budget Surplus
<font size=5>What Surplus?<font size=3>
by U.S. Senator Peter G. Fitzgerald
July 5, 1999
Last week the President announced that we will have federal budget surpluses this year and every year into the foreseeable future. The New York Times asserted that the national debt clock in mid-town Manhattan would soon start running in reverse, thanks to these surpluses, and news articles have appeared across the country proclaiming that the nation will be debt-free by 2015.
Before you uncork the champagne, take a look at the fine print in the President's projections. The national debt now stands at $5.6 trillion---that's $55,000 for every family in America. The fine print shows that, far from decreasing, the national debt will rise---every day, every month, every year---to over $7.5 trillion by 2015. Over the next five years alone, our national debt will jump by over a half trillion dollars.
How can our national debt be rising if we're running surpluses? The answer is simple---we're not running surpluses.
The President has a well-earned reputation for his careful choice of words. In his remarks on the budget last week in the Rose Garden, he correctly stated that the portion of the national debt held by the public will fall to zero by 2015. But he failed to point out that another component of the national debt---money borrowed from over 150 federal government trust funds, including Social Security and Medicare---will quadruple by 2015.
By the President's omissions, the public is hearing and perceiving a half-truth. Part of the government's debt will go down while another part skyrockets, and the total debt---and every family's share of that debt---continues to climb. Washington is simply moving its debt from one account to another---using its Visa to pay off its MasterCard. Such dubious refinancing is no cause for celebration.
Congress and the Administration are not being straight with the American people. Rather than admit that the federal government continues to run large annual budget deficits, they use accounting techniques to blur and obscure the problem.
In order to mask on-going annual deficits in the general fund, Washington "borrows" money from a variety of dedicated government trust funds and mixes that money in with the general fund. But each dollar taken out of these trust funds is another dollar added to our national debt. Borrowing from these trust funds explains why our national debt continues to rise even though many in Washington are claiming "surpluses" in the general fund.
Let's look at this more closely. Each year, Americans pay billions of dollars into over 150 federal government trust funds. Congress originally created these trust funds to specifically earmark or set aside money for programs like Social Security and federal employees' and veterans' pensions. Last year, for example, working Americans paid $423 billion in payroll taxes into Social Security, of which $53 billion went into the Social Security trust funds to help pay for the benefits of future retirees. Another $6.8 billion of your hard-earned tax dollars went to increase the Military Retirement Fund to provide future retirement benefits to veterans and their families. And the unemployment trust funds---used to provide financial assistance to workers who lose their jobs through no fault of their own---grew by $8.8 billion last year, thanks to payroll tax contributions by working Americans.
But there is no money in these trust funds. The federal government has taken every dollar out of these funds---over $1.6 trillion, or more than $6,100 for every man, woman, and child in America---and spent it on other government programs. In 1998 alone, the federal government borrowed, and then spent, $153 billion from the trust funds---$99 billion from Social Security alone.
In return, the Treasury Department has issued non-marketable, non-negotiable IOUs to the trust funds, contributing to our massive federal debt. These IOUs earn interest, but the federal government doesn't pay the interest in cash or other real assets. Instead, the government "pays" the interest by issuing even more IOUs to the trust funds.
Under Congress's own laws, if a private business raided its employees' pension funds and spent that money for general corporate expenses, its executives could be prosecuted. Yet that's exactly what Congress has done to the government trust and pension funds. They've dipped into these funds for years. They've used the proceeds to mask budget deficits and to pay for other programs, in what amounts to a shell game with taxpayers' money. But it's the American taxpayers who will pay in the long run, as our huge national debt will grow for many years to come.
I am working in the Senate to try to change the government's accounting practices so that the public cannot be so easily misled. I have introduced the Truth in Budgeting Act of 1999, which would require the federal government to separate the money borrowed from the trust funds from the general fund and report the real federal budget deficit or surplus. By requiring all trust funds to be reported separately from the general fund budget, the Truth in Budgeting Act shows that the government "surpluses" now being touted are fictitious.
This legislation specifically does not "lock box" every trust fund, as I and others have proposed for Social Security. In fact, of the over 150 trust funds, there may very well be some that should not have the status of trust funds, and whose monies should not be segregated from the general fund. The Truth in Budgeting Act will only illuminate our nation's finances, but this legislation is an incremental, critical step toward changing the way Congress budgets and spends your money.
The Truth in Budgeting Act---endorsed by the taxpayer watchdog group, Citizens Against Government Waste---will shine a spotlight on the budget shell games used by Congress and the Administration, and force the government to, literally, account to the American people. |
