The Biggest Ponzi Scheme on the Planet-The U.S. Government
"American Economic Exceptionalism Explained"                     USAPonzi                                      by John W. White   Mar 29, 2013

Is the U.S. Government Overspending or Undertaxing?
July 9, 2015
As posted on www.usaponzi.com  


One of the most frequent comments I get from my readers is that my website seems to place too much emphasis on the need to increase taxes rather than calling for less Government spending.  
I am not taking sides with either political party as to whether we should fix our debt and deficit problem with more taxes or less spending since we need to do both.  What I am trying to do is to expose the fraud and corruption in the U.S. Government.


The U.S. Government is "Cookiing the Books".  The U.S. Government is using a corrupt and fraudulent accounting system.  The U.S. Government is running a massive Ponzi scheme.  The U.S. Government is creating
counterfeit money.  The U.S. Government is appearing to make the upper class rich with counterfeit money by undertaxing them relative to the U.S. Government's
outrageous spending and committing.  The U.S. Government is overpaying itself with counterfeit money.  The U.S. Government is lying to the general populace by promising to pay social benefits but not funding these promises.  The U.S. Government is passing a huge and unpayable financial burden to the next generation(s) of U.S. citizens.


The U.S. Government is filled with people that are willing to lie and cheat for their own "temporary" personal financial benefit.  It was LBJ that started this Ponzi scheme with the "Unified Budget" in FY1969 but Ponzi schemes are temporary even though USAPonzi has been operating for 46 years.   Ponzi schemes operate to the benefit of the perpetrators and operators until they implode.  Then the victims of the Ponzi scheme may suffer for years and years or even a lifetime.


Okay, now that I got that off of my chest, lets get back to the original question.


Is the U.S. Government overspending or is the U.S. Government undertaxing?


The simple answer to that question is both!   But the facts show that by far the dominate problem is overspending.  But there are also two types of spending.  There is the spending that we do today and there is the spending that we promise to do in the future.  It is the accounting for these commitments to future spending that is the major problem with our Fiscal Policy.   We are making massive commitments to pay future social benefits but we are not setting aside the funds to pay these future commitments.  Worse yet, we are not even paying all of our current bills.


When we do not have enough tax revenue to pay our current bills we incur Debt.  When we do not have enough tax revenue to set aside the funds to pay our future social benefit commitments we incur Unfunded Future Liabilities.  We, as a country, have for the last 46 years been getting further and further behind on both of these obligations.  This has appeared to have been very good for the current U.S. citizens and businesses because they have not had to pay the taxes to cover these deferred liabilities.


These Public Liabilities, both Debt and Unfunded Future Liabilities, tend to increase at a compounding rate since we must pay real interest on the Debt, because we have already borrowed that money, and we must also pay virtual interest on the virtual debt of our Unfunded Future Liabilities since these Unfunded Future Liabilities are measured at what is called "Present Value".   "Present Value" determines how much we need to have in the bank today so that with earned interest we can pay these future commitments when they come due at the designated future dates.


Because our current Fiscal Policy makes no provision for how we will pay off either our Debt or our Unfunded Future Liabilities both of these will increase without bound, i.e. to infinity.  This means that we will accumulate unbounded Public Liabilities and since the current U.S. citizens and businesses do not have to pay for this overspending and overcommitting they enjoy the benefit of accumulating unbounded Private Wealth.


That is why our current Fiscal Policy is a Ponzi scheme.  We are expecting the future U.S. taxpayer to eventually pay all of our Public Liabilities and these Public Liabilities are growing at a compounding rate while at the same time the upper class U.S. citizens and businesses are appearing to get rich at this same compounding rate since they do not have to pay these taxes.


The mission of this website is to expose the fraud of this Ponzi scheme (USAPonzi) that is created by the massive overspending, overcommitting, and undertaxing of the U.S. Government's current Fiscal Policy.  The U.S. Government attempts to conceal the massive deficit spending of the current Fiscal Policy by assessing and reporting our financial status with Cash Accounting vs. the appropriate GAAP Accounting.


The U.S Government's Fiscal Policy is a Ponzi scheme because this massive GAAP basis Deficit Spending defers most of the cost of operating the U.S. Government to the future U.S. taxpayer since our GAAP Deficit in FY2015 is $5.5 Trillion according to www.usdebtclock.org.  Yes, you read that correctly, our GAAP Deficit of $5.5 Trillion is much larger than the total U.S. Government tax revenues of $3.1 Trillion in FY2015!   We are spending and committing to spend 2.8 times our income ((($5.5T+$3.1T)/$3.1T)=2.77) this fiscal year.


This is why I say that overspending and overcommitting is by far a bigger problem than our undertaxing and that our overcommitting on social benefits is a much bigger problem than our overspending.  Our Cash Deficit of $0.5 Trillion is the measure of our overspending in FY2015 and our GAAP Deficit of $5.5 Trillion includes both this overspending and the overcommitting on social benefits.


But let's again get back to my readers' complaint that I place too much emphasis on the need to increase taxes rather than calling for less Government spending.  Yes I do think that the most prosperous U.S. citizens and businesses need to pay more taxes to help close our budget deficit.   But to close the huge budget gap that we have, it is imperative that the U.S. Government dramatically reduces our social benefit promises and significantly reduces our general operating expenditures.


We have four major problems with our current Fiscal Policy that are causing it to be a Ponzi scheme.  They are in order of most serious to least serious as follows:


1) Fraudulent Accounting, using Cash Accounting vs. proper GAAP Accounting

2) Overcommitting on social benefits

3) Overspending on general operating expenses

4) Undertaxing


When planning a budget, any entity (person, business, government, etc.) must start with projected income and then make decisions as to how that income will be allocated to various expense items in the budget.  I certainly do not have a crystal ball to tell me the ideal tax rate for our Federal taxes but I would propose a level of nominally 20-21% of GDP when our recent trends have been about 18% of GDP.   The U.S. Government then must use this budgeted revenue target to plan their allocation of these funds for the various Government departments and for social benefit promises but must use GAAP Accounting to make this determination.  We must use GAAP Accounting so that our budgeting process comprehends the impact of these future social benefit spending commitments.


This website (www.usaponzi.com) simply uses the spending and committing of the current Fiscal Policy to determine how much more tax revenue the U.S. Government would need to have collected since FY1969 to pay for the spending that the Government has already done and the social benefit commitments the U.S. Government has already made.  I am not in any way endorsing this level of spending and committing.  On the contrary, I am trying to make the point that the cost of our current Fiscal Policy is dramatically out of line with the U.S. taxpayer's capacity to pay.


According to www.usdebtclock.org, the current Fiscal Policy would have required the U.S. taxpayer to pay $97.0 Trillion more in taxes than we have paid over the last 46 years since we have incurred Debt of $18.3 Trillion and Unfunded Future Liabilities of $78.7 Trillion.  Paying that much more additional taxes is obviously unaffordable for the U.S. taxpayer so it follows that the U.S. Government must reduce spending a lot and reduce social benefit promises a whole heck of a lot.


But since the U.S. Government has already incurred these Public Liabilities of $97.0 Trillion and the U.S. citizens and businesses did not pay these taxes, the U.S. citizens and businesses now appear to be richer by $97.0 Trillion.  The GAAP basis Deficit Spending that produced these Public Liabilities has stimulated the U.S. and global economy which is what is causing this apparent private wealth increase to show up in the value of stocks, bonds, real estate, gold, oil, art, and other assets.  But this $97.0 Trillion is counterfeit money since the future U.S. taxpayer cannot pay these deferred Public Liabilities.


The Fiscal Policy of the U.S. Government is corrupt and fraudulent because the spending and committing of the current Fiscal Policy is not supported by a rational tax revenue stream of income from the current U.S. taxpayer.  Therefore this Fiscal Policy is a classic Ponzi scheme (USAPonzi) since the U.S. Government is deferring these massive Public Liabilities to the future U.S. taxpayer.


It is criminal that the U.S. upper class is living a super opulent lifestyle and appearing to get super rich because of this U.S. Government fraud that is not funding the future social benefit promises that the U.S. Government has made to the U.S. citizens and has passed a $97.0 Trillion financial liability to the future generation(s) of U.S. citizens.  The upper class does not pay the taxes to fund the Government's spending and committing so they appear to be $97.0 Trillion richer but with counterfeit money.


It is criminal that the U.S. ruling class is living an opulent lifestyle and some of them even getting rich because of this U.S. Government fraud that is paying the ruling class and the Government related businesses more than the taxpayer can afford and has passed a $97.0 Trillion financial liability to the future generation(s) of U.S. citizens.


It is criminal that the U.S. Government is telling the current U.S. middle and lower class citizens that if they will pay employment taxes to the U.S. Government the U.S. Government will pay them Social Security and pay their Medicare bills and is then immediately spending that tax revenue instead of funding the future social benefit trust fund and has passed a $97.0 Trillion financial liability to the future generation(s) of U.S. citizens.


It is criminal that the U.S. Government is paying the current social benefit recipients more in social benefits than the U.S. taxpayer can afford because of this U.S. Government fraud that is not funding the future social benefit promises that the U.S. Government has made and has passed a $97.0 Trillion financial liability to the future generation(s) of U.S. citizens.


My point is that we should increase tax revenues somewhat and use GAAP Accounting to assess what is an affordable level of general operating spending and social benefit committing while adhering to a policy of a balanced GAAP basis budget.


I am NOT proposing that we raise taxes to cover our current level of spending and committing to spend.


In fact, it is not mathematically possible to raise taxes enough to cover our current level of spending/committing since paying more taxes reduces consumer spending which reduces our GDP which reduces our tax revenues.  (See Laffer Curve for further discussion on the peak taxation rate).


What I am saying is that the apparent economic prosperity and wealth that we enjoy in the United States of America is an illusion created by the USAPonzi scheme Fiscal Policy of the U.S. Government that is deferring an exponentially increasing amount of Public Liabilities to the future U.S. taxpayer.  Our U.S. economy and in fact most of the global economy is operating on counterfeit money that we have borrowed ($97.0 Trillion) and are continuing to borrow ($5.5 Trillion in FY2015) from the future U.S. taxpayer.


The U.S. financial crisis that this Ponzi scheme has caused is 9X more serious than the Greece financial crisis!


See The Implosion of USAPonzi for what I predict will have to happen when USAPonzi implodes.


See The Distortions of USAPonzi for a discussion of some of the issues that USAPonzi is causing in the global economy.


The U.S. Government is operating USAPonzi

"The Biggest Ponzi Scheme on the Planet"!!!!


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The Oswald Financial Bubble