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  -Cap'n Jacq'
    Jacques Tucker
    Kansas City, MO

http://www.kansascity.com/mld/kansascitystar/business/2440649.htm

Posted on Fri, Jan. 11, 2002   
from the Kansas City Star

Election year? Best reach for a shovel
By JERRY HEASTER
Columnist

Elections?

Best reach for a shovel While 2002 will be celebrated in some Asian countries as the Year of the Horse, the looming November elections promise to make it the year of horse manure in America.

A good example of such is the canard blaming the predicted fiscal transition from budget surplus to deficit on the $1.35 trillion tax cut pushed by the White House and enacted by Congress last year. It's the Big Lie technique favored by propaganda meisters throughout history. It will be repeated incessantly and thus become gospel in the minds of many Americans unfamiliar with the nuances of federal finances.

Just for the record, the tax relief has barely begun to kick in. The biggie so far has been the tax rebate, which consumed only about $40 billion of a fiscal 2001 surplus expected last spring to be $275 billion. The stated surplus when the fiscal year ended Sept. 30 was $127 billion, which wasn't as large as expected but a good deal more than $40 billion.That $127 billion, incidentally, brought the cumulative 1998-2001 budget surpluses to more than a half a trillion dollars. The fact is, however, that there never were any surpluses. There were, to be sure, Treasury statements showing more income than outgo. After four years of stated budget surpluses, however, the national debt was still $400 billion higher than when the era of surpluses began.

You don't have to be a math whiz to understand there couldn't have been surpluses in the real-world accounting sense of the word if Uncle Sam's overall debt was growing. The fact that the debt was rising means there was more going out than coming in. The problem is that all but a relatively small portion of the budget surpluses resulted from excess Social Security revenues.

While much of this excess revenue was used to pay down the marketable, publicly held portion of the debt, what wasn't used for this purpose went to finance regular budget outlays, which had begun to rise significantly. In return, the Social Security trust fund got IOUs, which increased the nonmarketable debt government owes itself faster than public debt was being paid down.

Does the federal government's going back into a deficit mode make any difference to the fortunes of average Americans? Not really.

Political demagogues and economic charlatans try to make the case for deficits resulting in higher interest rates and slower economic growth -- even recession -- but quite often just the opposite has been true. There have been times when rates were low and the economic growth relatively robust when deficits were at historically high levels. And there have been times when rates rose and growth slumped during times of surplus or relatively low deficits.

The current recession, in fact, began in March, which was long before the tax cut was legislated, rebates were mailed, or anyone suspected a return to budget deficits was near.

In truth, Washington's movers and shakers are hard-wired to spend as much money as they can get their hands on. This is true regardless of party affiliation. They were living beyond the taxpayers' means while claiming surpluses, and they'll do the same thing while lamenting deficits.

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