2003-09-09 -- Bad As Deficits Are, They Are Grossly Underestimated


As Bush demands $87 billion more for Mid-East war/occupation, tax cuts
for business and the rich, and prepares to re-structure Medicare,
Medicaid, and Social Security, a look at the Federal deficit is in
order.



The deeper deficit

Boston Globe 8/30/2003

NEW FIGURES for the record budget deficit being piled high in
Washington are grim, as are revised estimates for deficits extending
to 2011. But dark as they are, most reports understate the threat
because they accept the use of Social Security-designated funds for
current expenses. The nonpartisan Congressional Budget Office this
week estimated that this year's deficit will reach $401 billion --
beating the 1992 record by some $110 billion. For the decade from 2002
to 2011, the total deficit will be $2.3 trillion, according to the
CBO.

But these figures include all federal revenues and expenditures,
including payroll taxes ostensibly designated for the Social Security
system.

Looking only at the operating budget -- essentially income taxes and
other revenues minus expenditures -- the CBO pegs the deficits
considerably higher: for this year at $562 billion and for the 10-year
period at $4.5 trillion.

Budget makers in Washington downplay this view. They say it makes
sense to deal with the "unified surplus" -- actually the unified
deficit these days -- because the cash from the Social Security
payroll tax (FICA) is not locked away to pay future benefits; it is
used to pay current expenses and has been for years.

The Social Security trust fund contains only promises from the federal
government that it will pay future benefits -- out of future revenues.
As for cash in the trust fund, "there's nothing really there," the
CBO's director, Douglas Holtz-Eakin, said in an interview.

This is accepted in Washington but wouldn't be in anyone's household.
It is the same as a family using its IRA and 401(k) savings to pay for
groceries and gasoline and then expecting that the money will still be
available at retirement. Families can't spend the same dollar twice,
and neither can the government.

The surplus of Social Security tax revenues over benefit payments is
expected to grow for several more years, but Holtz-Eakin says the
number of retirees will begin to spurt in 2007. Soon after, Congress
will have to find a way to pay for programs now being funded with FICA
revenues. And after that, Congress will have to find yet more money to
fund Social Security's benefits when they outstrip its revenues.

According to the Center on Budget and Policy Priorities, a nonpartisan
think tank in Washington, the baby boom "age wave" will create
pressures that "will grow from 2008 on and will ultimately force large
tax increases, major benefit cuts" in Medicare, Medicaid and Social
Security, "deep cuts in other federal programs, or some combination."

Washington may never create a real trust fund for Social Security. But
it should not use FICA revenues in a way that understates both current
operating deficits and future jeopardy for retirees.



Challenge, 7-23-2003

The US ruling class is using the Social Security (SS) system to pay
the military's $400 billion budget and cut taxes for the rich while
raising them for the working class.  In this $3.2 TRILLION scam, the
rulers are stealing trillions from the SS surplus to mask the real
budget deficit, and scaring people into thinking that unless SS funds
are privately invested, their pensions will go down the drain.

The bosses' laws mandate that payments into the SS Trust Fund be used
only to pay for current and future retirees' pensions.  A surplus has
developed by more being paid into SS by current workers than is paid
out to current retirees.

But since 1968, the government has been "folding" the surplus into the
overall Federal Budget, called the Unified Budget.  The Johnson
Administration did this to mask the true cost of the Vietnam War.  By
including the surplus in the general federal budget, it "dramatically
reduced the percentage of the budget devoted to 'defense' in 1968 and
throughout the military build-up of the 1980s." (NY Times, 1-21-90)

In 1998, Senator Ernest Hollings (D-SC) estimated that by 2012 there
should be "a $3.2 trillion reserve" when the baby boomer generation
starts retiring. (NY Times, 11-9-98)  But there won't be any reserve.
There will be a huge deficit because the government stole trillions
from the surplus to help finance every war from Vietnam to Iraq.

The threat to SS could be eliminated if the biggest loophole of all
was plugged.  The law says that workers must have 7.65% deducted from
their paychecks in SS taxes.  Employers must pay another 7.65% for
each employee into the SS Trust Fund.

But this tax is paid only on the first $87,000 of wages annually.  So
a couple earning $50,000 a year pays $3,825 into the Fund, while a CEO
making $10 million a year pays $6,655, a tax RATE of less than
0.0004%!  If the CEO had to pay 7.65% on his full $10 million salary,
he would pay $765,000 a year and his corporate employer would have to
pay another $765,000!  With that loophole gone, there would be no
"deficit".

The current Bush tax cut for the wealthy and the billions of debt
building from the Iraq war are producing an astronomical deficit.  But
this process began in the 1980s under Reagan and Bush I and continued
under Clinton.  They also used the SS system to mask their swindles.

If a $200 billion SS surplus were not diverted into the overall
Federal budget revenue, the Federal deficit would be that much higher,
and would force the government to borrow even more money to "balance"
the budget.  So the working class is paying more in taxes and the rich
pay less, while we are giving our sons and daughters to be killed in
oil wars for profit and world domination.

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How the 1980s "tax cut" was a tax increase for workers:

In the 1980s, the net income of millionaires greatly increased when
the top tax rate for individuals was reduced from 70% to 28%.  "The
corporate tax rate also dropped substantially ... (while) the share of
Federal revenues from Social Security taxes rose 23% ... .  (In) the
Reagan-Bush years ... the burden of taxation was shifted from the
income tax to the Social Security tax.  Counting their employers'
share, nearly three quarters of all Americans now pay more in Social
Security taxes than they do in income taxes... .  (Now) the expenses
of the government are financed more by a tax on the poor and middle
class and less by a tax on the wealthy." (NY Times, 1-21-90)