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

USAPonzi in a Nutshell V2
The Goose that is laying Golden Eggs!
Oct 1, 2014


The U.S. Government is spending and committing to spend much more money each year than the U.S. taxpayers are sending to Washington.  Furthermore the accounting system that the U.S. Government is using to manage our finances does not properly reflect the magnitude of this overspending and overcommitting.  The Government currently reports how much more cash they are spending each year than the taxpayers pay into the Government which is our Cash Deficit.  The Government also reports how much more cash they have spent over the years than the taxpayers have paid into the Government which is our National Debt.


However, part of the money that taxpayers pay to the Government each year is intended to pay future social benefit commitments for Social Security, Medicare, Medicaid, Disability Insurance, etc. and this money should be held in trust funds to earn interest income so that these future social benefits can be paid when they are due to the beneficiaries.  Since FY1969, the U.S. Government has been spending all of the money that comes into the Government each year (plus some more) and as a result the funds required to pay these social benefits do not exist, creating what is called Unfunded Liabilities.  As of October 1, 2014 the present value of these Unfunded Liabilities is $80.4 Trillion which when added to our National Debt of $17.7 Trillion yields a total GAAP Obligation of $98.1 Trillion.


The U.S. Government's current accounting system does not properly assess the total amount of taxes that the taxpayers should be paying to the Government to be able to pay not only our current year bills but also to properly fund the trust funds for the current social benefit commitments.  Because of this, the current and previous taxpayers have paid much less tax than is required to pay for the social benefit commitments that the Government has made.  In general, the people that should be paying these taxes are the wealthy citizens and businesses and since they do not pay these taxes, they appear to be even wealthier and the businesses appear to be more profitable and valuable than proper accounting and taxing would indicate.  Since 1969, this undertaxing of wealthy citizens and businesses has totaled $98.1 Trillion so these citizens and businesses appear to be $98.1 Trillion wealthier than proper and sustainable accounting and taxing would reflect.


As a result of this undertaxing of current and previous taxpayers, the U.S. Government now has promises to pay back not only the National Debt of $17.7 Trillion but also has commitments to pay $80.4 Trillion of social benefits to U.S. citizens when it does not have any money in the bank or in the trust funds to meet these payments when they come due.  Furthermore these commitments that the U.S. Government has made are increasing by $6.9 Trillion this year (FY2015) when the taxpayers are only expected to pay taxes of $3.1 Trillion this year.  Therefore, current taxpayers are paying less than one third of what the U.S. Government is spending and committing to spend.


This Debt of $17.7 Trillion and Unfunded Liabilities of $80.4 Trillion for social benefits has been left to be paid for by future taxpayers and the Government is already spending even more cash money each year than the current taxpayers are paying to the Government.  Every year the amount owed by these future taxpayers goes up by more than twice the amount that the current taxpayers are paying to the Government.  This of course means as long as the Government continues to spend, to commit to spend, and to tax the U.S. citizens and businesses at current levels, our National Debt and our Unfunded Liabilities will continue to increase dramatically and exponentially.


The only way to resolve this budget imbalance is to do some or all of the following: 1) reduce the size of the social benefit commitments that have been made to U.S. citizens, 2) reduce the rate of spending by the U..S. Government, and/or 3) increase the tax rates for U.S. citizens and businesses.


Because the U.S. Government is spending and committing to spend much more money than the taxpayers are paying to the Government, this creates what is called "deficit spending". This is just like what happens when a family spends more than their income, it looks like they are more prosperous than they really are but they are also going into debt to buy things they cannot otherwise afford.  This deficit spending by the U.S. Government causes the U.S. and global economy to look like we are doing much better than we really are, causes U.S. citizens and businesses appear to be much wealthier than they really are, causes U.S. businesses to appear to be much more profitable and valuable than they really are, and also causes the U.S. Dollar to become less valuable every year, i.e. it causes inflation.



At some point, the people that are buying the U.S. Treasury bonds that we sell to finance our National Debt (our Unfunded Liabilities will transition to debt as the social benefit commitments come due) will come to realize that there is no way the U.S. Government can pay this ever increasing National Debt and Unfunded Liabilities and they will stop buying U.S. Treasury bonds.  This will likely occur somewhat gradually at first as investors will require higher and higher interest rates on these bonds but at some point they will likely stop buying these bonds altogether unless the U.S. Government takes the steps necessary to properly balance the Federal Budget.


Even now the Federal Reserve Bank is purchasing some of these bonds and other related financial instruments (called Quantitative Easing) to keep the interest rates low on these bonds.  In effect, we are buying these bonds from ourselves to minimize the financial impact on the Government's borrowing costs and to keep the interest rates low so that individuals and businesses can gain access to low cost capital in an effort to further stimulate economic activity.


The current fiscal policy of the U.S. Government has created a massive Ponzi scheme, that I have named USAPonzi (see www.usaponzi.com), since to meet the current spending desire of the U.S. Government and to meet the current social benefit commitments to U.S. citizens will require an ever increasing amount ot tax revenue from future taxpayers which today is $98.1 Trillion and increasing by $19.0 Billion every day.


The U.S. economy, and in fact the global economy, is living on a Giant Credit Card that currently has an outstanding balance due of $98.1 Trillion and the U.S. Government is borrowing another $19.0 Billion every day.  And this $19.0 Billion that the Government is borrowing daily, from future taxpayers, is more than twice the Goverment's daily income of $8.5 Billion.  How long do you think your credit card company would let you borrow money from them at this rate if they knew that your financial situation was in this condition?   We are borrowing 2X our income every day just to maintain our current lifestyle.


And then when the Government borrows this money from the future taxpayers (they are the people that are on the hook to pay off this credit card) the Government immediately gives that money to the people that need it the least, the wealthy citizens and businesses in the form of unpaid taxes.  That is why the Government officials and the wealthy citizens and businesses do not want to expose this massive Ponzi scheme.  This corrupt and fraudulent accounting system, run by a lawless U.S. Government, is appearing to make these Government officials and the very wealthy even wealthier.  But at the same time it is making it more difficult for the eldery, the poor, and the very poor since wages and social benefits are not increasing at the same rate that the U.S. Dollar is losing purchasing power which over the last 46 years has been nominally 5% per year.


The elderly and the underprivileged should be told that the U.S. Government is only pretending to commit to these social benefits.  If the U.S. Government was really serious about paying the social benefits commitments that it is making to the elderly and the underprivileged, it would be collecting real money from the wealthy citizens and businesses to make good on the social benefit payments.  As it is, the social benefit commitments are just $85.4 Trillion of empty promises ($80.4 Trillion of Unfunded Liabilities and $5.0 Trillion that has been borrowed from the social benefit trust funds and spent to finance the U.S. Government's outrageous spending and enhance the lifestyles U.S. citizens).


We are unlikely to get this corrupt and fraudulent accounting system corrected any time soon because the decision makers that approve this fiscal policy are getting their pockets lined with the counterfeit money that this scheme is creating.  It is of course phantom money, since it is a massive Ponzi scheme, but at least for now it looks like the people that run the U.S. Government and work for the U.S. Government, either directly or indirectly, will continue to get their compensation largely from this counterfeit money, the 1%ers will continue to appear as if they are getting richer every day, and the elderly and the underprivileged will in fact be getting poorer every day.


This is why we have a stalemate in Washington over how to resolve this fiscal policy crisis; neither side wants to "kill the goose that is laying the golden eggs"!!!


Next Page: The Anatomy of USAPonzi


Alternative Next Page: USAPonzi in a Nutshell V1 
The same basic message this commentary but with more direct language.