The Worst Economy of Our Lifetime (Part Three)

By Hale Stewart, Huffington Post. Posted November 9, 2007.

Republicans stand for "fiscal conservatism", meaning they believe in smaller government and balancing the books. At least, that's what they say. The underlying reality is far different. Bush has yet to balance a budget. In fact, he has yet to come close to balancing a budget. In fact, Bush has yet to even get moderately close to maybe possibly balancing the books one day.

First, Bush has cut taxes twice -- once in 2001 and once in 2003. Working off the standard "supply-side" economic theory he thought this would create a huge wave of tax revenues. The problem is it didn't. Here is a chart from the Federal Reserve of St. Louis which shows the year over year change in Federal government receipts. Notice there is no meaningful change between the 1980s and 2000s (the great supply side experiments) and years when supply side policies were not in place.

(click for larger version)

Now, here is a chart of federal receipts and expenditures. Expenditures are in blue and and receipts are in red. Notice the two lines have yet to meet.

(click for larger version)

"But we're hearing the deficit is low! That means things are great!"

OK -- let me ask you a very basic question: If you balanced your checkbook every month would you need to borrow money? The self-evident answer leads to this chart of total federal debt outstanding.

(click for larger version)

Here are the actual year end totals of federal debt outstanding from the Treasury Department.

09/30/2006          8,506,973,899,215.23

09/30/2005          7,932,709,661,723.50

09/30/2004          7,379,052,696,330.32

09/30/2003          6,783,231,062,743.62

09/30/2002          6,228,235,965,597.16

09/30/2001          5,807,463,412,200.06

The current total of debt outstanding is: $9,084,273,781,557.64

So -- what gives with this? Why are we issuing all of this debt?

The problem is FICA taxes. These are the taxes that are withheld from paychecks to go into the Social Security Trust Fund. These funds are supposed to be saved for future generations. And they are -- in the form of federal debt. Here is a chart of all debt held in agencies and trust from the St. Louis Federal Reserve.

(click for larger version)

The Republicans are spending social security money now, hoping no one will notice. And so far they're getting away with it. But intra-governmental debt is still debt. It has a legal priority claim on government revenue and must eventually be paid.

And that, ladies and gentlemen, is the real story of Republican rule. They haven't come close to balancing the books. Instead, they have borrowed from the social security trust fund of mask mammoth deficits.

From the party that brought you Enron.....

See more stories tagged with: bush, economy, taxes, budget

Hale "Bonddad" Stewart is a former bond broker with several regional firms. He has been involved with the financial markets since 1995. He currently practices law in Houston, Texas. Stewart is the proprietor of the Bonddad Blog.