The U.S. Government is overspending, overcommiting, undertaxing, and lying by using corrupt and fraudulent accounting and as a result is introducing dramatic artificial economic stimulus into the U.S. and global economy. This is making the U.S. economy look dramatically more productive and prosperous than it would be without this U.S. Government stimulus.
The U.S. Government is promising to pay more social benefits to U.S. residents than the taxpayer can afford. The U.S Government is employing more direct and indirect government employees than the taxpayer can afford. The U.S. Government is paying themselves and Government employees higher compensation than the taxpayer can afford. The U.S. Government is spending more money than the taxpayer can afford. The U.S. Government is not taxing nearly enough to pay for its overspending and overcommitting. And the U.S. Government is concealing most of this overspending, overcommitting, and undertaxing by using corrupt and fraudulent accounting. The U.S. Government is using Cash Accounting rather than the appropriate GAAP Accounting.
This has created a massive Ponzi scheme that I have named USAPonzi. The effect of this "spend now and pay later" (it is really spend now and never pay) philosophy has introduced a massive and exponentially increasing stimulus ($6+ Trillion per year) to the U.S. and the global economy and has created a massive and exponentially increasing financial liability ($98.7 Trillion) for the future taxpayer that is unpayable.
This is why the United States appears to be the most successful and prosperous country on the planet. This is why the stock market continues to set new record highs. This why the United States has so many millionaires and billionaires. This is why 1.75 billion people worldwide can afford a smartphone. USAPonzi is creating so much buying power for U.S. consumers that it is creating stimulus for other economies as well. This is why many American families can own multiple cars. This is why many American families can have a bigger and nicer house than in most other parts of the world.
With the current fiscal policy (USAPonzi) the U.S. Government is dramatically undertaxing the U.S. citizens and U.S. businesses and as a result has created $98.7 Trillion of counterfeit money that can be spent by most Americans but is primarily accumulated by the rich. (see The $100 Trillion Counterfeit Money Machine).
But this fake prosperity comes with a price and that price is that the U.S. Government is in debt by $98.7 Trillion (GAAP basis) as of Nov 1, 2014! The U.S. Government does not call it debt, because it has not yet borrowed all of that money, but it has financial commitments to pay that $98.7 Trillion to public creditors and to U.S. citizens in the form of social benefits. The U.S. Government owes $12.8 Trillion to the public investors and owes the U.S. citizens $85.9 Trillion for social benefit promises. The U.S. Government has no way of ever paying these financial commitments. By using corrupt and fraudulent accounting (Cash Accounting), the U.S. Government has covertly created this $98.7 Trillion GAAP Obligation and is covertly adding $6+ Trillion to this unpayable obligation every year. So when the U.S. Government tells the U.S. citizens that it will pay the currently promised social benefits it is FLAT LYING.
Since FY1969, the U.S. Government has been using this corrupt and fraudulent accounting system (Cash Accounting) that does not report the size of this financial obligation (our GAAP Obligation of $98.7 Trillion) nor does it report the rate of increase of this financial obligation (our GAAP Deficit of $6+ Trillion a year).
Living on a GIANT CREDIT CARD!
Because of this Ponzi scheme, since 1969 we have been living on a GIANT CREDIT CARD in the name of the future taxpayer that has a balance due of $98.7 Trillion as of Nov 1, 2014. The U.S. Government has not been funding the social benefits trust fund and has been spending all of the tax revenue that the taxpayers have paid in since FY1969 for that purpose. This has created, according to GAAP Accounting, $80.8 Trillion of Unfunded Liabilities that go unreported since the U.S. Government is only reporting on a Cash Accounting basis. GAAP Accounting assesses and reports the amount of tax revenue that the U.S. Government should be collecting each year to properly fund the social benefits trust fund.
On a macro basis, USAPonzi is making the "rich folks" the big winners because they should be paying most of this credit card bill and since they are not, they appear to be about $98.7 Trillion richer. The U.S. Government officials and U.S. Government employees are winners because they have nice cushy high paying jobs that are paid for with the GAAP basis Deficit Spending of USAPonzi. The social benefit recipients are the big losers because they should have $85.9 Trillion in their social benefit trust fund and they have nothing. This is because LBJ convinced congress, in FY1969, that they did not need to fund the social benefit trust fund. This has given the U.S. Government a lot of room ($85.9 Trillion is a lot of money) to expand the size of Government without the U.S. citizens noticing. This single act by LBJ is the primary cause of USAPonzi.
The rich win really really big, the government employees win big, and the underprivileged get cheated.
Does not seem quite right does it.
That's why the rich folks use tons of their counterfeit money (see The $100 Trillion Countefeit Money Machine) to promote the election of the folks that will continue this fraud.
But since the people in U.S. Government are getting paid by this same GIANT CREDIT CARD they also want this Ponzi scheme to continue. They want to continue to live "The Life of Riley" on the GIANT CREDIT CARD of the future U.S. taxpayer.
Liars and Cheaters in Washington!
That is why I say that we have a bunch of Liars and Cheaters in Washington.
The U.S. Government is lying by saying that they will pay the current social benefit commitments to the U.S. citizens when the taxpayer does not have the money.
The U.S. Government is cheating by paying themselves when the taxpayer does not have the money.
And the U.S. Government is attempting to conceal this overspending and overcommiting by using corrupt and fraudulent accounting.
How does USAPonzi affect U.S. Citizens?
The following is my assessment of how this corrupt and fraudulent accounting system and the resulting Ponzi scheme is now or will in the future affect various citizens.
The rich: Because the U.S. Government has been and is now dramatically undertaxing rich U.S. citizens and rich U.S. businesses on a GAAP basis (see The $100 Trillion Counterfeit Money Machine), they appear to be a lot richer than they really are (7-8X for the super rich).
The direct and indirect employees of the U.S. Government: Many of you will see your jobs or pensions diminished or vanish because the U.S. Government is dramatically overspending on both a Cash basis and a GAAP basis. The U.S. Government is much much bigger than the U.S. taxpayer can afford.
The poor, the disabled, the unemployed, and the elderly: The social benefits that the U.S. Government is currently promising you cannot be sustained. The U.S. Government is promising dramatically more social benefits than the U.S. taxpayer can afford.
The poor, the disabled, the unemployed, and the elderly: The U.S. Government has made ZERO provisions for how it will pay for your social benefits in the long term. The U.S. Government has not put one penny into the social benefit trust fund since FY1969 that would assure that the promises that the Government has made can be kept. The U.S. Government is short by $85.9 Trillion of being able to pay the current social benefit promises.
The rest of the U.S. citizens: We will see a slowdown in economic activity (my estimate is 47% see U.S. "Real" GDP FY2015) when the GAAP basis Deficit Spending goes away with a balanced GAAP basis budget. It may be quite some time before the U.S. Government finally "bites the bullet" and accepts the fact that we must move to a balanced GAAP budget (or at least a small GAAP Deficit on the order of 2-3% of GDP). I would also expect to see some across the board tax increase to achieve the GAAP basis balanced budget.
What must be done to fix our Fiscal Policy and extinguish USAPonzi!
The U.S. Government must adopt GAAP Accounting.
The U.S. Government must balance the GAAP basis budget. This may require an amendment to the U.S. Constitution.
The U.S. Government must pass "The Inform Act" (see www.theinformact.org) so that any major new social benefit program can stand the test of Fiscal Gap Accounting to determine if the cost of the program is affordable over the long term.
Washington is lying, cheating, and creating a distorted economic and financial system!
Washington is dramatically undertaxing ($98.7 Trillion) the rich citizens and rich businesses to make them appear to be even richer. Most of this undertaxing ($85.9 Trillion) is because the Government is not funding the social benefit trust fund.
Washington is dramatically overspending. This includes paying themselves and U.S. Government employees much more than the taxpayer can afford.
Washington is promising to pay more social benefits than the taxpayer can afford.
Washington is failing to fund the social benefit trust fund that is required to pay the ongoing social benefit commitments to the poor, the disabled, the unemployed, and the elderly. Not just underfunding the social benefit trust fund but flat not funding the social benefit trust fund all.
Washington is treating the rich, the Government officials, and the Government employees royally today by treating the underprivileged like dirt (by not funding the social benefits trust fund).
Washington is using a corrupt and fraudulent accounting system.
This will cause massive civil unrest when the general populous realizes that the U.S. Government has passed out nearly $100 Trillion to the rich citizens and the rich businesses (and is giving them $6+ Trillion more every year) and has been paying themselves and government employees unaffordable salaries, by not living up to the promises that the U.S. Government has made to pay social benefits to the poor, the disabled, the unemployed, and the elderly.
Yes I know that the $100 Trillion is counterfeit money because it is backed by the future taxpayer who cannot possibly pay it, but for now the world is treating that $100 Trillion and the salaries of the government officials and government employees like real money so the rich, the powerful, and the government employees are living an extravagent life style while nearly 150 million U.S. citizens are headed toward financial devastation because the U.S. Government has made promises it did not keep.
When will we get some honest politicians in Washington? The U.S. Government is doing exactly what Madoff, Enron, Worldcom, Tyco, and Healthsouth did just on a grander scale (about 2000X).
Our current fiscal policy, USAPonzi, is unsustainable (a nice word for corrupt and fraudulent) and distorted and the only way we can get to a sustainable and fair fiscal policy is to adopt GAAP Accounting and balance the GAAP Budget. This will stop the fiscal lying and fiscal irresponsibility that has been coming out of Washington since 1969.
Using GAAP Accounting and balancing the GAAP budget will also let U.S. citizens know what social benefits to expect so that they can plan their financial future with some degree of confidence.
Adopting GAAP Accounting and establishing a balanced GAAP basis budget policy should also take some of the politics out of our fiscal planning and budgeting process. This will give a closed loop and sustainable fiscal policy so it will be easy to see if we are making spending or committing decisions that are out of line with fiscal reality.
We also must pass "The Inform Act" (see www.theinformact.org) so that any major new social benefit program can stand the test of Fiscal Gap Accounting to determine if the cost of the program is affordable over the long term.
The U.S. Government needs to be
1) spending a lot less.
2) committing a whole lot less (social benefits).
3) taxing more.
4) and using the proper accounting system.
The first three items on this list are directional guidelines only. It is the fourth item, the adoption of GAAP Accounting and agreeing to a balanced GAAP basis budget, that truly defines the limits as to how much we must adjust our spending, committing, and taxing. One thing we do know is that today the U.S. Government is much much bigger than we can afford. The $100 Trillion Counterfeit Money Machine commentary includes an analysis that suggests that we are spending more than 2.2X our "Real Income" on a Cash basis even before we start considering the impact of our future social benefit commitments that will be reflected by GAAP Accounting. The U.S. Government has got a lot of hard work and difficult decisions to make to get us on a sustainable fiscal path.
The U.S. Government is lying to the U.S. citizens and to the world about our financial condition and GAAP Accounting and a balanced budget will go a long way toward fixing this problem.
The U.S. Government does not want to do this because that means that they would have to admit that they are lying and would have to face the reality that they are running a massive Ponzi scheme to make the economic environment look a whole lot better than it really is so that their rich friends can appear to get a whole lot richer and so that they can continue to syphon off money from the U.S. taxpayer. The U.S. Government officials fear that they will be fired if they start telling the truth and they are probably right but we must face the facts and that means that the U.S. Government must start telling the truth.
Strong letter to follow...
Next Page: Fixing Fiscal Policy