- The Washington Times - Saturday, October 22, 2005

Congress, in its self-approving cocoon in Washington, should never forget the attitude outside the Beltway toward the federal deficit, among both the informed general public and the world financial community is: “Whom do you think you are kidding?” Congress may treat the deficits as a big irrelevancy or joke, but the rest of the world doesn’t find them very funny. People aren’t stupid enough to think “deficit reduction” is really that.

Congress has outspent its own income in 45 of the last 50 years, thereby running up deficits by more than $5 trillion. But $4 trillion was run up in just the last 20 years, and President Bush’s budget submission last February projected $3 trillion more of deficits in just the next six years. Those are the actual numbers provided Congress, without disguising them as Congress always does by adding Social Security surpluses, which it removes spends and subtracts from losses reported to the public as “the” budget.

But, lest people actually get alarmed that Congress spent about $1.42 for every $1 of income tax revenue in both fiscal 2003 and 2004, setting all-time percentage and dollar deficit records, Mr. Bush has assured us “deficit reduction” would cut the deficit in half by 2009.

So apparently there was a decision to try to fool the public about what was being done. The budget deficit for 2004 was projected at $521 billion, by far the highest ever, exceeding even the previous record actual deficit of $378 billion in 2003 by 38 percent. In fact, the actual 2004 deficit came in at “only” $412 billion, thus still setting a new national record.

Now guess what the starting point was selected for measuring “deficit reduction?” You’re right: the never-realized $521 billion budget of 2004. In other words, the deficit will be reduced from a level that it (thankfully) never even reached.

And the goal was to cut that $521 billion in half, meaning the goal was to cut $261 billion out of it annually by 2009.

Those in Washington must mistakenly think it is a secret that $184 billion (or 70 percent) of the “cutting” was already done before the “deficit reduction” began. The first $109 billion was of course the difference between the $521 billion budget and the record $412 billion actual in 2004. That was $109 billion of “deficit” that never really even happened. The second $75 billion comes from how Congress covers up its actual deficits by adding in the Social Security surplus.

The Social Security surplus was $155 billion in 2004 and is projected to be $230 billion in 2009. So that increase of $75 billion a year that Congress expects to subtract from its intended purpose (of preparing for Baby Boomers’ retirement) and spend is the second big way the deficit will be “reduced.”

So the real plan is to “cut” the deficit by only the remaining $77 billion, which means about 4 percent of the expected $1 trillion 949 billion Congress anticipates spending in 2009 (still leaving Social Security out of these numbers).

So, Mr. Bush’s 2006 budget submission projects a 2009 (“on-budget”) deficit of $463 billion, or spending about $1.24 for every $1 of income tax revenue. In fact, 2004-2009 annual federal spending is forecast to rise $600 billion, or 45 percent.

And of course by 2009 the annual Social Security surplus, in effect embezzled from the retirement fund and spent by Congress to cover at least some of its own perpetual spending, will be up to $230 billion, meaning we are told “the” (net) deficit will be not the real $463 billion but “only” $233 billion.

If those in Washington wonder why inflation is building, why seniors are becoming alarmed about their retirement income, and why the dollar is headed further down the tubes in foreign currency markets, they should realize the rest of the world does know what is going on, even if Congress doesn’t.


A writer based in Katy, Texas.



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