Real Wealth Society

Saturday, October 21, 2006

I’ve been thinking about reconciliations by Fred Cederholm

Column for on/after Oct 15th, 2006

I’ve been thinking about reconciliations. Actually I’ve been thinking about bank statements and press releases, the budget deficit, the national debt, the current deficit, foreign advances, and bank overdrafts.

Individuals/citizens/voters shouldn’t believe what they hear/read/see because the information cannot be taken at face value. Things are not what they might seem from what we’ve “learned.” This is particularly true in election years - when the DC incumbents are running-on/running-from their records.

You see during this past week I learned (or at least became aware) of a number news worthy items which got me thinking and reconciling. This is the forensic accountant part of me. At first blush the news “factoids” – facts in the context of their presentation - appeared to be of a positive nature, but in the wider context of what I already knew about related matters; the opposite was true. Receiving these news items was like receiving a monthly bank statement of a checking account, the “balance” shown was not the real deal – there was reconciling to consider which would greatly alter the picture of reality.

It was heralded from the White House that the “budget deficit” for Uncle $ugar’s fiscal year just ended on September 30th was below $250 BILLION! This was a lot less than was projected/expected. That would seem to be good news, but I knew that the number being presented was a bad way to analyze the Federal Government’s performance for the fiscal year just ended. The budget deficit is a net number - much like the ending balance shown on bank statement before any reconciling items were considered.

A truer benchmark of fiscal responsibility and performance was what had happened to the national debt during the same period. On 09-29-2006 the “debt stood at $ 8.507 TRILLION after beginning the fiscal year at $ 7.933 TRILLION. Now… the increase to the outstanding debt of $ 574 BILLION was a far cry from the $ 248 BILLION budget deficit being hyped. One must realize that the budget deficit is the difference between all monies appropriated (and paid) versus all the monies taken in by Uncle $ugar. Employers and employees had over-paid into the Social Security Trust Fund some $ 180 BILLION, but THAT surplus was tossed into the General Fund “kitty” and spent elsewhere.

The picture actually gets worse than what you just read. Because the total national debt for the fiscal year grew by $ 574 BILLION, the budget deficit was reported at $ 248 BILLION, and there was some $ 179.9 BILLION of Social Security SURPLUS; an additional $146.1 BILLION of surpluses from other designated trust funds were raided/spent on things other than their legally mandated purposes. Because these are designated trust funds and the overpayments into their “accounts” were not spent as required by their enabling legislation – make that as required by law – the funding may be pre-paid, but the future obligations/liabilities are still there. Hence, total debt/obligations grew by the $574 BILLION.

The trade figures for the month of August 2006 also came out last week, but they didn’t get a lot of fanfare. You probably didn’t see (or even hear anything about) them. The August numbers again contained record highs. While our exports of goods and services increased by $2.7 BILLION over July 2006, our imports of goods and services increased by $4.6 BILLION over that prior month. The total exports of $122.4 BILLION and the total imports of $192.3 BILLION were records. Our August deficit with China was $21.96 BILLION, with Japan was $7.47 BILLION, with Mexico was $ 6.22 BILLION, with Canada was $6.08 BILLION, with Germany was $4.19 BILLION, with Venezuela was $3.07 BILLION, with Malaysia was $2.35 BILLION, with Saudi Arabia was $2.34 BILLION, with Nigeria was $2.22 BILLION, and with Ireland was $2.15 BILLION. Not ALL of those were monthly records!

The $69.9 BILLION current deficit WAS a record. This meant that US/us consumed $2.25 BILLION more in foreign goods and services PER DAY than we sold to them during the month of August alone. Those foreign entities “financed” that difference for us. Note well: that this one month’s increase of almost $70 BILLION in our “accounts payable” to them for our August UBER-consumption of their various and sundry “stuff” (a big portion of which was crude oil and petroleum distillates) is NOT reflected in the August 2006 increase to our outstanding national debt of $79 BILLION.

When you have the cavalier “ability” to keep raising the ceiling on the national debt, to keep printing fiat money, to keep “transferring” the designated trust fund surpluses (using them for whatever), and to keep drawing on the largesse of foreign off-the-books (memorandum entry only) financing for your trade deficits; it’s just like: “Hey, I can’t be overdrawn, I’ve got plenty of checks left!” I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.
Copyright Questions, Inc. 2006 all right reserved.

To audit the column and to learn more about the items discussed, please check out:

Debt to the Penny and Who Holds It

Interest Expense on the Debt Outstanding (by month)

Status of the Social Security and Medicare Programs (2006 Summary)

The 2006 OASDI Trustees’ Report

US Census Bureau: Monthly trade highlights

Top Ten Countries with which the US has a trade deficit

Daily History of the Debt Search results


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