Fraud from Uncle Sam

Published 15 years ago -  - 15y ago 38


Does it make sense that we increase the national debt, our own indebtedness, by giving money to the federal government? Does it seem reasonable or rational that we are buying debt just as though we walked into the U.S. Treasury, plunked down a bundle of cash, and said: Here, give me some debt?

Of course it doesn’t make sense. It’s crazy, insane, something a normal person would not expect or want to accept. But that is exactly what happens.

Last year, fiscal 2003, Americans fortunate enough to have a job sent eighty-two billion dollars of their sweat equity to the federal government believing they were contributing to the Social Security supplemental retirement insurance program. And what did we get for it?

We got a dollar-for-dollar increase to the national debt of $82 billion. That’s what we got. In a form of reverse alchemy, we gave the government gold and they changed it into lead, a bigger ball and chain for all of us, including our children and grandchildren, to drag around and eventually pay off.

Since 1983, the Social Security Administration (SSA) located in Baltimore, Maryland, has been collecting more money than needed to pay benefits to the currently retired and disabled. At that time, Senators Daniel Patrick Moynihan and Bob Dole sponsored a bill increasing payroll taxes far beyond what was necessary to pay benefits far into the future and perhaps forever—an increase that passed in less than 30 days. An increase that has produced greater and greater surpluses for, as Senator Moynihan put it, “the government to enjoy.”

Pretending to “borrow” the surplus, when it is outright theft, the government takes this extra dedicated money and spends it wherever it pleases.

The Tools of Fraud

Enabling the government to run this scam are 143 dummy accounts that have been set up and labeled “trust funds.” Accounts that never hold any viable assets, not even for a second, and have little if any resemblance to real trusts in the private sector. Instead, they resemble the things done by Enron, WorldCom, Arthur Andersen, and other industries under investigation and prosecution by the Securities & Exchange Commission for hiding debt, falsifying their economic condition, cheating stockholders, and causing a false bubble in the stock market in order to attract investors. The government plays the same game big time.

Instead of creating a false bubble in the stock market, the government creates a false bubble in the national debt.

Approximately forty-two percent of the national debt is absolutely fraudulent because it’s made up entirely of these dummy trust fund accounts. They come in a wide variety of flavors, but the bulk of the fraud is represented by 24 entitlement accounts. The two Social Security trust funds (Federal Old Age & Survivors Insurance and Federal Disability Insurance) combine as the largest of these entitlements, currently standing at almost one and one-half trillion and twenty-one percent of the overall national debt. (See: Trust Fund list)

The point is that any of these accounts could become a slush fund equivalent to Social Security if the government could fabricate the sort of rationale that was prevalent when, in 1983, payroll taxes were dramatically increased. It could happen with gas taxes collected for highways and highway maintenance. It could happen with airfare taxes collected to pay air traffic controllers and repair airports. It could even happen with Military Retirement Insurance.

In other words, whether Social Security is good or bad, a necessary or an unnecessary program, socialism or free enterprise insurance, is not the point. Fraud and the
outright theft of surplus tax is the problem and it could be applied to any of the entitlements.
It’s fraud and the misappropriation of funds that we’ve got to stop.

Tool Number Two—falsely dividing the debt

With an accounting trick the government divides the national debt in two. One portion, the honest side (currently standing at about $4 trillion), is labeled “Public Debt” and pertains to the constitutionally authorized borrowing of money from investors under contract. The Beltway Bandits would like taxpayers to believe that this is the only portion of the debt for which the public is responsible—which simply is not true. Only taxpayer money can redeem any portion of the nation’s debt.

The other side, the dishonest fraudulent side where the entitlement trusts are found (currently standing at almost $3 trillion), is deliberately mislabeled “Intragovernmental Holdings” so the public will believe that the “government owes itself” or one governmental department owes another and that somehow this portion can be redeemed without taxpayer money. This portion of the debt was once called “Federal Debt” until Alan Greenspan gave it the more ambiguous title.

On one side, both foreign and domestic investors walk-in with their eyes wide open and contract with the government to loan money for a set annual percentage rate and a payoff at term. On the other side, there is no contract and most taxpayers submitting the money don’t even know that it’s happening. Pretending that it’s possible to both spend and save the same money, the government deposits debt marker IOUs in trusts and in the form of “special obligation” nonmarketable Treasury bonds that cannot be traded, have no intrinsic value, and are used only to double tax the public, with annual interest added.

We have statements, right from the horse’s mouth, that these fraudulent bonds cannot be redeemed without the poor dears in Washington being faced with the tough decision to either (1) raise income taxes (2) borrow enormous sums legitimately from investors (3) slash programs in the annual budget, or any combination thereof.

It should be noted that these options are the normal fund raising options and money management options of the federal government at any time—whether there are trust funds or not. They are exactly the same options the government would face if there were ever a shortfall in entitlement obligations, promises, or any need for money, and there were no trust funds.

Recognizing this has caused many good hearts to feel that the so-called trust funds, the debit markers held by entitlements like Social Security, are useless. Some even leap to the conclusion that the trusts don’t really exist.

While it’s true that these fraudulent “trusts” are a useless burden around the necks of taxpayers, they certainly are not useless to the Beltway Bandits. With these accounts posing as trust funds, the government can set up perks for themselves, gift accounts and so forth, by simply throwing some nonmarketable bonds in the account and they can carry these accounts from year-to-year without separate budget legislation, drawing real money from the Treasury’s general account whenever required.

Most importantly, the Beltway Bandits can and do use these fraudulent accounts to double tax all American taxpayers.

Tool Three—double billing taxpayers

Right now, today, as you read this, American taxpayers are being double taxed plus interest. It’s happening because of the sour economy, 9/11, and the war against terrorism. In fiscal 2003, we were double billed $79 billion from entitlement accounts.

For example, because unemployment tax receipts from employers were not sufficient to pay all unemployment benefits and extended benefits to people laid off, the Unemployment Trust Fund was drawn down $26 billion. This means that the general taxpaying public replaced, plus interest, surplus taxes that were paid previously by employers but, years ago, were stolen by the government and spent elsewhere.

Other entitlement accounts that were drawn down include:

Federal Supplementary Medical Insurance (Medicare)……$16.1 billion

Federal Employees Retirement and Disability…………………$3.6 billion

Airports & Airways……………………………………………………..$1.1 billion

Highways…………………………………………………………………$6.3 billion

Inland Waterways……………………………………………………$44.3 million

Railroad Retirement Account…………………………………….$24.2 billion

Railroad Retirement Social Security Equivalent………………$1.1 billion

Veterans Life Insurance…………………………………………….$915 million

All Others……………………………………………………………….$25.5 billion

Imagine what it will be like when we start repaying the Social Security taxes that we’ve already paid once before but now amount to almost $1.5 trillion in debt and interest.

The Beltway Bandits have a gazillion excuses and spin stories about why they are allowed to do this, but not one of these alibis stands up to reason or the light of day, particularly in regard to Social Security. And they’ve spent years pretending to reform the goose that lays the golden eggs without once approaching the real problem. All they ever had to do was to stop stealing the money, the surplus that would be back over one hundred billion a year if the economy were on its feet and so many people were not unemployed or under employed.

They spent years toying with the idea of “lock boxes” when real trust funds have always been lock boxes. They’ve claimed that putting money back in the hands of the people is the best stimulus to a sick economy while they’ve done nothing to reduce payroll tax overcharges. And they’ve cited laws, even Supreme Court cases, that they falsely claim allow them to take the American worker’s supplemental retirement and health care overpayments while, at the same time, they do exactly the same thing with other entitlements where there are no such rulings and they set up an elaborate pretense of “borrowing” money they conversely claim that they are able to take freely.

Social Security is the granddaddy of all fully binding implied contracts. After more than sixty years of promoting and talking about it as an “insurance” program it is exactly that. Even the words “Federal Old Age & Survivors Insurance Trust Fund” and “Federal Disability Insurance Trust Fund” prove that.

Social Security is not the “third rail” of politics. It’s just one of the third rails of crime and a highly potential trip to the slammer. All politicians in both parties know this and they will do anything to avoid exposure including starting wars as a weapon of mass distraction.

Jerry Heaster of the Kansas City Star once said: “Any government leader who discusses the Social Security trust fund as if it comprises real financial assets with marketable value isn’t worthy of being taken seriously.”

I will take that one step further and say that any presidential candidate who doesn’t address this problem directly and honestly should be ignored. We could eliminate almost $3 trillion from the national debt, without harm to anyone but the Beltway Bandits, by simply getting rid of this fraud.


Published originally at EtherZone.com : republication allowed with this notice and hyperlink intact.”

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