Coming To A Theater Near You: The $4 Trillion Rip-Off

On Wednesday, I testified before the Congress about the biggest Rip-Off of the century. And I can’t say that anyone really cared.

I was arguing that the deceptive accounting techniques used by the federal government–techniques that would send anyone to jail in the private sector– is hiding the fact that $4 trillion (more than the federal government spends in a year) is unaccounted for. Well, it’s accounted for but as if the money still exists, when in fact, it has been gone for a while. And guess who will be stuck with the tab?

Okay, now bear with me because it’s a little geeky. However, I promise that this is a story worth reading about (if you like sickening stories that is).

Remember Al Gore’s lock box or FDR’s bank-account-with-your-name-on-it? Yes, the lock box in which your payroll taxes were supposed to go to produce interests until you can get it back in the form Social Security and Medicare payments when you are old and sick. Well, as it turns out, the federal government had the key of that lock box and helped itself with the $4 trillion accumulated to pay for its daily consumption of wars, Prescription Drug Bill, Freddie and Fannie and ACORN and else.

Not to worry, we are told, because in exchange for the cash, the Social Security and Medicare Trust funds received federal government IOUs. The day the two programs need the money, because they are paying out more money that they are receiving in tax revenue, they will get it back. Bankrupted Federal government’s honor.

Well, turns out, the time is now. Two of the three Medicare Trust Funds have been in the red since 2005 and 2008. And this year, the Social Security Trust Fund is in the red (6 years sooner than expected). See the cool chart below.

Now, the two programs want their money back. But oops, the money isn’t there anymore. The only way the big fat federal government can repay the Trust Funds is by borrowing the money to the public or increasing taxes (or cutting benefits). Either way, it’s not exactly what we were told right? If it borrows the money, it adds to our gigantic publicly held debt and exposes us to potential interest rate increases (sooner than we expected it to happen). If it taxes us, it means that the same people who have contributed payroll taxes their entire lives to fill the Trust Funds will have to pay taxes all over again, so that the federal government can pay its debt back.

That’s a ponzi scheme if I have ever seen one. Ad yet, no one will go to jail with Madoff for this one.

Hope you had a good Tax Day!