Sham Accounting

In the past presidential campaign, Mr. Obama and other Democrats pointed to the 90s as an example of their party’s fiscal responsibility. Voters were told that, with President Clinton at the helm, the American economy surged and there was a budget surplus in the last years of Clinton’s presidency.

What surplus? For the fiscal year ending Sept. 30, 1999, the U.S. government reported a $124.4 billion dollar surplus on a cash basis ($72.9 billion on an accrual basis). The Social Security surplus was 124.7 billion. The Medicare Part A surplus was 21.5 billion. The Government, despite all of Vice-President Gore’s rhetoric about a leaner government, still spent $21.8 billion more than it received in 1999.

The Federal government borrows money from the Social Security fund, calls it “income” and reports a budget surplus. Only in America. As long as there has been a surplus in the Social Security fund, both political parties promote this sham accounting and fight against all attempts to adopt a more rational accounting system that reflects the actual realities and liabilities of the Federal government.

When will our elected representatives come to their senses? In the latter part of the next decade, the many years of Social Security surpluses will finally come to an end as the baby boomer generation retires in greater numbers. The Federal government will no longer be able to borrow from the fund and will, in fact, have to start paying the fund back. Those paybacks will hurt the sham budget numbers that both parties dangle in front of voters eyes. Then we will see a growing political movement to have a more realistic system of accounting. These are the same politicians who are currently running a large insurance company, AIG, and will soon be running a car company, General Motors.

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