George Rebane

[I recorded this commentary for its scheduled 5mar10 run on KVMR FM89.5.  The topic was a continuation of ‘The Sad Tale of Patricia Black’ post that exposed a surprising ignorance that a large number on the left profess about the status of Social Security funding.  I consider this to be a serious problem in the intellectual make-up of our electorate, at least equivalent to persistent beliefs that the Apollo 11 moon landing was staged in a restricted area hangar somewhere.  Such beliefs, when taken into the voting booth, also burden the rest of us.]

What comes after trillions, gazillions?  Today all government dollar figures describing debt, deficits, budgets, unfunded liabilities, … all have become denominated in trillions of dollars.  What happened to the billions that were huge only yesterday?   And no one even mentions millions anymore – have those become governmental chump change?

Hi, I’m George Rebane trying to make sense out of these numbers.  First, let’s get one thing settled from the gitgo, any Washington politicians, who tell you that they know how to pay off our nation’s financial obligations, are lying in their socks.  And you can tell them that I said so.

The US government’s unfunded liabilities are today somewhere north of $106 trillion, of which our national debt is but a small part.  This amount is owed in many ways to many different people, but don’t ever think that it does not have to be made good.  In one way or another it all must be paid, and paid out of our pockets.  But no one has provided for these payments, and that’s why no one wants to talk about it.

Those of us who do want to talk about it sometimes run into people who have no idea about the reality of America’s finances.  My last month’s Union column focused on retirement accounts and the funding of federal deficits.  This week the newspaper printed a letter from a reader who took me to task for spreading 'myths' about Social Security.  The reader still believes that Social Security is funded for the next thirty years from a ‘lock box’ that contains $2.7 trillion dollars of set aside cash.  And from the letter’s online comment stream, it is apparent that her ignorance is much more widespread than many of us think.

Some years back, Democratic congressman Peter DeFazio explained the so-called Social Security lockbox on the House floor.  It contains only government IOUs – no spendable cash, only Treasury bonds.  These IOUs must be paid for by future taxes or future borrowing or future printing.  To get the cash, the retirees have to get in line with all the other bond holders here and around the world.  And since the Congressional Budget Office projects that our federal government will run in the red to the tune of about $1 trillion a year, literally forever, there is no money set aside to pay for SS or, for that matter, anything else that the government is obligated for.  It will all have to come out of a future general fund one way or another.

Social Security and other big entitlement programs are unsustainable Ponzi schemes that make up most of the $106 trillion.  These worked for a while, but now the Ponzi schemes are being recognized for what they are, at least by most people.  In response, our politicians are busy cobbling together new programs that promise to be even greater disasters than the ones they are supposed fix.  As an example, see what the Congressional Budget Office says about the proposed healthcare reform.

My message here is that the uninformed voter continues to vote for politicians who promise unsustainable free-lunch programs.  Social Security and Medicare are funded only to the extent that current and future workers will stand still for being taxed for something from which they can reasonably expect no return.  There is no stash of cash anywhere, except maybe China, to pay for any of these entitlements.  It is important for us to know this and vote accordingly.

Finally, let’s not forget that these are my opinions, and not necessarily KVMR’s.  I also expand on these and other themes at georgerebane.com.