PART ONE - Earth Emergency

1、How So-called Experts Mislead Us about the Economy Richard A. Stimson Playing with the Numbers 2 Published by Westchester Press 2132-G Crossing Way High Point, NC 27262 (336) 884-1038 E-mail: W Copyright 1999 by Richard A. Stimson All rights reserved Library of Congress Catalog Card Number: 99-93764

2、 ISBN 0-9671232-6-7 Printed in the United States of America 3 CONTENTS Part One: Miscounting Growth, Efficiency, And Debt 1. Who Are The Economic Experts? 1 2. Faulty Wisdom . 6 3. Measuring Growth 10 4. False Boom Of The Eighties . 17 5. Deficits And Debt . 24 6. Social Security As Scapegoat 34 7.

3、Whose Welfare? . 39 Part Two: Nonsense about Taxes and Income Distribution 8. The Illusion Of Tax Cuts 45 9. Beware Of Tax Reform And Simplification . 49 10. Is The Tax Burden Shared Fairly? . 55 11. The Strange History Of Capital Gains . 62 12. Should Corporate Income Tax Be Abolished? 67 13. Can Y

4、ou Take Tax Shelters With You? . 70 14. The Flat Tax As The Ultimate Simplification 73 15. The Growing Gap Between Rich And Poor . 77 Part Three: Propaganda Of The Privateers 16. Decentralization Of Government . 86 17. Deregulation . 93 18. Privatization . 110 19. Saving America From Government Heal

5、th Care . 130 20. Why Unemployment Exists . 137 21. Downsizing And Downgrading .145 22. Old Theories In New Clothing .150 Part Four: The Awesome Power Of Bankers 23. The Unelected Rulers Of The U.S. Economy 155 24. The Bugaboo Of Inflation .161 25. The Trouble With Banks 168 26. The Great S they wer

6、e accumulating debt, plunging deeper into the markets, seeking ever-greater personal gains. At the same time, real capital spending, which induced genuine economic growth, was declining. In the end the merger craze and piles of new debt it induced did not improve the nations industrial capacity and

7、competence. It did not result in overall economic benefit to the nation.” The secret financial crisis Economist John Kenneth Galbraith predicted in the January 1987 Atlantic that eventually the wave of mergers and corporate debt they created would be “regarded as no less insane than the utility and

8、railroad pyramiding and the investment-trust explosion of the 1920s.”30 That following October the bubble burst as record losses were recorded on the stock exchanges of Tokyo, Rome, Frankfurt, Amsterdam, Paris, London, and New York. On Wall Street, stock market prices had dropped 22.6%, almost doubl

9、e the record losses in the crash of 1929. Most people never realized the extent of the disaster that hung over the New York Stock Exchange and the worlds financial system. Haynes Johnson noted the irony that “what kept 87 from turning into another 29 was the very hand of the federal government that

10、Reagan and the supply-siders had railed against.” As the stock exchanges were on the brink of closing down, the 23 Federal Reserve announced a reversal of its tight money policy and provided funds that enabled banks to extend credit to troubled Wall Street firms. 31 24 5. DEFICITS AND DEBT It would

11、be reasonable to think that the national debt is simply the accumulation of past deficits, but because of government accounting peculiarities it is not true. On February 3, 1998, newspapers printed a photograph distributed by the Associated Press of President Clinton and Vice President Gore flanking

12、 a big placard: “1999 Federal Budget Deficit $0! A Balanced Budget.” That implied the national debt would stop rising, didnt it? Not necessarily. I added up the federal deficits for 16 years from fiscal years 1981 through 1996 for total deficits of $3.030 trillion; then I subtracted 1996 national de

13、bt from that of 1980 for the 16-year increase in debt and got $4.315 trillion. Therefore, total deficits were $1.285 trillion less than the increase in debt, as reported in the official government statistics. Whats wrong here? The general answer is that this is one of many ways government accounting

14、 dishonestly attempts to confuse the taxpayer. More specifically, politicians play games with what is “on-budget” or “off-budget.” For example, a bi-partisan tacit agreement kept the public in the dark about the extent of the savings and loan crisis until after the 1988 election and later arranged f

15、or the bailout to be off-budget. Costs that never showed up as expenditures in the budget were added to the national debt. Conversely, Social Security tax receipt surpluses reduced budget deficits but added to the debt when government bonds were issued for the trust funds. 25 The mania for budget ba

16、lancing Despite the unreliability of budget measures, a campaign promise is frequently made and broken to balance the federal budget, despite the fact that the public doesnt even know the true size of the deficit. The available figures do not make sense, because government accounting has its own rul

17、es. They are so different from generally accepted accounting principles that whenever CPAs do an independent audit of a governmental agency they use special wording much different from a standard opinion. Capital investment and current expenses are mixed together in government accounting. Also trust

18、 funds are mixed in with current operations. No business could operate with such accounting, and it leaves taxpayers without honest information about their government. Nevertheless, the idea that the government cannot keep borrowing without the same kind of disaster that faces a family living beyond

19、 its means is one that sounds like common sense. In his inaugural address President Reagan declared: “For decades we have piled deficit upon deficit, mortgaging our future and our childrens future for the temporary convenience of the present.We must act today in order to preserve tomorrow.”32 Even F

20、ranklin D. Roosevelt was elected president on a platform that promised to cut spending and balance the budget. Both Roosevelt and Reagan added considerably to the national debt, whether for good or ill. Presidents Nixon and Carter each reduced deficits but left office rather unhappily. In a December

21、 1995 column William Safire blamed the “deficit explosion” from $73.8 billion under Carter in 1980 to $290 billion in 1992 under Bush on “House Democrats” whose “spending binge” was “insufficiently resisted by Ronald Reagan,” omitting that the presidents own proposed budgets were not balanced. On at

22、 least one occasion, to force Congress to increase military spending, he refused to sign the appropriations bill and let the treasury run dry. In 1980 the federal budget spent 22.6% on 26 national defense and 27.8% on what OMB calls “human resources” (excluding Social Security and Medicare). By 1987

23、 the balance had approximately reversed to 27.6% on national defense and 21.6% on human resources.33 Alan S. Blinders 1987 book, Hard Heads, Soft Hearts, pointed out that spending other than interest took 20.4% of GNP in 1981 and 20.7% in 1985, making little change in spending relative to GNP, simpl

24、y shifting it away from civilian purposes toward the military. Total spending authorized by Congress in each year was extremely close to the presidents original budget submissions. See Wall Street Journal, Jan. 6, 1987. “Thus the Reaganite charge that spendthrifts on Capitol Hill caused the budget d

25、eficit simply wont wash.”34 The Gramm-Rudman-Hollings Act in 1985 was supposed to eliminate the deficit on a rigid five-year timetable, but a district court declared the law unconstitutional in February 1986. Before the case reached the Supreme Court each house of Congress passed a budget resolution

26、 purportedly achieving the $144 billion deficit ceiling, but President Reagan would accept neither budget, for each raised taxes and cut his request for defense. After the Supreme Court declared the law unconstitutional the House and the Senate, trying to comply with the spirit of the law, compromis

27、ed on a fiscal 1987 budget supposedly under the limit, but the president balked again on the defense cuts.35 By 1992 budget balancing had become a hot issue with third party candidate Ross Perot hammering away at it. Labor Secretary Robert Reich got an explanation on March 18, 1993, from Marty Sabo

28、D.-Minn., chairman of the House Budget Committee as to why Congressional Democrats wanted to cut spending even more than the President recommended. “As long as the Republicans were in the White House, the business community didnt talk about the budget deficit,” Sabo said. When big business saw Democ

29、rats about to take over the White House along with both houses of Congress, he added, they figured they wouldnt get more military spending “and certainly no more big tax cuts for corporations or for the wealthy.Suddenly all they 27 want to talk about is the national debt.” When Reich asked about the

30、 Democrats in Congress, Sabo declared: “Were owned by them. Business. Thats where the campaign money comes from now. In the 1980s we gave up on the little guys. We started drinking from the same trough as the Republicans.”36 The much discussed “peace dividend” after the Cold War ended was elusive. A

31、ccording to Laurence Korb, a former assistant secretary of defense, now affiliated with the Brookings Institution, the U.S. is spending, in adjusted dollars, more on defense today than it did in 1955, or 1975, or most years of the Cold War with the exception of the Vietnam and Reagan peaks. The 1996

32、 defense budget was to be approximately $267 billion, or 85% of average Cold War budgets. Even the right-wing, libertarian Cato Institute questioned the need for todays spending levels. In a July 1995 report, its authors noted: “One of the most tenacious myths, especially among conservatives, is tha

33、t there has been a dangerously excessive reduction in U.S. military spending since the late 1980s.”37 The “Contract with America” of the 1994 “Republican Revolution” that took control of Congress made a major issue of passing a Balanced Budget Amendment to the Constitution. In 1995 the proposed amen

34、dment failed to obtain the necessary two- thirds vote. Senator Mark Hatfield (R.-Ore.) cast the only Republican negative vote and was bitterly attacked by members of his own party. Poll results showed that voters favored the Amendment, but only if Social Security were protected. Several Democratic s

35、enators were ready to provide the needed vote for the Balanced Budget Amendment on condition only that Social Security trust funds be protected. They wanted them excluded from budget calculations so that future politicians would be prevented from raiding them. In his memoirs, Robert Reich, who was S

36、ecretary of Labor throughout the four years of President Clintons first term, recalled that on June 13, 1995, President Clinton gave a 5-minute TV address calling for a balanced budget in ten years, saying, “Its time to clean up this mess.” 28 “What mess?” Reich asked, “Weve been cutting the deficit

37、 for two years running. Its already less than 2% of national outputthe smallest of any industrialized nation, the smallest it has been in two decades.”38 In the 1996 election campaign both major presidential candidates were promising a balanced budget by the year 2002, and early in 1997 the Republic

38、an Congress tried again for a Balanced Budget Amendment. As in 1995, if the amendment were worded to protect the Social Security trust funds, there were plenty of Democratic votes available in Congress to meet the two- thirds requirement, but the Republican leadership would not agree. Policymakers r

39、egularly ignore the 1990 law that restored the separation of Social Security trust funds from the budget. For example, with Social Security excluded, the deficit grew $121 billion from 1980 to 1988, but the government put the trust funds in a “unified budget” to report an increase in the deficit of

40、only $81 billion over those eight years.39 The Washington accounting deception that counts the trust funds as part of the budget is dishonest bookkeeping and illegal under Section 13301 of the Budget Enforcement Act of 1990, according to its coauthor, Senator Ernest F. Hollings (D- SC). The bill tha

41、t Congress passed and President Bush signed into law includes this language: The concurrent resolution shall not include the outlays and revenue totals of the old age, survivors, and disability insurance programs established under Title II of the Social Security Act or the related provisions of the

42、Internal Revenue Code of 1986 in the surplus or deficit totals required by this subsection. “That says in plain language they cant use the trust fund to cut the deficit,” Hollings observes. “And yet they keep doing it.They call it a unified budget, as though that changes something.”40 29 The 1990 pr

43、ovision was one more step in a continuous effort to correct the treatment of Social Security in the budget. For example, the 1998 Statistical Abstract, in a note at the heading of the federal budget summary 1945-1998 (Table 537), states: “The Balanced Budget and Emergency Deficit Control Act of 1985

44、.moved Social Security off-budget.” The unified budget has a long history. A column by Edwin Yoder of the Washington Post Writers Group in 1995 blamed it on Lyndon Johnson in 1967, saying, “Social Security receipts were then running well ahead of outlays, and consolidation of Social Security with ot

45、her budget categories shrank the apparent deficit then attributable to the cost of the war in Vietnam.”41 My own recollection of the timing is that it occurred during the Eisenhower administration, and this agrees with footnote 4 to the table of Receipts and Outlays of the Federal Government in the

46、1994 Information Please Almanac: “Beginning 1956, computed on unified budget concepts; not strictly comparable with preceding figures.”42 The overall budget was made to look better due to a 1983 increase in the payroll tax for FICA contributions, as recommended by a commission headed by Alan Greensp

47、an, which resulted in a very large surplus in Social Security funds. Since all tax receipts were lumped together, Social Security surpluses were counted as an offset to the budget deficit. Shakelford and Stamos economics text commented, “Many economists and legislators are upset that a large part of

48、 the deficit is being paid by the middle and working classes.”43 Because the large surpluses in Social security were being loaned to the Treasury and used to obscure part of the deficit, Senator Daniel Moynihan (D-NY) proposed in 1990 to reduce the payroll taxes to a pay-as-you-go basis. Greenspan,

49、as Chairman of the Federal Reserve Board, opposed this and gave the Senate Finance Committee a complicated explanation describing the extra tax money as forced national saving. President Bush talked of the “brink of insolvency” and threats to “bankrupt” the system. 30 Senator Ernest Hollings (D-SC)

50、declared in disgust: “When you try to stop a raid, they call it a raid. When you try to defuse a time bomb, they say you are creating a time bomb. How, after all this lying, are we going to make ourselves honest?” The Moynihan proposal lost 60-38.44 In contrast to its handling of Social Security, ho

51、wever, Congress put the savings and loan bailout “off-budget to hide it from the public. The interest burden of the debt For government at all levels, as well as individuals and corporations carrying large amounts of debt, the greatest burden is the growing amount of interest that must be paid. It m

52、akes a difference whether debt is incurred for investment or wasteful extravagant living. When people borrow to buy a home or a car or a college education, it is a wise investment, as is business borrowing to build needed facilities. Unfortunately, government accounting does not tell us whether the

53、borrowing is for investment. Much of the $4 trillion debt inherited by President Clinton had been piled up during the 1980s to pay arms manufacturers for weapons that were not needed and sometimes didnt even work. The Ames spy case revealed that the arguments for big spending on defense were based o

54、n false information from known double agents that was passed on as true by the CIA to policy makers. Another large part of the debt was incurred to cover revenue lost by the selective tax cuts in the 1980s. Some of the windfall to those who got tax cuts was put into long-term U.S. government bonds.

55、The 30-year government bonds issued in 1953 at 3-1/4% interest matured in 1983 and were refunded at 12%, locking in a high interest rate for three decades.45 Sadly, those bonds will be costing taxpayers huge amounts of interest for many years to come, and so long as the government honors those bonds

56、 nothing can be done about it. Reich described the accounting problem this way: “The.federal budget.is almost meaninglessan imperfect 31 accounting device. It excludes future liabilities like federal pensions and veterans benefits, and it also excludes assets like the value of the federal government

57、s landholdings, buildings, and facilities. Worst of all, it treats all spending the samewhether a crop subsidy to a rich farmer or college aid to a poor kid. “The GI Bill made college affordable to a whole generation of returning World War II veterans and propelled much of the economic growth of the

58、 1950s and beyond. The expense was justifiable, even though the federal deficit was a much larger percentage of the national output then than it is now.”46 How can we balance itor should we? It is widely assumed that balancing the budget would be a good thing, but as an economic question it is debat

59、able. When almost everybody agrees, as they did in the Middle Ages about the earth being flat, it may be time to raise questions. The official “unified” budget figures only tell us, more or less, the governments net cash flow. This information is useful mainly to apply Keynesian principles for stabi

60、lizing the national economy, running a deficit during a slump and a surplus during a boom. Balancing the budget every year would not be good for America. In time of recession, when tax collections decline and unemployment claims rise, the government would be forced to cut its outlays, making the rec