Gross misstating of the annual spending deficit hides many billions of dollars the federal government routinely spends out of trust funds.
The combined surplus of federal trust funds totaled $100 billion in 1988, the Congressional Budget Office reported. In 1989 a $116 billion surplus should accrue in these funds, most of it in the Social Security Trust Fund.Instead, all these billions went or will go for more government spending, "which does not appear on the (federal general funds) balance sheet," said a news release from the Utah Foundation, a private non-profit research agency based in Salt Lake City.
The $155.1 billion deficit for fiscal year 1988, as officially announced Oct. 28, "was $100 billion less than the general fund deficit ($255 billion) actually incurred," said the foundation's report.
The amazing difference is from an established practice of the government announcing a net deficit figure. The net figure resulted from subtracting the trust funds surplus from the actual federal funds deficit for 1988, which was $255 billion before the subtraction.
More amazing is the surplus money is gone - spent along with the huge government budget - but someday must be repaid from current revenue the federal government rakes in.
"The deficit problem," the foundation reported, "is significantly larger than it appears on the surface."
Congress' budget office predicts a $295 billion general funds deficit in 1994, five years from now. Surplus from the trust funds that year will balloon to $174 billion only to be subtracted from the larger deficit figure, not accounted for on the balance sheet, routinely spent, and a net diminished deficit of $121 billion will be announced.
In seven years $963 billion (only $37 million short of $1 trillion) should accrue for systematic draining away into general fund spending, a CBO chart shows. These funds are supposedly, by law, dedicated for future use in the funds that generated them.
Instead, these accumulating reserves won't really accumulate but will be spent year after year.
As the annual trust surplus develops, laws require such money be invested in U.S. government bonds. Research shows the billions the federal government rakes in from issuing its bonds to the trust funds routinely going into general funds of the government, becoming ordinary revenue and getting spent currently.
"The bonds," said the Utah Foundation, "will someday have to be redeemed, and when they are the money will come from current revenue and not from any accumulated reserve." The reserves were spent as they accumulated.
Starting probably 30 or more years from now, the number of people drawing Social Security benefits will increase abnormally. This will occur when the post-World War II baby boomers reach retirement age.
While retirees will be booming, the number of people working and paying Social Security taxes into the federal fund will drop.
With trust fund reserves being used to supplement general government spending annually, this supplemental money will be cut off - right at the time that bonds issued for Social Security surplus years before will have to be redeemed.
"The double impact on the general fund will be severe," the foundation predicts. The added impact of the hidden deficit (money owed the trust funds) is "an additional threat to fiscal stability that could be serious."