During the Reagan administration, someone figured out a way to use Social Security money as general revenue, and Reagan’s successors just followed his example. The result was that the $2.7 trillion, which is alleged to be in the Social Security trust fund, was all spent for wars, tax cuts for the rich, and other government programs.
So, here’s the thing, we have not had a balanced federal budget since sometime back in the fifties. That means, every year since then, the Federal Debt has increased, it has never decreased since then. If you don’t believe me, look up the yearly growth of the National Debt and try to find any year after 1960 that it didn’t increase. You can’t claim to have a budget surplus when you just bumped up the overall national debt. Math just doesn’t work that way.
Wait, didn’t Bill Clinton run a surplus? Uh no, Virginia, Bill Clinton did not have a balanced budget, he only had the appearance of such helped by the scheme outlined in paragraph one. That scheme not only allowed the excess Social Security funds to be used in the general budget but, by some magic that escapes me, the “borrowed” SS fund money was not the same as all the other borrowed and printed money, so it was not figured into the yearly deficit.
The fact is that Bill Clinton’s, so-called, “surplus” was the result of two things.
1. The dotcom boom – there was so much money around when the tech industry boomed, that tax revenue was extremely healthy.
2. Borrowed Social Security funds that could be borrowed but not entered onto the deficit line.
So, between large tax revenue’s during the years of the dotcom boom due to the rise of wealth, and the yearly excess funds available from the SS fund to supplement tax revenue, no further borrowed money was needed.
Now while the budget books could be cooked to make it appear that Clinton had orchestrated a surplus, the debt owed to Social Security and the bottom line of National Debt both continued to increase.
The lie of a Clinton surplus that Democrats, including Hillary Clinton, have tried to foist on the American people is all smoke, mirrors, and lies.
With that resolved there is another myth that needs to be exploded. America’s debt to China is no big deal. The fact is that many, many countries loan money to the US, because America is good pay. They like the interest and the safe investment of loaning money to America.
So, as America approaches 30 trillion dollars of National Debt, a number that has, for the first time in history, exceeded the entire yearly Gross National Product of the whole country, who holds all that debt?
Shhhh… the dirty little secret is that you do. China and Japan, our largest foreign creditors, hold less than $1.5 trillion each of US debt. Look, the 3 trillion dollars of debt that we owe to China and Japan is nothing to scoff at but, it pales in comparison to the over 70% of the national debt held by Americans. If you’re counting, that’s 21 trillion dollars, owed to us by us, because our elected officials do not know how to live within a budget.
(At this point, so as not to alarm you any further, I will forgo diving into the topic of unfunded liabilities – that’s a debt that has been promised to be paid to someone in the future but is unfunded. That would be Social Security and Medicare that is estimated in the range of 100 to 250 trillion dollars.)
So, I’m back to investigating who in America holds that 21 trillion dollars debt? All Americans. The borrowed money, that has long been squandered, came from Pension Funds, Social Security, Banking institutions, and the Federal Reserve.
Now while the money loaned to run the government by Pensions, Social Security, and banking institutions, is real earned money, the money loaned to the government by the Federal Reserve is Monopoly money. In other words, it’s not backed by any real labor or earnings. As an example: the order is put in for a million dollars, the Fed fires up the printing presses, loads the money into suitcases (relax, it’s an analogy), and delivers it to the Congress… along with a promissory note to be signed by the Congress to repay the loan (someday) with interest. And there’s the hook, the Fed prints money, loans it, charges you and me interest, and when, if ever, it is repaid, the money is burned because it was never earned by anyone, it was printed.
Are you getting all this?
Here’s the problem, as I see it. In the past, the US has run up debt and then repaid it, like during the wars. And I’m sure once the Congress waved good-bye to a balanced budget in the rearview mirror, and the debt hit $1 billion, $10 billion, $100 billion, $1 trillion, that there was an assumption it would eventually be paid back. You know what is said about good intentions, right?
All this begs the real question of “will the National Debt ever be repaid and by whom”? If we can’t get by without borrowing nearly a third of our budgetary needs every year, how will we ever begin to repay the $30 trillion, and growing, that we owe? Do the math.
In fairytale land, the burden of repayment will be squarely placed on the shoulders of our grandchildren… if we ever turn this around and start collecting more than we spend. And it will take years to do that. Look, it took us about sixty years to get here at the $30 trillion mark, how long will it take to repay it while we’re also paying interest? And if the interest rate goes up… well again, do the math. That’s why people don’t generally take loans with a fluctuating interest rate that they intend to hold over a long period, it could just get way too expensive. That’s why a Variable Rate mortgage is usually only held for the short term and then either repaid or converted to a desirable fixed rate mortgage. The National Debt is equivalent to a variable rate loan. If money gets tight and interest rates rise… Oops. Again, that might not happen because the people involved will work to keep the interest rate in the toilet. Of course, if you’re looking for safe investment opportunities and are happy with the going rate (say you’re retired), you’re screwed when we play the “loan money to the government at near zero percent.” In other words, the interest rates on different kinds of loaned money all follow the Fed rate closely. Can’t pay you 5% interest and loan that money to the government for 1%.
Now what? I’ve seen conspiracy theories about all the debt being wiped out and some sort of Reset. I don’t do conspiracies and this one is much like the chemtrails conspiracy that propounds that harmful chemicals are being released into the atmosphere. Poisoning a food or water supply can be worked around. You establish a private food and water supply for yourself and poison mine. But we’re all breathing the same air so while someone is harming others through poisoned air, how does someone protect his/her own family? I’ve been blocked by chemtrail-ers for raising that question.
So, what’s the comparison? Well, if all the debt was owned by the rich capitalists and the promissory notes were all thrown in the trash, while I don’t necessarily recommend that type of behavior, I wouldn’t lose a whole lot of sleep worrying about the rich capitalist. While I am a capitalist, I’m what you might refer to as a poor capitalist.
The problem is, all that debt, if zeroed out screws the American people. Do you know anyone who was retired with a pension and the former employer went belly up and the pension plan collapsed? And that brings us to the reason student loans are guaranteed by the government.
As a married man with two young children, I considered going to school and sought a student loan when the student loan business was in the private sector. I met all the criteria to receive a loan except one… the bank informed me that it did not loan money to freshmen because the rate of default was too high. Too many dropping out and using the money for other things with the inability to repay the loan.
Then the government stepped in and began the guaranteed student loan program. In other words, while your 19-year-old could not qualify for a $20,000, $40,000, $75,000 loan, the government said, go ahead and loan the money and the US government will guarantee repayment. That also prompted the schools to go on a tuition raising rampage because if the student agreed to attend, at the exorbitant tuition many schools now charge, the government would guarantee the loan. Thus began the student loan bubble, followed by the fantasy of Student Loan forgiveness which is nothing more than another leftist lie. The debt cannot be forgiven, it can only be shifted onto the shoulders of someone else… the taxpayer. The bank loaned the money based on the government promise to repay and that’s what you and I will do if the leftist scheme of student debt forgiveness comes to fruition. Unless, of course, the whole scheme enters default, then the bank depositors will get screwed… again, you and me.
Look, if I thought default was a workable solution to our debt, it would, pretty much, make all this wrangling about the recent COVID relief bill moot. I mean, go ahead and give everybody money and up the relief checks from $600 to $2000. Yes, the nearly $700 Billion, given away to foreign countries, is the lion’s share of the nearly $1 Trillion package, but the increase in relief checks from $600 to $2,000 adds $200 to $300 Billion to the bill. So, while fiscal conservatives balk at the additional $300 Billion dollars on money we don’t have, the big-spending Republicans, and Democrats, didn’t have a problem foisting the original trillion-dollar pork-laden bill onto the American people. It’s a giant shell game and the longer we can be kept in the dark the better.
In the end, my objective is to draw attention to the fiscal problems that very soon are going to become up close and personal and affect how we live our lives.
Change My Mind! 