A Debt Reduction Commission?

[Confederate Kahanist]

http://acuf.org/issues/issue150/100214gov.asp



Should there be a special commission with the power to propose solutions to the nation's financial crisis that Congress must fast-track and give an up or down vote to?

The answer is: yes and no.

Yes, the financial crisis is dire. It needs our immediate attention. Every President since Ronald Reagan has acknowledged that entitlement spending is on an unsustainable course. And the longer we put off reform, the worse the problem gets.

No, not if the cure is worse than the disease. And it will be, unless we first agree on what the problem is. Yet, as in the case of health care, we often find that the two sides are not even talking about the same subject.

Here's what we should be talking about: Ponzi schemes. The only difference between Social Security and Medicare and Bernie Madoff's funds is that Madoff is in prison while the overseers of these two federal programs are running around giving speeches, going to parties, and acting like they have done the rest of us a huge favor.

All else is secondary. The composition of the commission. The short run deficit crisis. Whether or not taxes are part of the solution. All these concerns are minor relative to the overriding need to end our chain-letter approach to funding Social Security, Medicare, Medicaid (which mainly goes to seniors) and other elderly entitlement programs.

Since Social Security's inception, the President, the Congress and even the Social Security Administration itself have told workers that their "contributions" were being "invested" and held in completely safe "trust funds," when in fact those funds have all been spent - usually the very minute, the very hour, the very day they were deposited in the Treasury Department's bank account.

The trust funds consist of nothing more than IOUs the government has written to itself. In the case of Social Security, the IOUs are actual pieces of paper kept in filing cabinets. In the case of Medicare they are mere computer entries. Although we call these IOUs "bonds," they really aren't bonds in any meaningful sense of the word. They cannot be used to purchase anything. They cannot be sold on Wall Street. They cannot be sold to foreign investors. They are no more valuable than the IOUs Bernie Madoff wrote to himself.

Were a fire to break out in the Social Security Administration office in Parkersburg, West Virginia, and burn up all the IOUs, the nation would not in any way be financially worse off. Were the President by Executive Order to double or triple the number of IOUs, the nation's finances would not be improved by one whit.

Contrary to the Madoff-like promises of our leaders, neither money nor any other valuable asset has ever been deposited in the entitlement trust funds. Every employer payroll tax check is written to the U.S. Treasury. Every Social Security check comes from the U.S. Treasury. The Trust funds neither receive funds nor disburse them.

(By the way, in this respect the entitlement trust funds are no different from almost every other federal government trust fund. But somehow it doesn't seem as bad when the government steals from the highway trust fund. At least as a voter/taxpayer I feel no moral obligation to pay the money back.)

But here's the problem. We can't fix this problem until we first acknowledge it exists. Who denies it? Paul Krugman for one. The editorial page editors of The New York Times are others. Throw in most members of Congress and then there are a whole raft of EINOs (Economists in Name Only) who routinely obfuscate. Let's call them the entitlement spending deniers.

And here's the danger: If we don't first agree on the nature of the problem, the "solution" is likely to make things worse.

Consider the Greenspan Commission in 1983. Instead of acknowledging the need to move from pay-as-you-go finance to a funded system, the Greenspan reforms were designed to patch up the Ponzi scheme and give it more years of life. So we raised the payroll tax rate and ever since we have been spending those additional taxes on everything from art subsidies to a bridge to nowhere and piling up more and more IOUs in the process.

So, I'm against any new commission unless we state in the preamble that its purpose is to end chain-letter finance and set the nation on a path toward a funded system in which each generation pays its own way.

To make sure that we stay focused, each Commission meeting should begin like an AA meeting - going around the table, with each member saying the following: "My name is _________. I'm a member of Congress and I'm a spendaholic."