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    Political Accounting Gimmicks are Destroying America

    05/06/2012
    Democracy and Power 108: Obfuscation

    Wherever politics intrudes upon economic life, political success is readily attained by saying what people like to hear rather than what is demonstrably true. Instead of safeguarding truth and honesty, the state then tends to become a major source of insincerity and mendacity. – Hans F. Sennholz

    Political Accounting Gimmicks are Destroying America

    Charles Blahous is a very competent and dedicated public policy expert and a trustee of the Social Security and Medicare programs. Blahous recently published, "The Fiscal Consequences of the Affordable Care Act" – aka ObamaCare.  The report exposes an accounting gimmick – used regularly by government – which “cooks the books” by counting additional revenues and restraints twice on Medicare to pay for ObamaCare.  In plain English, the additional tax revenue only pays for one of the programs – either Medicare or ObamaCare, not both.  Blahous writes in the Wall Street Journal:  

    The government now has on its books two large, expensive and permanent entitlement commitments—the health law's premium subsidies and the Medicare hospital insurance program—yet Congress has only identified enough resources to pay for one of them.

    Tragically, accounting gimmicks are regularly used by politicians – Democrats and Republicans -always seeking re-election.   Politicians give more benefits to today’s voters placing the debt burden on future workers – even the unborn.  Therefore, in order to disguise the debt, politicians use deceptive accounting methods.   Bluntly, politicians buy votes today and intentionally “cook the books,” which has created an enormous and dangerous national debt.

    Beyond accounting gimmicks, politicians manipulate labels.  They contort plain English, e.g. tax increases are labeled spending cuts.  This is immoral, and a great threat to democracy, freedom and prosperity.  Not to mention trust.

    Every competent participant in DC knows this deceit is occurring.  There have been attempts to “come clean” on the actual debt, but “politics as usual” prevails and snuffs reform.  Laurence Kotlikoff, an economist at Boston University, has been a wise voice on the dangers of government debt for a long time. In 1993, he was recruited by the Clinton administration to correctly measure the national debt.  His next attempt was during Bush II;s administration. 

    These scholarly studies exposed an exploding debt and should have halted the political gimmicks and manipulations of our elected officials.  Of course, as usual,  the political expediency of the moment prevailed and the studies were buried by Clinton and Bush II.  [Read: When Pretending Fails to Hide Bankruptcy]

    In 1993, Kotlikoff and other economists were asked by Alice Rivlin of the Office of Management and Budget to analyze the fiscal gap.  After months of study the report exposed rapidly increasing debt. However, the report was never published.  It was squashed by the Clinton Administration, which didn’t like the negative repercussions.  The next attempt was by Treasury Secretary Paul O’Neill in 2002.  O’Neill and the report were annihilated in favor of pushing tax decreases and prescription drugs. 

    Thus, two decades ago competent politicians recognized the dangers of the national debt.  They knew they were immorality taxing future generations, and competent politicians knew the exploding debt would cause economic stagnation.  Horrifically, Republicans and Democrats spent, spent and spent some more.  Worse, they manipulated accounting and the English language to deceive Americans about the exploding debt.  The politicians completely ignored an honest and correct accounting system.  Again, Kotlikoff:

    It’s only the value of the infinite horizon fiscal gap that is unaffected by the choice of labels of language. Take this year’s payroll tax contributions. Let’s call these transfers from workers to Uncle Sam “borrowing” by the government, rather than “payroll taxes,” since the money will be paid back as future benefits. If the future payback isn’t in full (equal to principal plus interest), we can call the difference a “retirement tax.” Presto! With this change of words, our 2011 deficit of about 10 percent of GDP is boosted another five points to 15 percent.

    Today, Charles Blahous has exposed the latest manipulation and deceit by America’s political elites.  Two decades ago, Laurence Kotlikoff proposed an accounting alternative that honestly states the national debt.  Thankfully, two competent scholars have exposed the political duplicity.  As scholars, Blahous and Kotlikoff have calmly presented the facts.  Contrary to the politicians, Blahous and Kotlkoff have not demagogued, inflamed or distorted the truth.

    Now, We the People must elect honest, competent and moral politicians.  People dedicated to transparent accounting and reducing the debt.