- The Washington Times - Saturday, June 10, 2006

Think of Uncle Sam as a real person with two hands and with two pockets in his pants. You send him a lot of money, but here is a simple “handy” way to understand that he lies to you about what he is doing with it.

You have heard him tell his Big Lies, as he does each spring when the Social Security Administration puts out its “trustees’ ” report on his “trust funds” for Social Security and Medicare. The rest of each year, he of course sticks to his Big Lies.

When you give him money called “payroll taxes,” he takes those with his left hand and puts them in his left pocket. He calls most of this “off-budget” and keeps a separate record of it. This left pocket is the one with the money for the nation’s seniors: Social Security and Medicare.

When you give him money called “income taxes,” he takes those with his right hand and puts them in his right pocket. He calls most of this “on-budget,” but we can simplify it by calling it “Congress.”

Your uncle actually has only one big bank account, called the U.S. Treasury, where the money really is or isn’t. But he wants to tell you about only the left and not the right pocket.

When you ask him, “Uncle Sam, what’s going on with all that money I’m giving you for my Social Security and Medicare when I’m old?,” he tells you about only that left pocket. He says he has “trustees” watching that money for you in “trust funds,” that this pocket already has about $1.7 trillion in it to cover your future pension checks, is building up to be more than $6 trillion in a few years, and won’t be empty until about 2040. “Empty?” Yes, every year he tells you that, in “Your Social Security Statement” that he sends you.

But that is the first Big Lie. As bad as it sounds, the situation is actually even worse.

Your uncle of course doesn’t send you annually “Your Medicare Statement” admitting he has told you another Big Lie about what he won’t be able to pay for your medical expenses when you retire.

So why is all of this lying?

First, this year’s trustees’ report admits that your uncle has promised you retirement and medical benefits about $84 trillion(!) in excess of what he will be able to pay you, unless he can come up with far, far more (payroll and/or income tax) money than he now expects to have coming in. The second reason your uncle is lying is that he has in truth “loaned” all the money he hasn’t already spent out of his left pocket to his right pocket (Congress), (i.e., to himself).

In fact, all his left pocket has in it is a bunch of IOUs from the right pocket. He calls these IOUs “the trust funds,” but they are really just running totals of how much the left pocket has given the right pocket, keeping the left pocket empty.

Uncle Sam’s problem is his right pocket (Congress), which has no money remaining in it either. It is chock full of records of the IOUs he has given the left pocket and the additional IOUs he has to keep giving everyone else.

This right pocket (Congress) has spent more than you have been giving it for 45 of the last 50 years. In that time, there were more than $5 trillion of deficits, of which $4 trillion were in the last 20 years. And in the back pages of some of your Uncle’s financial statements, his president says Uncle’s right pocket will spend $3 trillion in the next six years, in excess of what you are scheduled to give him in income tax.

To say it another way, for every $1 you gave him for his right pocket in 2003, he spent $1.43, and in 2004 it was $1.42. Over the six years of “deficit reduction,” he hopes to get on the wagon and bring that down to an average of “only” $1.29. But he has taken the pledge many times before.

Meanwhile, about a fourth of what your Uncle now spends out of his right pocket, he has no money to pay for. So he borrows it first from his left pocket and then he borrows from others, mainly the Chinese. What he tries to ignore is that some day this borrowing has to be paid back, and that task will go to your financially unaware children.

When you get your Uncle to be honest and turn both his pockets inside out, you may finally understand “there are no trust funds” for either Social Security or Medicare. They are both long gone.

BERT MCLACHLAN

Author, “Saving Social Security (from Congress)”

Katy, Texas


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