Ed Henry: Silent War.. The Bomb Is In The Treasury
THE BOMB IS IN THE TREASURY
By: Ed Henry
Inside Washington, there's a war going on that is not being covered by anyone. While the Bush administration is determinably marching to war, buying and strong-arming leaders of friendly nations to go against the democratic will of their people and coming up with the up-front bounty to pay others like Turkey, it has been six days running since we hit the national debt ceiling.
On Thursday, February 20, 2003, the federal government closed the day $25 million below the debt limit and it has been holding there ever since. It should be noted that the cash interest paid investors requires approximately $500 million per day plus the normal expenditures under the new fiscal 2003 budget finally approved a week or so ago. At least, we are not running on "continuing resolutions" any more, last year's budget.
This means that Secretary of the Treasury John Snow is running in all directions to put together money to operate the government. Coming in all the time are personal and corporate income taxes, payroll taxes, excise taxes, and so forth, but we've never been able to live within those limits. In the last sixteen months, the Bush Administration has borrowed an additional $638.7 billion, averaging about two billion a day. It is absolutely impossible to do this now.
Previously, a situation like this has been preceded with great fanfare, fear, and journalistic bugaboo, but today there's nothing. The media hasn't even noticed, probably because their Mayberry sources are keeping their mouths shut. No one wants to talk about a shortage of money while others are questioning the cost of war and not thinking about what it has cost us already.
Worst of all, there is no legislation pending to raise the debt limit, nothing except a bill that's been around since January 7th and a budget proposal from the President for fiscal 2004 that contains the idea of eliminating the debt ceiling altogether. Congress, the Speaker of the House, and probably the Majority Leader of the Senate have all received memos from Snow urging them to act quickly, but it seems to fall on deaf ears. Nothing has even been scheduled for discussion of the debt limit.
It could be that the democrats and some of the republicans are deliberately holding out to teach Bush a lesson and perhaps avenge what the republicans did in 1995 when we had threats of default and government shut downs with "nonessential" employees taking a paid-later vacation.
You should all remember Newt Gingrich with his "contract with America" in his pocket claiming that he didn't care if the government went bankrupt and former Secretary of the Treasury Lloyd Bentsen detailing the national and international disaster default would entail. The national debt stood at $4.9 trillion at the time. That was seven years and $1.5 trillion ago.
The fact that we've reached the debt limit doesn't mean that all financial activities have stopped. The government is still selling securities on the "bond market" and as long as these new issues do nothing more than replace securities maturing at the rate of about $5 billion a day, everything will be all right. They could theoretically hold below the debt limit forever if the Treasury merely replaced these maturing securities and did not spend more than the tax money coming in. Do you think our government could do that? Not a chance. Not even in peaceful times.
So how are we going to conduct a war and an occupation with the credit card declined? Do you think Tony Blair is going to come to our rescue with some pounds sterling?
All the other times we've been at the debt limit with Congress doing its grandstand balking, we were warned that the Treasurer would raid the Federal Employees (FERS) retirement money. But the Federal Employees Retirement Insurance trust fund is in exactly the same position as the Social Security trust funds-no money, just a load of junk bonds or claims on future tax receipts that will be in the Treasury's general fund someday paid by tomorrow's taxpayers. The Pay-It-Again Sam scam with interest added.
The one place where there's some real assets to grab is the Federal Employees Thrift Saving Plan trust, one of the few real trust funds that the government operates. Standing at about $44 billion in assets, this is the source of temporary money for John Snow. But the holdings, investments that returned 17 percent last year despite the economy, must first be liquidated.
Not all of this money is in stocks, but you can bet your boots that most of it is. Thus, you can expect some surprises at the New York Stock Exchange as the government begins to dump billions in stocks. Of course, the news media will report this as something else since they never know why stocks go up or down and most of their guesses are off the mark. But now you will know.
Meanwhile, President Bush is salting his daily television appearances with talk about his "stimulus package" for eliminating dividend double taxation. What he claims will stimulate spending and investment for his business buddies, hopefully spending in our own country.