Paying down the debt: This year’s money laudering

Published 16 years ago -  - 16y ago 24


Almost six months into the federal government’s fiscal year, it’s far enough to predict how much money the government will save with their money laundering scam of stealing Social Security and other entitlement money to pay down one side of the debt. The side where annual interest must be paid in real cash, not simply the bogus bonds they stuff in entitlement trust funds. Saving interest at the rate of six cents on every dollar we give them.

The Congressional Budget Office expects a surplus of $281 billion this year. Money to throw into the pot and bringing us nothing but more debt in return. Enough of a factor to predict this year’s savings via the money laundering scams. The moving of debt from one credit card to another. From cash interest to bond interest. Saving them six real cents, while leaving us with another dollar of debt, plus more paper interest.

Last year, the government took $237 (236.9) billion from Social Security profits, Medicare, gas taxes, Airport & Airways profits and other entitlements, throwing $230.8 billion of it against the side of the National Debt that they label “Public Debt.” The honest borrowing and legally contracted side of the debt sometimes known as “Debt Held by the Public.” All so that you don’t confuse it with the other “Intragovernmental” or “Federal” side of the debt. The side with nothing but nonmarketable nonsense bonds to account for all of the money stolen.

Actually, putting this much of their ill-gotten surplus against the debt is pretty good for them. Who knows where the other $6 billion went last year, probably against Medicare “Part B” that isn’t doing so well. We’ll assume that honest George will cast the entire $281 billion against the debt this year, while he argues for tax breaks in personal income tax part of our contribution to crime and corruption.

The story

The money laundering operation, Clinton’s real legacy, started back in 1998 with the first surplus. It may have even happened by accident because if the government leaves any cash in the General Fund at the close of the fiscal year, money that cannot be attributed to the next year’s revenue, that leftover cash will go directly and immediately against outstanding liabilities—the national debt.

In the preceding year, fiscal 1997, the government had a deficit of $21.9 billion. Not as much of a deficit as had been run in previous years, but a deficit nonetheless. The total interest paid against the national debt at the time was $355.79 billion, according to the U.S. Treasury Bureau of Public Debt.

Total interest paid over the last few years becomes very interesting. Let’s look at that first.
INTEREST ON THE NATIONAL DEBT

FISCAL YEAR
SURPLUS
INTEREST
SURPLUS -$21.9
INTEREST $355.79
1998
SURPLUS $69.2
INTEREST $363.82
1999
SURPLUS $124.4
INTEREST $353.51
2000
SURPLUS $236.9
INTEREST $361.99
2001
SURPLUS $281.0
INTEREST $371.86

(Surplus for 2001 is CBO estimate. Interest for 2001 is my estimate)

Hey, wait a minute. The debt is supposed to be going down. Alan Greenspan told us that the interest on the national debt was killing us. Why is the interest going up if the debt is going down?

First, the surplus is being applied to only one side of the National Debt. The Investor (Public Debt) side where annual interest is paid in real money. That side is actually being paid down.

Secondly, every time the government takes entitlement money to do this, it must deposit nonmarketable nonsense bonds in the respective entitlement trust fund or the “Intragovernmental” side of the National Debt. What, more properly, should be called the “Trust Fund” portion of the debt. That side is going up.

And the Trust Fund side of the debt is going up faster than the Investor side is going down. That’s why we had an $18 billion rise in the overall National Debt last year, although the overall debt may actually go down a little bit if Bush’s income tax cut is not retroactive or doesn’t get off the ground. Trust funds, particularly the Social Security Trust Fund were already at a high level before the money laundering operation started in 1998.

By itself, the Social Security Trust Fund held $1.016 trillion at the close of fiscal 2000. Even if the government did not steal close to $100 billion from Social Security profits this year, 2001, the trust fund would still go up. Interest alone would raise it somewhere between $60 to $70 billion depending on the rate paid this year.

The Trust Fund side of the debt is paid annual interest too, just like the honest Investor “Public Debt” side. But it’s paid in funny money. More nonmarketable nonsense bonds are simply handed the trust.

Remember, the results of fiscal 1997 through fiscal 2000 are facts, carved in stone in the Treasury files. The more than one billion per day estimate for fiscal 2001 is my estimate and could vary slightly. As someone once said: “A billion here. A billion there. Pretty soon you’re talking real money.” In this case, a good part of the annual interest is not real money. It’s funny money paid to trust funds with very real promissory notes that you or your children will someday redeem through income taxes.

The money laundering advantage to the Beltway Bandits is obvious. Let’s look at it more closely.

Interest advantage, six cents for a dollar

Remember, interest is paid annually. It’s paid Investors every twelve months from the date they each formally contracted with the government. Twelve months after they bought their bills, bonds, notes or other securities. As a result, anything saved by paying off Investors and not immediately reissuing new securities to replace these does not show up as a savings for twelve months. Thus, in fiscal reporting, it is in the following year’s totals.

SAVINGS ON INVESTOR DEBT INTEREST

 

Year

1998
Open balance (trillions) $3.789
Pay down (billions) $55.80
End balance (trillions) $3.733
Annual interest rate 06.556%
Yearly savings (billions) -0-
Accumulated interest savings -0-

1999
Open balance (trillions) $3.773
Pay down (billions) $97.76
End balance (trillions) $3.636
Annual interest rate 06.341%
Yearly savings (billions) $3.54
Accumulated interest savings $14.16 (4 yrs)

2000
Open balance (trillions) $3.636
Pay down (billions) $230.80
End balance (trillions) $3.405
Annual interest rate 06.489%
Yearly savings (billions) $6.15
Accumulated interest savings $18.49 (3 yrs)

2001
Open balance (trillions) $3.405
Pay down (billions) $281.00
End balance (trillions) $3.124
Annual interest rate 06.462%
Yearly savings (billions) $14.91
Accumulated interest savings $29.82 (2 yrs)

2002
Open balance (trillions) $3.124
Pay down (billions) ?
End balance (trillions) ?
Annual interest rate 06.462%
Yearly savings (billions) $18.16
Accumulated interest savings $18.16 (1 yr.)

Totals
Pay down (billions) $665.36
Accumulated interest savings $80.63

Note: This amounts to more than the six cents for every dollar from entitlements because income tax surplus is included.

There you have it. The government saves $80.6 billion by paying $665.4 billion of your extra income and entitlement taxes against one side of the debt. It’s the same as taking thousands of dollars and throwing it against your home mortgage so you don’t have to make such high monthly payments. A good idea if you’ve got tons of money to spare or you just won the lotto. With the surpluses we’re donating, the federal government thinks that it has won the lotto.It would be good business if the other side, the Trust Fund entitlement side of the National Debt, wasn’t going up dollar-for-dollar from everything they steal.Most of the $665.4 billion comes from Social Security and other entitlement payments you made. Money that is not supposed to be used for other purposes. Money that is working for them, but definitely not for us, unless you believe that putting the $80.6 billion gained this way into discretionary spending is good business or proper use of your retirement money.See: Money LaunderingSix Cents for a Dollar

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