Spin city and the surplus

What the American people are getting from the administration in Washington is a heavy dose of misinformation regarding “the” surplus, “paying down” of the national debt and the “do-ability” of George W. Bush’s $1.35 trillion tax cut over the next 10 years, without touching the Social Security surplus. (The Social Security Administration states the fund is solvent through 2039.)

For fiscal year ending Sept. 30, it is projected by the Office Management and Budget that there will only be $1 billion of operating surplus. That is all that should be available for a tax cut. Of course, Congress could borrow from the public or Social Security and other trust funds’ surplus receipts. The rest of the projected $160 billion surplus (this is the exact amount predicted last year by OMB) is from Social Security, postal workers’ retirement, government employees’ retirement, Medicare and other such dedicated and supposedly untouchable (for tax cuts) funds.

When this administration says we are swimming in surplus, implying it is available to support Bush’s ludicrous tax cut, it is wrong. Nearly all of that $160 billion surplus is for our retirement, disability and Medicare trust funds. It appears that on budget (operating) surplus for fiscal year ending Sept. 30, 2002 is also projected to be only $1 billion.

Why do you think the administration had to borrow $59 billion about a month or so ago? There was no money in the till to send us our $40 billion tax rebate advance. I am appalled by the lack of fiscal responsibility demonstrated by this administration and Congress when they borrowed money to give us a tax rebate.

Would we tolerate a town or city manager and the council or board of selectmen if they perpetrated such an irresponsible act? Of course not. Then why should we allow this to happen to us at the national level?

“Paying down the national debt” seems to be the phrase of this era from politicians and media alike. No such luck. The national debt of $5.7 trillion, as of now, has two parts: the public debt portion (about $3.3 trillion) and the government portion (about $2.4 trillion). The public part of the debt represents money borrowed by our government from banks, countries, individuals and mutual funds, etc. This part of the debt is being paid down by borrowing surplus tax receipts from Social Security and other dedicated trust accounts only. It is projected to take at least nine or 10 more years.

The government part of the debt represents money borrowed by our government from the surplus tax receipts of Social Security, government employees’ retirement funds and other dedicated type funds. In the past the government used these borrowings to pay for operating expenses when income and other type taxes were insufficient. This, combined with pubic borrowing, built the national debt. Now, the government is borrowing the annual Social Security and other dedicated funds surplus to pay down the public portion of the debt.

As the debt held by the public decreases, the government debt increases. According to the OMB and the Congressional Budget Office, the national debt will continue to grow between $6 trillion and $6.7 trillion by 2011. Interest alone on that debt in 2011 will be approximately $400 billion. However, the government does not recognize interest expense due government trust funds in its financial reporting, because it becomes an asset in the government trust funds. Actually, the Federal Treasury simply issues treasury bills to the funds for the interest owed.

By the way, the recently defeated Republican proposed lock-box law would have prohibited Congress from using Social Security Surpluses for operating expenditures.

Presently, there is no money in the various dedicated trust funds. It has been exchanged for IOUs, interest-bearing treasury bills. So, instead of paying down the public debt with Social Security and other fund surplus receipts, Congress and Bush could borrow these receipts for his ridiculous tax cut program.

A few years ago, Sen. Daniel Patrick Moynihan proposed that the Social Security Trust Fund and other such dedicated funds be separated from the General Fund and placed into a special trust fund account, to be managed by the various fund trustees. However, passing such a bill is as likely as the foxes leaving the hen house. We would probably need a national referendum.

Duncan E. Beaton lives in Easton.