Funny official accounting tries to paint a rosy picture
We owe more than the government says -- trillions more
Given wasteful spending, no wonder our debts are far huger than admitted as three abridged 2007 articles show: “Even Cut 50 Percent, Earmarks Clog Military Bill” by Thompson and Nixon in the New York Timesy (Nov 3); “Sleight-of-Hand Math for the Budget Deficit” by Allan Sloan, a Fortune magazine senior editor, in the Washington Post (Sep 4); and “The mystery of the missing $2.9 trillion” by David Francis, columnist in the Christian Science Monitor (Oct 29).
by Jeffery J. SmithNYT: House lawmakers tacked on to the military appropriations bill $1.8 billion. It’s for projects the Pentagon did not request. It’s to pay 580 private companies in the districts of members of the House committee for military spending, ranging from major military contractors to little known start-ups, many of whom contribute to Congressional campaigns.
Congressional earmarks are for programs that are not competitively bid. The earmarking this year actually represents progress. Returned to power, Democrats cut in half from last year the value of earmarks in the bill.
The $459.6 billion war bill is the largest appropriations bill to go through Congress. The House version of the military bill includes 1,337 earmarks totaling $3 billion, the most Congressional earmarks in any of the spending bills passed this year. The Senate added $5 billion in earmarks.
For the first time, representatives had to sponsor their pet projects in the open. Requests include $92 million by Rep. Jerry Lewis, Republican of California, who is under federal investigation for his ties to a lobbying firm whose clients benefited from his earmarks.
Rep. John P. Murtha, chair of the defense appropriations subcommittee, asked for $166 million. Firms receiving Murtha’s earmarks have given at least $437,000 to his campaign since 2005, with about $110,000 streaming in just before this year’s March 16 request deadline.
JJS: Such profligate spending for war worsens a problem government tries to hide.
Post: The Treasury announces that the federal budget deficit for fiscal 2007 (ending Sep 30) to be $158 billion, down $90 billion from the 2006 deficit. But if you use realistic numbers, the real federal deficit is more than 2 1/2 times the stated deficit.
Start with Social Security, which will take in about $78 billion more in payroll and income taxes than it shells out. The Treasury takes that cash for the annual budget, gives the trust fund IOUs, and pays the fund interest, but will give the trust fund more IOUs, not cash. That’s $186 billion in IOUs. Add that to the deficit and it more than doubles, to $344 billion.
The Treasury owes $97 billion more to "other government accounts" such as federal employee pension funds.
At their current growth rate, Medicare and Medicaid will devour 20% of our gross domestic product in 2050 -- more than today's entire federal budget.
JJS: Debt makes an economy top-heavy, ready to topple. As worried foreigners unload dollars, its value falls. So they charge us more for imports.
Monitor: We Americans owe more others than the Department of Commerce says. Count American-owned private assets in foreign nations (plants, equipment, retail outfits, property, corporate stocks and bonds, etc.), US official international reserves (gold, special drawing rights, foreign currencies), and other US assets abroad. Then count what foreigners own of American assets.
At the end of 2006, Americans owed foreigners $2.6 trillion more than foreigners owed Americans. In other words, the country is by far the world's biggest debtor nation. A quarter century ago, the US was the world's largest creditor nation.
But if you look at the balance of trade, flows of interest and dividends, foreign aid, and other international transfers, the US should be far deeper in hock -- $2.9 trillion more over the years from 1990 through 2006 than the official $2.6 trillion, totaling $5.5 trillion. If it came due in one year, it’d swallow much of our economy. America's GDP is currently $13.7 trillion.
One reason for our trade “imbalance” is that the dollar is down 20.6% since 2002. So foreigners raise their prices, as they have to oil.
Against the tide is the return on investments; more comes in than goes out. One reason is US corporations report "extra" income in low tax jurisdictions of their foreign affiliates. For example, Microsoft pays a 10% tax profits in Ireland from foreign sales rather than the 38% corporate rate in the US. Another reason is many foreigners, especially central banks, play it safe and invest in US Treasuries, which pay tiny dividends.
JJS: One way to settle the mess is to quit letting politicians spend our money, and spend it ourselves via a dividend to citizens; raise the revenue from natural assets, where the flow of wealth gets concentrated in the first place, clinging to ownership of prime land and lucrative natural resources.
Jeffery J. Smith runs the Forum on Geonomics.
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