Billions add up to serious money
Dear Mr. Berko:
You made a ridiculous comment a year ago that the national deficit was $40 trillion. I thought that you were out of your mind and, respectfully, I still do. The papers tell us that the deficit is $7 trillion and all the data from Congress tell us the same.
Several weeks ago, you said it again in a presentation to an investment club and I couldn’t allow this number to go unchallenged. So I wrote my congressman and a member of this staff (I know he doesn’t write letters to peons like me) wrote back telling me that the national deficit is $6.8 trillion. I’m giving you this information straight from my Congressman’s office so you can be more accurate in your facts. That $40 trillion number is terribly misleading, the American public would never approve that much debt and you ought to be more careful when presenting your facts.
G.T., Gainesville, Fla.
First of all, every one of my facts is accurate. They always are. And I never said that the deficit was $40 trillion. It is certainly a lot less than $7 trillion.
Government statistics are so full of hot air that I expect the White House and Congress to float toward the sun any day. Fortunately for Congress, the average American will believe anything he is told, especially if he thinks it will put a dollar in his pocket. The difference between the deficit and the national debt is as simple as blowing bubbles.
Every year since 1969, Congress has exceeded its budget and spent more money than it has taken in from taxes. When Congress exceeds its budget for any year, it is called a deficit. That means that every year, Congress has to borrow money by selling Treasury bonds to cover the deficit.
Since 1969, the collective total of all the money borrowed to cover each year’s deficit spending is known as the national debt. Washington tells us that the total national debt is $7 trillion. That number is so large that few voters fully comprehend the magnitude. But the national debt is really much larger.
To understand, think of Government statistics as icebergs. They only show a little bit of ice so the voters can’t see the real problem, which lurks far beneath the surface. If you think my numbers are off, I suggest you read on and send the following numbers to your representative for verification. These numbers from Michael W. Hodges ought to make your blood run cold.
Federal government sector debt at the end of this year is expected to exceed $7 trillion. You know this. But did you know that state and local debt sectors represented by the issuance of municipal bonds may reach $2 trillion by year end? California will have a $40 billion deficit in 2003.
We must include unfunded Social Security contingent liabilities, which add up to $10 trillion. Social Security is not supposed to be part of the general fund, and supposedly has a separate trust fund with its own source of income. But years ago Congress ordered the Treasury to use the Social Security Trust money as though it were part of the general fund. Now Social Security is part of the national debt.
We also have unfunded Medicare contingent liabilities, which amount to an estimated $7 trillion. Then there’s unfunded federal employee pensions and unfunded state and local government pensions and medical benefits, which total another $2 trillion.
Don’t forget household sector debt (credit cards, small loans, auto, home mortgages, etc.) of $8.5 trillion. Finally, there’s the business sector debt (non-farm and non-financial) of $7.5 trillion and financial sector debt of $10 trillion.
Do the math and you get $54 trillion, which is greater than the entire gross national product of the globe and more than four times the U.S. gross domestic product for 2003. Yet that number doesn’t include money people owe bookies or in-laws or their salary advances.
Milton Friedman and Gary Becker, both from the University of Chicago, don’t disagree with this number. Neither does Larry Lindsey, who was the economic adviser to President George W. Bush. Any way you want to put it, that’s a lot of money to owe and even more to pay back, considering that the annual interest costs on this debt is in excess of $3 trillion.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at email@example.com.