The Biggest Ponzi Scheme on the Planet-The U.S. Government
"American Economic Exceptionalism Explained"                     USAPonzi                                      by John W. White   Mar 29, 2013

The U.S. Government is "Juicing the Economy!"
As a result "We are in one hell of a pickle!"
July 20, 2015
As posted on www.usaponzi.com 


The U.S. Government is "Juicing (stimulating) the U.S. and Global Economy" by spending a lot more than it is collecting in taxes.  If an entity (person, business, government, etc.) spends more than its income, called deficit spending, the entity appears to be more prosperous and wealthy than it really is but this also causes the entity go into debt.  The U.S. Government has been doing this at an exponentially increasing pace since 1969.


The U.S. Government is "Juicing the U.S. and Global Economy" by spending more than the U.S. taxpayer can afford, by committing to spend much more than the U.S. taxpayer can afford, and by intentionally undertaxing the U.S. taxpayer.  Since LBJ convinced the Congress to adopt the "Unified Budget" for FY1969, the U.S. Government has been dramatically undertaxing the U.S. citizens and businesses relative to what the U.S. Government is spending and committing to spend (See Is the U.S Government Overspending or Undertaxing?).  This has created US Unfunded Liabilities (Debt + Unfunded Future Liabilities that are primarily for social benefit promises) of $97.1 Trillion as reported by www.usdebtclock.org.


The U.S. Government is paying the direct and indirect Government employees more than the U.S. taxpayer can afford.  The U.S. Government is paying the social benefit recipients much more than the U.S. taxpayer can afford.  The U.S. Government is dramatically undertaxing the current taxpayer and deferring the resulting GAAP basis Deficit to the future U.S. taxpayer.  This means that the U.S. Government is giving essentially every U.S. citizen extra money, counterfeit money, to spend every year either by overpaying them or by undertaxing them.


With GAAP basis Deficit Spending in FY2015 of $5.5 Trillion as reported by www.usdebtclock.org, this means that, on average, the U.S. Government is giving $17,134 to each U.S. citizen this year ($5.5T/321 million citizens = $17,134).  The shrewdest of the citizens, for example Warren Buffett ($63B Net Worth) and Donald Trump ($4-10B Net Worth), have figured out ways to get a dramatically larger than average share of this windfall counterfeit money of $97.1 Trillion that the U.S. Government has distributed to the U.S. citizens and businesses with this Ponzi scheme since FY1969.


The cumulative effect of the GAAP basis Deficit Spending since FY1969 has produced $97.1 Trillion of US Unfunded Liabilities (GAAP) as posted on www.usdebtclock.orgThe U.S. Government has simply given the U.S. citizens and businesses $97.1 Trillion of counterfeit money by undertaxing them and falsely claiming that the future U.S. taxpayer will somehow come up with the $97.1 Trillion to pay these social benefit promises and to pay off our National Debt.  And these Public Liabilities are increasing by $15.1 Billion every day because of this GAAP basis Deficit Spending.  Our GAAP Deficit for FY2015 is $5.5 Trillion and $5.5 Trillion/365 = $15.1 Billion per day.


This "Juicing of the Economy" causes our GDP to be about 1.6X (37% of our GDP is stimulus induced) what it would be if the U.S. Government was taxing the current U.S. citizens and businesses enough to cover the spending and the committing to spend of the current fiscal policy (see U.S. "Real" GDP FY2015 with $5.5T Deficit).  GAAP basis Deficit Spending is what is
artificially stimulating ("Juicing") the U.S. and Global Economy.


The overpaying of the direct and indirect Government employees is giving many of these Government workers a comfortable to opulent standard of living that the U.S. taxpayer cannot afford and is not sustainable.


The overpaying of the social benefit recipients is giving the people receiving these social benefits a minimal to decent standard of living that the U.S. taxpayer cannot afford and is not sustainable.


The undertaxing of the upper class U.S. citizens and businesses is giving the upper class an opulent to super opulent standard of living as well as making them rich to super rich.  This is fraud!   This is corruption!   Why should the U.S. Government give the upper class an opulent, even super opulent, lifestyle and make them rich, even super rich, at the expense of the rest of the U.S. citizens by not funding the social benefit promises?   The upper class U.S. citizens and businesses get the economic benefit of the "Juicing of the Economy" but they do not have to pay the taxes required to sustain this stimulus/juicing.


The U.S. Government is not collecting the tax revenue required to pay the future social benefits that the U.S. Government is promising.  By assessing and reporting our budget deficit with Cash Accounting, the U.S. Government does not have to openly disclose just how much it is overspending, overcommitting, and undertaxing.  According to proper GAAP Accounting, the U.S. Government should have $78.8 Trillion in the bank, earning interest, to pay the currently promised social benefits.  The U.S. Government has nothing in the bank to pay these benefits and in fact the U.S. Government is in debt by $18.3 Trillion.  The U.S. Government is making social benefit promises that it cannot deliver and is not funding these promises.


The U.S. Government cannot continue to pay Social Security at the currently promised levels.  The U.S. Government cannot continue to pay Medicare and Medicaid at the currently promised levels.  If the U.S. Government intends to pay social benefits it must start funding these social benefit promises.


The U.S. Government is promising a fantasy world wherein all U.S. citizens and businesses appear to get massive financial benefits from our current fiscal policy without having to pay for most of these benefits.   And the sad part is, almost everyone believes the U.S. Government!   What a bunch of suckers we are!


The U.S. Government is deferring these Unfunded Future Liabilities and the National Debt to the future U.S. taxpayer who cannot pay these liabilities.


Because the current U.S. citizens and businesses did not pay $97.1 Trillion of Unfunded Liabilities the most prosperous U.S. citizens appear to be getting really rich and the most prosperous U.S. businesses appear to be really profitable.  $97.1 Trillion of counterfeit money can make a lot of people appear to be very rich and can make a lot of businesses appear to be very profitable.


Because the U.S. Government is using Cash Accounting rather than the proper GAAP Accounting and is also overspending its cash receipts, the future U.S. taxpayer is getting a huge and unpayable tax bill, the Government employees are getting overpaid, the social benefit recipients are getting overpaid, the upper class citizens appear to be getting super rich, the upper class U.S. businesses appear to be very profitable, there is not any money in the social benefit trust fund to pay the $78.8 Trillion worth of social benefits that have been promised to the future social benefit recipients, and the U.S. Government has $18.3 Trillion of Debt.


We are in one hell of a pickle!


So what is stimulating the U.S. and Global Economy?


There are several factors that contribute to this stimulus.  On a macro basis it is caused by GAAP basis Deficit Spending, $5.5 Trillion in FY2015, but let's try to understand this stimulus at a little more detail level.


1) The U.S. Government is paying the Government employees more than the U.S. taxpayer can afford, so they have extra money to spend.

2) The U.S. Government is paying the social benefits recipients much more than the U.S. taxpayer can afford, so they have a lot of extra money to spend.

3) The U.S. Government is not collecting the taxes to pay for the over payment of the Government employees, so the taxpayers have extra money to spend.

4) The U.S. Government is not collecting the taxes to pay for the future social benefit promises, so the taxpayers have a whole heck of a lot more money to spend.

5) The U.S. citizens and businesses have a lot more money in their pockets, $97.1 Trillion, to spend into the day to day economy or to appear to create private wealth.


GAAP Accounting tells us just how much the U.S. taxpayer has been undertaxed, $97.1 Trillion according to the US Unfunded Liabilities (GAAP) posting on www.usdebtclock.org.


But the economic stimulus does not stop there.


Stimulus begets Stimulus!


Because of the stimulus to the economy as described above, the economy is creating more jobs, more products, more profits, more income, which means more tax revenue for the U.S. Government.  This makes the U.S. Government think it has more income to spend so it spends it creating even more stimulus.


This is the kind of stimulus that caused Bill Clinton to appear to be a very smart President from an economic viewpoint in the late 1990s.  The USAPonzi scheme created enough artificial economic activity and counterfeit wealth to cause a bubble in the internet stocks that produced enough artificial wealth for a couple of years that the tax revenues from that artificial wealth creation caused enough of a bubble in the tax revenue stream to give the appearance of a budget surplus.  It was not anything that Bill Clinton did to create this budget surplus, it was just one of the major distortions caused by the corrupt and fraudulent fiscal policy that LBJ introduced in FY1969 (see The Oswald Financial Bubble!).


We should now know that this was only a Cash basis surplus and not a GAAP basis surplus and in fact the National Debt increased throughout that time period even though the Government was reporting a budget surplus.  Because the U.S. Government is spending all tax revenues every year and because of the way the U.S. Government does its accounting, it could report a Cash basis budget surplus for a couple of years even though the National Debt continued to increase each and every year.  This is because the U.S. Government spends all incoming tax revenue and does not fund the social benefit trust fund.  The U.S. Government is spending the tax revenue that should be funding the social benefit trust fund to pay for future social benefits.


The U.S. Government tries to make us think things are getting better by telling us that they are reducing the deficit.  Reducing the deficit, as reported by the U.S. Government, just means that our financial condition is continuing to get a whole lot worse but at a slightly slower pace.   And the U.S. Government is measuring their progress toward balancing the budget on a Cash basis when they should be measuring their progress on a GAAP basis.  Our "real" deficit is our GAAP Deficit which is $5.5 Trillion in FY2015 and the GAAP Deficit is increasing exponentially.


The U.S. Government is "Cooking the Books"!


We are also getting this benefit of artificial tax revenues from artificial economic activity today, it is just not as visible as it was during the "Internet Bubble".  The USAPonzi Fiscal Policy is creating artificial economic activity for the reasons enumerated above, which I estimate to be about 37% of our GDP (See U.S. "Real" GDP FY2015 with $5.5T Deficit) and on a macro basis we get tax revenues at a rate of about 17.7% of GDP so a fair chunk of our tax revenue, about 37%, is artificial tax revenue.


The U.S. Government reports that we will have a Cash Deficit of about $0.5 Trillion for FY2015 but our "real deficit" is our GAAP Deficit and according to www.usdebtclock.org, it is $5.5 Trillion for FY2015.  However, our tax revenues in FY2015 are expected to be $3.1 Trillion and about 37% of that tax revenue is created by the artificial economic stimulus of Deficit Spending so our sustainable tax revenue is overstated by $1.15 Trillion (0.37x$3.1T=$1.15T) therefore both our Cash Deficit and our GAAP Deficit are understated by nominally $1.15 Trillion.  This means that our "Real" GAAP Deficit is more like $6.65 Trillion ($5.5T+$1.15T=$6.65T) in FY2015.


The U.S. Government is dramatically stimulating the U.S. and global economy by spending and committing to spend massive amounts of money,
counterfeit money, that the U.S. Government is borrowing from the future U.S. taxpayer.  The U.S. Government has already borrowed $97.1 Trillion and is borrowing $15.1 Billion more every day from the future U.S. taxpayer.


The U.S. Government has borrowed
$97.1 Trillion from the future U.S. taxpayer so that it can give it to the current U.S. citizens and businesses.  No wonder so much of the rest of the planet is irritated with the United States of America; the U.S. Government is creating counterfeit money out of "thin air" to give to Americans
so that we can appear to be prosperous and wealthy.  We are not nearly as exceptional or as prosperous or as wealthy as we think we are.   We just appear to be exceptional, prosperous, and wealthy because we have a corrupt and fraudulent U.S. Government that is "Juicing the U.S. Economy".


The U.S. financial crisis that this Ponzi scheme has caused is 9X more serious than the Greece financial crisis!


See The Implosion of USAPonzi for what I predict will have to happen when USAPonzi implodes.


See The Distortions of USAPonzi for a discussion of some of the issues that USAPonzi is causing in the global economy.


The U.S. Government is operating USAPonzi;

"The Biggest Ponzi Scheme on the Planet"!!!!