U.S. Government-A Lawless Enterprise
Jul 2, 2014
Both the Legislative and the Executive Branches of the United States of America have abandoned the rule of law and have ignored the rule of reason. While I certainly hope that the Judicial Branch of the U.S. Government has not "gone rogue", I believe that both the Congress and the Administration have violated their Constitutional vows to uphold the law of the land. Our founding fathers put in place a set of rules in our Constitution that established how our Government is to operate, including rules that provided for separation of power so that we would have appropriate checks and balances between the three branches of government.
The Legislative branch and the Executive branch have both clearly "gone rogue" when it comes to fiscal accountability. Our Government has been using corrupt and fraudulent accounting since FY1969 and the checks and balances of our governing bodies have so far not been sufficient to curtail this activity. As a result, our Government has created a public liability (GAAP Obligation) that as of July 1, 2014 totals $96.5 Trillion. This means that our economy and our financial system is operating as a massive Ponzi scheme (USAPonzi) since the Government is promising to pay social benefits that dramatically exceed what can be supported by the Government's stream of income.
The Executive Branch has clearly "gone rogue" when it comes to "executing" the legislative rules and policies established by the Congress. The President, the Attorney General, and the Secretary of the Treasury have chosen to interpret the "law of the land" as it best fits their personal and party agenda. While both political parties do it, recent actions are especially egregious with the implementation of "The Affordable Care Act" and "The Home Affordable Refinance Program". The administration has taken liberties in how they are executing these programs and with other actions (like making administration appointments) without securing appropriate approvals by the Congress. This is not what the founding fathers intended.
In order for USAPonzi to continue to operate effectively, both the Congress and the Administration must agree to continue to use a corrupt and fraudulent accounting methodology (Cash Accounting) even though the Department of the Treasury (see The Treasury Assessment) states in their annual reports that, with current fiscal policy, the Federal Debt will spiral out of control. This means that the President, the Congress, the Secretary of the Treasury, the Congressional Budget Office, the General Accounting Office, the Chair of the Securities and Exchange Commission, and the last four Chairmen of the Federal Reserve Bank are all willing to accept the fact that the U.S. Government is using corrupt and fraudulent accounting to assess and report our Government's financial condition.
USAPonzi Breeds More Fraud and Corruption
While this website is focused on the macro issue of fraud and corruption within the U.S. Government by using an inappropriate accounting methodology, I now feel that USAPonzi has also created the opportunity for massive fraud and corruption within the administration of these social benefits. USAPonzi makes it appear like we have much more social benefit paying power than we actually have since our financial statement ignores all future year commitments. The bureaucracy that administers these social benefit programs does not have visibility into the future liabilities that current beneficiary approvals create. With the current accounting methodology (Cash Accounting) this does not appear to be too much of a future problem since we don't recognize these future liabilities in our budgeting and reporting process.
Our Government's financial system is much too big and too complex to manage effectively both on the incoming (tax revenue) and outgoing (spending) sides of the financial statement. We MUST reduce the complexity in both the Internal Revenue Service and in the social benefit approval and payment process. We must establish a philosophy that we have only so much tax revenue coming into the Government so we can have only have that much being spent. Our current financial system has too many opportunities on the incoming side for people and organizations to "game" the system but the outgoing side is absolutely porous with opportunities for people to take advantage of social benefits payments. Whenever you have a system that guarantees that the Government pays a fixed amount of social benefit if you meet criteria that is even slightly fuzzy, schemers and scammers will find a way for beneficiaries to qualify for that benefit.
Defined Benefit vs. Defined Contribution Benefit Plans
As Warren Buffett warned in his 1975 letter to Katharine Graham (see Buffett on Pensions), corporations have to be very careful about the promises that they make for employee benefits like pension plans. That is why most companies have switched from "defined benefit" pension plans to "defined contribution" retirement accounts. The liabilities that a company can accrue for "defined benefit" plans can get out of control very easily if the company does not have an accurate methodology for assessing the financial impact of their future commitments or if the company is not committed to a budgeting process that can assure payment of these commitments.
This lack of understanding of the mathematics of defined benefit plans is what has gotten the Federal Government into our current fiscal crisis but it has been dramatically compounded by the decision by the Government to totally ignore the need to fund these plans. That is the core issue that created USAPonzi. Making social benefit commitments but refusing to fund them.
A Major Recent Lawless Action by the U.S. Government
"The Affordable Care Act"
A major and recent lawless action by the U.S. Government is the passing of the "Affordable Care Act". FDR laid the foundation for this law by setting up Social Security in 1935 so that "taxpayers" would pay for this social benefit. LBJ set up an accounting and reporting methodology for FY1969 (The Unified Budget) so that he could confiscate the trust fund money that social benefit programs had collected by 1969 to pay for the Vietnam War and at the same time conceal the fact that the U.S. Government had no intention of pre-funding any of the now over 200 social benefit programs that our Government has approved. This is what launched USAPonzi.
BHO then tweaked the LBJ lie (which is by now a $96.5 Trillion lie) by saying that by trimming just a couple of Trillion dollars, over a 10 year time horizon, off of this $96.5 Trillion lie, he can now demonstrate that the government can provide "free healthcare" for everyone. And then the Administration and Congress had the unmitigated gall to call it the "Affordable Care Act".
Our entire social benefit system is dramatically unaffordable at the currently promised levels and every last person in Washington knows it. Whether they are Democrat, Republican, or bureaucrat. Whether they are in Congress or in the Administration. But the U.S. Government is willing to pretend like they can eventually get our fiscal policy in order enough to make these outrageous Government promises a reality.
Another Major Lawless Action by the U.S. Government
"The Prescription Drug Act"
Another major lawless action by the U.S. Government occurred during the Bush(43) Administration when the Congress passed the "Prescription Drug Act of 2003". This social benefit was clearly not affordable when it was approved and according to www.usdebtclock.org, the U.S. Government now has "unfunded liabilities" for the Prescription Drug Act of $21.6 Trillion out of total "unfunded liabilities" of $122.8 Trillion. So these major and unaffordable commitments for social benefits have occurred during both Democrat and Republican Administrations.
Author's Note: It may be confusing that the USDebtClock reports much higher Unfunded Liabilities than I reference in other commentaries on this website. That is because when I refer to Unfunded Liabilities in most commentaries I am reporting the "present value" of the forwarding looking stream of social benefit commitments that are reported by the USDebtClock as the "when paid value".
Congress should not be able to approve social benefit programs without demonstrating the affordability of these programs. That is why it is imperative that we enact "The Inform Act" (www.theinformact.org) so that the Congress can show the U.S. Citizenry that the promises that the Government is making can rationally be fulfilled.
Current Social Benefit Commitments are Unaffordable
Simple mathematics demonstrates that the whole crowd in Washington is presenting a "pipe dream" scenario (see "The Big Lie") to the U.S. Citizenry that is not supported by rational financing. And since the whole mess is a massive lie to start with, they can continue to tack on more promises with only a marginal amount of impact to the size of their previous lies.
That is why I say that we must have a Constitutional Amendment to require that "The Government" as a whole is fiscally responsible because each person in a power position in Washington will always make a case that their project or their program has merit and it only costs a few billion dollars so we will never notice it in the big scheme of things. But there is a limit to the pocket book of the taxpayer and until we have an accounting system that properly assesses and reports this limit we will continue this lawless activity in Washington.
The current behavior of both the Legislative and Executive Branch includes offenses that in my opinion are impeachable, indictable, and convictable. But with the nature of our government today, there seems to be a conspiracy to protect one another from legal action but by so doing this obviates the penalty that should be imposed for these corrupt and fraudulent actions. Who polices the policemen? That is where the Supreme Court must step in and take action. But that requires that perceived violations are brought to the attention of the Supreme Court. That does not happen effectively when the violators are themselves members of the Government.
But the best approach is to have the Legislative and Executive Branches act responsibly without having to invoke the Judiciary Branch to enforce compliance.
Amend the Constitution to require Fiscal Responsibility of the Legislative Branch
The Fiscal irresponsibility of the Legislative Branch will have to be controlled by an amendment to the Constitution that requires a balanced budget, within a reasonable and taxpayer determined tolerance, using GAAP basis Accounting. Absent this control on the finances of the Federal Government, our financial system will continue to demonstrate dramatic financial distortions.
Balancing your budget TEN YEARS FROM NOW is not a workable plan when you are in a $96.5 Trillion hole and the size of the hole is increasing by twice your annual income every year.
Control the Committing and Spending Power of the Executive Branch
The Fiscal irresponsibility of the Executive Branch must be also be controlled by the Congress to ensure that the budgeting, spending and committing guidelines set by the Congress are being appropriately followed. With the practices being employed today, the Executive Branch can and does make massive changes in the taxpayer liabilities without seeking approval from either the taxpayer or the Congress.
No private business can operate successfully with the lax financial policies that are currently employed by the most important financial institution on the Planet; the United States Government. And the U.S. Government is the very organization that requires that public companies follow the strict financial assessment and reporting rules as now defined by the Sarbanes-Oxley Act.
The U.S. Government's current fiscal policy has lead to an open loop financial system without an adequate set of procedures and controls which allows almost unlimited committing and spending of taxpayer money.
We must restore the rule of law within the U.S. Government, and we must change the rules to preclude the implementation of a Ponzi scheme such as the one that is currently operating: USAPonzi. Defining these rules should not be that hard since the government has already defined these rules twice, once with the Sarbanes-Oxley Act for public companies and again with the recently implemented (June 15, 2014) GASB standards (www.gasb.org) for state and local governments.
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