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Tuesday, June 17, 2003
In order to avoid complete financial collapse, the George W. Bush administration is playing a dangerous game with the U.S. economy.
by Al Martin
In a recent Wall Street Journal/NBC opinion poll, only 18 percent of the people claim they actually understand what a budget deficit is. And out of all the respondents, only 6 percent understood the deleterious effects that ever-expanding budget deficits have on economic growth.
When their check bounces and they get charged twenty bucks at the bank, these people probably ask, “Hey, why am I being penalized here? This is just a budget deficit.”
Now, the Bushonian regime is encouraging American business and industry to borrow from future revenues and there is now a record number of companies selling on these delayed credit deals. You buy something for zero down, zero interest, and no payments for a year for consumer purchases like washing machines, TV’s and cars. And this is all done to maintain the consumption numbers.
Because of this we have decided to explain once and for all the meaning of Bushonomics and the scourge it represents to the American economy.
This borrowing from future sales is the latest pernicious effect of Bushonomics and now they’re doing it at levels unprecedented.
The people of the United States, wearing their hats as consumers, in the last 12 months have “spent” more than $500 billion in expenditures on these delayed payment programs. And this means that business and industry is stealing from future sales in order to maintain sales now.
Of course what happens is that this makes it very difficult for an economic recovery to take hold because these future payments act like an anchor around the neck of the economy.
This does bode well for the repo market. The repossession industry is the only industry in the country that is growing. Pawnshops are also doing well as are money-lending services, which have grown 36 percent in the past year. Psychiatrists and mental health facilities are also enjoying record business.
The key word for the future is “vig” as in “What’s the magic word for the New Era of Bushonomics? Vig.” Bushonomics is revitalizing an old concept in order to survive Bushonomics in the future, make the vig…or else.
Let us explain the concept of vig, or vigorish, for you.
If you’re a business owner or consumer in this environment, the only way you are going to survive is to pay the vig, or the egregious interest payments on the loans you’ve made.
Coincidentally, the Bush regime in the past 12 months has quietly allowed the states to relax the usury laws.
There is a federal usury limit, although the states regulate individual usury laws within a federal limit.
The federal limit is 36 percent, but a lot of the states have imposed 24 percent caps.
The Department of Justice (DOJ) had a lawsuit going against the Money Store for “we’ll cash your check this week and you don’t have to pay till next week” crowd.
DOJ finally figured out that you’re paying about 78 percent or so per annum. They had filed a suit against Money Store, Amoco and a lot of check cashing places for violation of the usury laws. And that lawsuit has been quietly withdrawn.
When that lawsuit was withdrawn larger and more mainstream businesses and industries took it as a sign that they could now literally charge what they want.
Both the Office of Management and Budget and the Congressional Budget Office have stated that Bushonian budget deficits are unsustainable beyond 2009 – when it will reach $1 trillion per annum.
UNSUPPORTABLE
People Who call into and ask me what does it mean when they say “unsupportable.” When a nation can’t sell any more bonds to support its debt, it means economic collapse.
Instead of using the government’s own language to say that deficits are unsupportable beyond a certain period of time, you have to tell people that budget deficits will lead to economic collapse. It sounds frightfully shrill to say it that way but it’s true.
I often wonder how Bush can stay in power. It’s only because he is governing a nation of people who are too manipulated to understand what he’s doing to the nation’s economy.
Under Bushonomics, all economic growth is a fallacy. It only exists on paper. The total debt of the U.S. government exceeds its total assets. The total debt of all business and industry also exceeds their total assets.
And then there’s the pro forma loophole. All publicly held businesses and industries report their earnings on both a pro forma and an adjusted basis. The adjusted basis is always less than the pro forma. Pro forma means according to the broadest interpretation of generally accepted accounting principles. Fully adjusted would be taking out all special interest payments, accrued reserves, accrued contingent funds for future liabilities, etc.
The analogy of business to U.S. government is that all government statistics are issued on a pro forma non-adjusted basis.
The U.S. government does not issue fully adjusted numbers and it’s only pro forma numbers. If the U.S. government was forced to issue fully adjusted revenue numbers, then it would have to start to make contingencies for future debts and obligations – something the Bushonian administration is steadfastly against.
In 1995 when the Clinton regime attempted to push through the recalculation of pro forma to include adjustments, the Republicans fought it like heck and defeated it, knowing that when they got back into office – had they not defeated it – it would have closed again another loophole which allows Bushonomics to continue.
If the Treasury Department were forced to make capital surplus reserves for future liabilities both actual and contingent the deficits would balloon.
And I always have to say that the reason debt service is so low is because the United States, unlike other countries, only services about half of its outstanding federal debt at any one time – because so much debt is not counted as debt, such as the deficit in the Social Security trust funds.
The accumulated deficits, which now total more than $2 trillion in the 42 other public trust funds, are also not counted as debt. This is at the very heart of Bushonomics.
Of course, a country that has the ability through “creative accounting practices” to only service half of its debt is always going to be able to stay between 18 percent and 26 percent of the budget. That’s all it will have to commit to debt service because as time goes by under Bushonomics, the government services less and less of its debt.
This gets a little more complex. People ask me how a government can actually service less of its debt over time insofar as the principal amount of that debt continues to rise.
You can do that under the crafty smoke-and-mirrors accounting procedures which Bushonomics incorporates. You do it by reducing future liabilities vis-à-vis that debt.
The Social Security Trust Fund is a classic example. Each year that goes by, the future liability of the Social Security Trust Fund grows – as population growth continues. Furthermore, future liability grows as the median life span of the nation – now at 77 years, an all time high – continues to increase.
However, to get around that, so they do not have to show an even larger future contingent liability, the government simply recalculates the basis of future payments to make those payments lower.
This is the plan that is the Bushonian 2029 Social Security Readjustment Plan, wherein between now and 2029, the age at which you can collect Social Security gradually rises and it’s not going to be 62 and 65. It will rise to 65 and 67,and then from 67 to 70. The Bush administration tries to justify this by saying that the median life span of the nation is growing.
In the future, beginning in 2017, Social Security payments will be calculated on an annuitized basis, i.e. an actuarial table, instead of a fixed payment scheme. That will immediately reduce Social Security payments by at least 50 percent.
The Republicans feel perfectly free in talking about annuitization because they understand that the American people don’t know what they’re talking about.
The Social Security trust fund must be annuitized by 2016 to 2017. These dates are important because the general trust fund that pays pensions to old people cannot financially survive beyond 2017 without a reduction in payments.
Al Martin is America’s foremost expert on corporate and government fraud. His weekly column “Behind the Scenes in the Beltway” is published regularly online at Al Martin Raw. This story appeared in the weekly newspaper, American Free Press, May 26, 2003, Volume 3, Number 21.
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