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Source link: http://archive.mises.org/16777/the-budget-mess-time-to-get-serious/

The Budget Mess: Time to Get Serious

May 4, 2011 by

The recently announced spending cuts are, in fact, less than 1 percent of federal spending, a token sum that does nothing to fix the long-term budget situation. FULL ARTICLE by D.W. MacKenzie

{ 7 comments }

J. Murray May 4, 2011 at 9:58 am

“There was a brief period of fiscal discipline in Clinton’s second term.”

No there wasn’t. This is only an illusion because government, unlike private enterprise, is allowed to ignore unfunded liabilities when putting together the balance sheet.

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm
http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

If you’ll notice, at no point did the debt actually decline. The smallest jump was FY00 at $18 billion official. And that’s just the outstanding Treasuries. The US government still was making a habit of borrowing out of the Social Security contributions using debt instruments, and then saying that because they didn’t borrow from outside of the government, that the debt really didn’t count and there was a surplus. What effectively happened that year was Social Security surplus contributions replaced maturing debt and folded in the $18 billion remainder in to new debt.

If there was a legitimate surplus, the total debt load should have declined, not increased.

The government gets away with this because government accounting does not require the government to create a liability for anything that isn’t backed up by an actual Treasury note. This means that all future promises to pay for Medicare, Medicaid, and Social Security recipients remains off balance sheet.

The government has never been fiscally responsible. It just uses accounting tricks to hide the debt.

Country Thinker May 4, 2011 at 3:16 pm

While I’m no Clinton fan, the publicly held debt did in fact decline in each year of his second term. The growth in the gross national debt reflects the fact that the Social Security trust fund was being raided to fund other priorities. Nothing unusual there – both of the “Big Two” did it.

Drigan May 4, 2011 at 4:39 pm

Correct me if I’m wrong, but isn’t that exactly what he just said?

J. Murray May 4, 2011 at 4:47 pm

Basically, yes. Private individuals don’t have the luxury of classifying debt under different categories so they can just ignore it. If anything, spending away the Social Security surplus and buying Treasuries with that is far worse than purchasing a Treasury on the open market. With the open market Treasury purchase, we know how much we have to pay back. With a Treasury purchase of Social Security funds, the amount to be paid back is significantly higher than the Treasury principle and interest schedule. For every $1 of debt transferred to Social Security away from the private market in reality increased the overall debt obligation by around $100.

BradO May 4, 2011 at 11:10 am

Austerity will fail because we have a debt-based monetary system. Money is not printed into existence, it is loaned into existence via fractional reserve banking. When the total debt reverses and goes down, the economy is bludgeoned due to falling money supply. Even now with the ridiculous government debt creation, they can’t keep up with personal bankrupcies and debt deleveraging. The problem is that in the debt-based money system, there is never enough money available to pay off the interest. Only the principal enters the economy. To pay off the interest plus principal implies that someone somewhere else will not have enough money to pay off their debt.

This debt-based monetary system with fractional reserve banking and a privately controlled central bank is the root cause. Changing to a non-debt based monetary system with 100% reserve banking is the correct solution, but the people holding our debt – i.e. the bankers – will act like gangsta’s to keep that from happening.

More at:
Money as Debt 2 Promises Unleashed: http://www.youtube.com/watch?v=_doYllBk5No
The Money Masters: http://www.youtube.com/watch?v=lXb-LrVkuwM

Jamal May 4, 2011 at 12:30 pm

http://factsandotherstubbornthings.blogspot.com/2011/05/warner-article.html

The American government may be on the hook for a grand total of 114 trillion dollars, but that’s why we can all count on Warner to make the hard choices no one else will. Can his plans to fruition ceteris paribus? We have all the time in the world to determine that of course.

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