Economics

Center on Wealth & Poverty

Where is the Balance Sheet?

If you spent more each month than you made and got deeper and deeper into debt, but had an asset equal to your debts, like a big expensive boat you never used, what would you do? If you were rational, you would sell the boat.

The U.S. government has spent more than it receives in tax revenue for most of the last 75 years, and, as a result, the national debt and the associated interest payments have gotten bigger and bigger. But what is not well known is that the U.S. government also has many trillions of dollars of assets, which may exceed the value of the debt. I say “may” because, in fact, no one knows because the government has no accurate balance sheet of what it owns and what it owes.

For instance, the federal government owns somewhere between 600 and 700 million acres of land, or about 30 percent of all U.S. land. But again, no one knows for certain if the federal government owns 630 million acres or 670 million acres or some other amount.

Private companies are required to produce accurate balance sheets for their stockholders, and, if they do not, their executives might be sent to jail.

We American citizens and taxpayers are the “stockholders” of our government, and hence we should expect and have the right to receive accurate accounting statements. It is a bit tiring to hear sanctimonious and hypocritical public officials say corporate managers should be punished for deliberate or even accidental accounting mistakes, when the most important legal entity for most Americans — the government — produces financial information so incomplete and inaccurate it would embarrass even an Enron accountant.

This issue of proper government accounting is important for many reasons.

As one example, the current debate about Social Security involves whether the government will raise taxes or cut benefits. The current system is a Ponzi scheme in which the taxes from the workers have been spent on both the current retirees and other government programs, and hence there is no money in the “trust fund.” If a nongovernment official set up such a scheme, he would (rightly) go to jail for fraud. Like all Ponzi schemes, the time on this one has run out as Americans live longer and have fewer children. To prevent this type of fraud in the future, Americans must move to individual trust accounts that cannot be raided by the politicians, whether managed by the government, or privately or some combination.

In the meantime, there is the multitrillion-dollar problem of the “transition” (or more correctly replacing funds taken from the trust accounts by the politicians) from the current fiscally unsound to a fiscally sound system. To take care of this “transition,”, there may be an alternative to either reducing benefits or increasing taxes, and that is for the government to begin selling assets, like land. However, before you can begin to sell your assets in a responsible manner, you must know what they are, which requires a correct government balance sheet.

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Dangerous Delusions Corrode our Medical Services

Our national flirtation with the illusory benefits of “free” national health insurance corrodes our debate about improving the quality of health care in the United States. Partly because of the allure of this delusion of free or single-payer national health insurance, we are slowly ceding our medical service system to government mismanagement at patient and taxpayer expense. The most dangerous Read More ›

The Injustice of ‘Tax Justice’

What does the phrase “tax justice” mean? A definition is important because some groups claim to favor “tax justice” but really want to increase taxes on productive people and transfer resources to the state. Webster’s, in part, defines justice “as the assignment of merited rewards or punishments.” There is an organization called the “Tax Justice Network.” Many of its leaders Read More ›

The Best of Times

Do you think things are getting better or worse around the world? Objectively, there is a correct answer, and that is unambiguously – better. No matter how you measure it – economic growth, life expectancy, childhood mortality, democratic countries, economic freedom, literacy, tax rates, crime rates, etc. – things are improving for most people in most places; and, in fact, Read More ›

Social Security Numbers Abused

At age 15, I’ve already found my calling: information rights activist. No, not your right to information but the natural rights of information, particularly against cruel and unusual punishment. I say this because a lot of Social Security advocates seem to be manipulating statistics and torturing facts to suit their preferences. I am part of the generation most affected by Read More ›

Weapons of Mass Disinformation

If someone advocates an ideology that has contempt for the individual and has caused untold economic misery and the deaths of hundreds of millions at the hands of their governments, what would you think of that person?

The ideology I refer to is, of course, socialism and its numerous variations, including the utopian socialists, the Fabian socialists, the National Socialists, and, naturally, the communists. Socialism is simply an economic system where the government (or collective) owns and controls the means of production. Given that the two centuries of socialists’ experiments, whether by utopians, Marxists, or Fabians, always ended in economic failure and a loss of personal liberty, why are people around the globe still proudly proclaiming themselves socialists? Socialist parties are still popular in parts of Europe, Latin American, and in much of Africa. Socialist parties have been elected to power in both Spain and Portugal in recent months. Many college professors and students on U.S. campuses claim to be socialists.

The “national socialists” caused the death of tens of millions of people. The communists in Russia, China, Cambodia and elsewhere caused the collective deaths of more than 100 million people and impoverished billions of others. (I happened to be at the Kremlin in Moscow in August 1992, when the Russia demographers announced they had determined there were 63 million “excess deaths” in the Soviet Union during Josef Stalin’s reign — 1923-53.)

The Third World socialists have kept their countries unnecessarily mired in poverty for a half-century. The democratic socialists gained control in England in 1945 under Clement Attlee. As a result, the British economy was run into the ground. Hence the British people voted to reprivatize their economy under Margaret Thatcher beginning in 1979.

Other democratic socialist economies had the same types of failure, so by the 1980s privatization became the vogue as it was obviously necessary to re-ignite economic growth.

Yet, the socialists keep coming back. They deny or ignore previous failures and say the next time “we will do it right.” Socialism only fails and will continue to fail because its theory is as flawed as its practice.

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Trapped

Assume you are a legal political refugee in the United States from a communist country. You are not well educated and have limited skill with the English language, but you are a master stonemason — a real artist in stone.

Because of your skill, you have no trouble getting jobs, but by their very nature your jobs are limited and transitory. In the warm months, you most often work in the Northern states, and in the winter in the Southern states. You do not have one regular employer because you go from specialized job to specialized job and often are paid in cash.

You occasionally want to send money to your elderly parents who still live in the old country, but you cannot use a bank because you do not have a bank account. The reason you do not have a bank account is are required by domestic and international financial regulatory bodies to “know their customers.” Your lack of a permanent address, a regular employer and close family in the United States means you do not meet the banks’ “know your customer” tests. This even though you have a good yearly income, are hardworking, constructive, and law abiding.

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Rolling Disaster

William Tucker is a Senior Fellow of Discovery Institute

End of the Line: The Failure of Amtrak Reform and the Future of America’s Passenger Trainsby Joseph Vranich
(AEI Press, 204 pages, $25)

Once again, Amtrak is before Congress asking for another handout. Having lost $600 million last year — about average for the 34 years of its existence — the company is once again begging Congress for money.

This time, however, the Bush administration plans to end the charade that Amtrak will one day become profitable. It wants to end the handouts, making Amtrak compete like any private company. Democrats, of course are opposed. They love any government program — even those created by the Nixon administration. Before they begin their annual last-ditch stand, however, they would do well to read Joseph Vranich’s new book.

A former public affairs spokesman at Amtrak, Vranich has one thing to say about Amtrak — it’s a rolling disaster. The government-owned corporation now regularly requires nearly $1 billion a year in subsidies. It is drowning in debt. Two years ago it mortgaged New York’s Penn Station for $300 million to pay three months’ operating losses.

Nearly empty trains roll through Iowa and Montana, subsidizing passengers at a rate of $300 per ride. Meanwhile New York’s cross-Hudson tunnels are a disaster waiting to happen because Amtrak won’t spend the money to improve fire protection and escape routes.

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Forum: The U.N. – An Economic Menace

The United Nations fancies itself a vehicle that reduces global poverty and increases economic wellbeing. But, in fact, the U.N. advocates policies that will do the opposite. U.N. reports and committees issue a steady stream of demands for tax increases. Most would fall on Americans and citizens of other very successful countries, with revenues given to the U.N. and leaders Read More ›