December 18, 2003

With all the fanfare about the new "Medicare Prescription Drug, Improvement, and Modernization Act of 2003" you don't hear much of anything about the long existing Medicare Trust Fund, the combination of the Federal Hospital Insurance trust and the Federal Supplementary Medical Insurance trust.

This so-called trust stood at $276.1 billion at the close of fiscal 2003, more than two-thirds of the anticipated $400 billion cost of this new legislation over the next ten years. That would be a pretty good and immediate chunk if only the trust fund were authentic, or something besides a scam.

By now, informed people understand that the federal government's entitlement trust funds are fraudulent, that these so-called trusts hold no viable assets, and in fact nineteen of them make up about forty percent of the national debt. There's nothing positive about debt and those who still believe that these trust funds can contribute to any program haven't read or understood the confessions from the horse's mouth.

Still others, engaged in wishful thinking, believe that because these entitlement trusts hold no money they are worthless, even that they don't really exist. It would be nice if that were true, but it isn't. Debit black hole accounts like the Social Security Trust Fund, currently holding almost $1.5 trillion in debt markers, are very real and they're worth a lot to the Beltway Bandits. As Alan Greenspan says: "The only thing that matters is that they (the bond holdings) are enforceable."

And then we've got quite a few who think that the government will simply print more money or inflation will take care of the national debt. These people are waiting for Godot. They're waiting for the day when a loaf of bread costs a thousand dollars and minimum wage is a million a week.

What no one seems to realize is that once these nonmarketable bonds are enforced, once they're called or cashed-in, taxpayers are paying the same tax that was paid once before plus interest. It's double taxation plain and simple. That's where the Beltway Bandits make out with business as usual.

For instance, we are being double taxed from the Unemployment trust fund right now. Last year, fiscal 2003, taxpayers repaid $26 billion that had been stolen by the government and this double taxation continues month-to-month as long as receipts from employers are less than outlays to the unemployed. This repayment method works so well the government is about to finance a good part of the new Medicare program with debt.

It's also the same way that the government sets up perks for themselves (See: Trust List, items #21 thru #144). Just name an account, deposit some nonmarketable bonds in it, and whenever cash is needed take it from the Treasury's general account of taxes on hand or money borrowed legitimately. Last year, we paid $89 billion to the "Unconditional Gift Account, State Department" to buy the coalition of the willing.

Sorry for the long introduction, but it's necessary to what follows:

Section 1860D-16 titled "Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund" states the following:

(a) Establishment and Operation of Account.—

(1) Establishment.—There is created within the Federal Supplementary Medical Insurance Trust Fund ... an account to be known as the "Medicare Prescription Drug Account' (in this section referred to as the 'Account')

(2) Funding.—The Account shall consist of such gifts and bequests as may be made ... accrued interest on balances in the Account, and such amounts as may be deposited in, or appropriated to, such Account as provided in this part.

(3) Separate From Rest of Trust Fund.—Funds provided under this part to the Account shall be kept separate from all other funds within the Federal Supplementary Medical Insurance Trust Fund, but shall be invested, and such investments redeemed, in the same manner as all other funds and investments within such Trust Fund.

Besides setting up "the account," the key phrase here is: " ... invested, and such investments redeemed, in the same manner as all other funds and investments within such Trust Fund."

In other words, they fully intend to do exactly what they've been doing with payroll tax surpluses paid for health care. The overcharges every American worker already contributes to Medicare and have helped bring it to four percent of the national debt.

Every cent that comes into this new "account" and it comes from many sources other than payroll taxes will be borrowed/stolen by the government and spent elsewhere. Then they will deposit an equal amount in nonmarketable bonds in the account calling it an "investment" and awarding annual interest by simply handing the account more bogus bonds, no money involved.

There's more.

The legislation repeatedly talks about "contingency" funds set aside for various aspects of this compounded and convoluted bill, initial funding or start-up money, even correcting "clerical errors" and, most importantly, general borrowing from the honest sale of real Treasury securities to investors in the bond market. The latter is disguised in statements like the following:

"In order to assure prompt payment of benefits ... and to provide an initial contingency reserve, there are authorized to be appropriated to the Account, out of any moneys in the Treasury not otherwise appropriated, such amount as the Secretary certifies are required ..." Phrases similar to this appear throughout the new Medicare bill.

Can you believe that? "Moneys in the Treasury not otherwise appropriated?" There is no such thing except money that has been borrowed for some purpose. Our congressional legislators spend months, even years, arguing and deciding budgets in terms of expected receipts. Both the House and Senate have dozens of committees and the help of the CBO, GAO, and OMB to put together their budgets and even then receipts usually do not live up to expectations. What could possibly be in the Treasury that hasn't already been spoken for? Only money that has been specifically borrowed for the purpose and put in the general fund for the Secretary to find. Gee, it's like an Easter egg hunt.

Right now, today, as you read this, we are three months into the new fiscal year and still haven't a final budget for 2004. Debate on discretionary spending will continue after the holidays and well into the new calendar year. How would you like to be waiting for a check in the mail after the Secretary finds some money "not otherwise appropriated?"

The Bush administration ran up the national debt $555 billion last year. They claim the deficit is only $374 billion because they don't count the money "borrowed" from Social Security and other entitlements or the other indebtedness they dump on taxpayers in the form of "interest" on "investment."

Want to bet on a national debt increase of at least $700 billion this year, fiscal 2004? Plus the need to raise the debt limit another trillion or so just before elections and after having just raised it a trillion last June.

John Denton put it best when he said: "It is economic stupidity to think that a nation can borrow itself into prosperity, and then tax the people to pay the principal and interest on the debt."

Visit Ed Henry's own web site!

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