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The Discourteous Mr. Walker

Mises Daily: Friday, September 19, 2003 by

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Every once in a while, the truth somehow leaks out in Washington.

For example, earlier this year Bush administration economic adviser Lawrence Lindsey got the boot. His political crime: He dared to suggest that the occupation of Iraq will cost upwards of $100 billion. In retrospect, it now seems his estimate was, if anything, on the conservative side.

However, the imperious breakfast table warriors of the Bush administration, whooping it for the America as the reincarnation of the British Empire, didn't want to hear it. And in Lindsey's case the truth certainly set him free. It set him free to look for another job.

Reluctantly, another one of our hired help recently told the truth about how the relentless taxing, inflating and spending of our central government is leading our nation down the road to serfdom.

David M. Walker, the Comptroller General of the United States, probably shouldn't sign any long term leases after his "wake up call." The discourteous Walker criticized the budgetary hijinks that are the norm in Washington. He is also predicting that the federal government will be in the red as far as the eye can see. He projects annual deficits of between $566 billion and $644 billion respectively over the next two years. And he recently conceded, in a National Press Club speech, that even the figures we're given by our masters are often bogus.

Indeed, the numbers we are provided are "incomplete and misleading," Walker said. For example, there is our 68-year old social insurance scam, our lovely Social Security/Medicare programs. Over the years, of course, the payroll tax rates used to finance these messes have become a crushing burden, especially for those with moderate and low incomes.

The rates, raised dozens of times since the system's founding in 1935, are now 15.30%. Even with these huge rates, these mismanaged programs will sometime need more tax increases "to save them."  That's because, Walker has just discovered, the money "contributed" to these programs' trust (sic) funds has been arrogated.

"In the case of the Social Security and Medicare Trust Funds," Walker said, "the federal government took in taxpayer money, spent it on other items and replaced it with an IOU."

This is about as surprising as discovering that taxes are high in New York City and that there is a large amount of street crime. But remember this is a government bureaucrat detailing this shell game called tax and spend. However, Walker also asserts that the government has been engaging in Enron accounting for many years. He complains that these Social Security/Medicare IOUs are not counted as liabilities as they should be under any rational system of accounting.

"Does this make sense, especially when the government continues to tell Social Security and Medicare beneficiaries that they can count on the bonds in these Trust Funds? Is the federal government," Walker asked, "trying to have its cake and eat it too?"

There was no word from Walker on the poor taxpayers who are getting sick because they are forced to buy this overpriced, rancid cake.

After all, this is an old game, played by our rulling class. It's easy to enjoy something today and just pass the bill to another generation. How many votes are there in fetuses? How many babies are part of pressure groups demanding that the government spend and tax more? The bottom line, Walker explains, is that the federal government owns about $1 trillion in assets, but has "almost $8 trillion in reported liabilities." 

If you or I or tried that, we'd be forced into bankruptcy. But we can't print money so that's why this nonsense goes on and on for a while until the economy crashes and burns. And then, of course, the political architects of this disaster blame "the market." That $8 trillion, by the way, comes to $24,000 "for every man, woman and child in the United States."

Ah, but the operative word in penultimate paragraph is "reported." The true obligation actually isn't anywhere near $8 trillion, Walker agrees. That's because the federal government's chicanerous accounting standards would make the Enron boys seem like pikers.

"The current U.S. government liability figures." Walker explains, "also do not adequately consider veterans' health care costs provided through the Department of Veterans' Affairs nor do they include the difference between future promised and funded benefits in connection with the Social Security and Medicare programs."

So, everyone knows there is a serious spending problem whenever our hired help gathers in D.C. Everyone knows that our ruling class should be sent en masse to a Betty Ford Rehabilitation Center for Compulsive Spenders and Taxers. But it is hard to say exactly what is the extent of the problem, except that we know it is huge, expanding and has the potential to turn these Estados Unidos into a modern Weimar Republic. Therefore, thanks to this budgetary flimflam, that has been going on for some time, one part of the government can't even certify what the right numbers are.

"Earlier this year," Walker explains, "GAO (The General Accounting Office) was unable to express an opinion as to whether the U.S. Government's consolidated financial statements were fairly stated for a sixth consecutive year." Oh, great. The taxpayers might just as well of hired Arthur Andersen to cook the government's books!

So what is the total bill? How much are we on the hook for the endless excesses of government and its enablers on the right and the left?

Walker guesses it will be in the "tens of trillions of dollars." This is hard to comprehend. So think of it this way: These myriad obligations, made by sleazy pols on our behalf, are "likely to exceed $100,000 in additional burdens for every man, woman and child in America today, and these amounts are growing every day."

Left unsaid by Walker: If this stuff keeps going on, the Marc Richs of this world will be giving back their pardons and getting on the first plane for Switzerland.

Walker used a good news/bad format in giving his speech so let me interpret it that way: The good news, taxpayers, is that you will get your Social Security payments twenty years from now even if the government gives you pieces of paper with a portrait of Winnie the Pooh. 

However, the bad news is that you will be paid in a currency that has been debased because of the relentless deficits run by a warfare/welfare state, a state led by career politicos who never had the word no in their lexicon. That's a government whose promises have somewhat less credibility than those made by Hitler at Munich or by Lyndon Baines Johnson in 1964, who promised to keep us out of Vietnam, or by George W. Bush in 2000, who said the U.S. was getting involved in too many wars and nation building experiments around the globe.

Still, despite Walker's candid comments, he is anything but a radical who wants dramatic changes. (His cites as his idol Theodore Roosevelt, a republican progressive who championed social insurance and thought idiotic conflicts like the Spanish-American War were the greatest thing in the world).

Walker is only critical of huge welfare programs because he wants to reform them. He wants an end to the skullduggery of the Social Security and Medicare trust funds. That's so they can be saved (So they can be expanded some more?). He proposes a series of reforms.

"We must take steps to assure that these programs are both solvent and sustainable over time," he explains.

No, Mr. Walker, we must dismantle these programs and let people run their own lives. If these welfare/warfare programs go on, how many more "tens of trillions" of dollars of debt will we force on already overburdened taxpayers and generations of taxpayers to come? How high will payroll tax rates go? Should we go the Western European route and impose 25% or 30% social insurance tax rates? 

The title of Walker's speech is "Truth and Transparency. The Federal Government's Financial Condition and Fiscal Outlook."

Maybe I can suggest something a little more punchy: Enough Is Enough.

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Gregory Bresiger, a business writer living in Kew Gardens, New York, holds a graduate degree in history from New York University. gbresiger@hotmail.com. See his archive.