In the first three months of the new fiscal year, the first quarter of fiscal 2005 that began last October first, the national debt has gone up $271.1 billion. If this continues, we’ll be raising the national debt limit once again during the fall of this year and the national debt will be well over $8 trillion.

In December, and for at least one month the federal government did, however, do a remarkably good job of not borrowing from investors. In fact, they even managed to pay down this honest side of the debt by some $13.5 billion. They did this by paying off maturing investor securities and not immediately renewing them by selling new securities as they typically do.

All of the $71 billion increase for December came from entitlements and it came mostly because December is one of the designated months when two of the biggest trusts receive half of the annual interest due against their closing balances from last year, fiscal 2004.

These two entitlements were the Social Security trust fund and the Federal Employees Retirement System (FERS), both of which are part of the trust fund scam that the government has been successfully pulling off for years. This is all on the completely fraudulent Intragovernmental Holdings side of the national debt, the dishonest side of the debt.

The Social Security trust was handed another $43.3 billion in debt markers (bogus nonmarketable bonds) while the FERS trust received $17.2 billion for a combined total of $60.5 billion for these two trusts alone. The interest rate was 5.304 percent figured on a five year model of interest paid long term bonds on the honest side of the national debt.

With the honest investor side of the national debt going down $13.5 billion, this means that the scam trust fund side of the debt went up $84.7 billion and we ended up with a $71 billion debt increase overall. Discounting the interest payments of $60.5 billion that means another $24.2 billion was added in surpluses from more than twenty entitlements robbed in December including Social Security.

FERS had a trust fund balance of $645.3 billion at the close of fiscal 2004 on September thirtieth, all of which is in “special obligation” nonmarketable bonds that can be redeemed only with taxpayer money. The federal employees don’t worry about getting their retirement money since it’s backed by the full faith and credit of the tax paying public. In other words, you will replace the premiums these employees paid and the government walked off with. And you will replace it with interest added.

The Social Security trust fund (the combination of the Federal Old Age & Survivors Insurance and the Federal Disability Insurance trust funds) held a balance of $1.635 trillion at the close of fiscal 2004. And the taxpaying public doesn’t appear overly concerned about this debt either, largely because they are unaware of the scam the Beltway Bandits have been pulling, believe that they or their children will not have to pay it off, or are simply weighted down and overwhelmed with other concerns and propaganda about Social Security that range from the sublime to the ridiculous.

Some of these stories and arguable ideologies have merit, like the role of the Federal Reserve, and some are pure fantasy, like Social Security being a Ponzi scheme. But they all have one thing in common. They divert the public from recognizing the most immediate problem. And that problem is that the federal government is stealing our entitled/dedicated supplemental retirement money.

All of these theories, complaints, and so forth could each be discussed, debated, and possibly rectified after we force the government to stop stealing the extra money we’ve been paying in payroll taxes, after we stop the bleeding, but we are never going to get anywhere as long as these distractions keep getting in the way.

For instance, if we had taken the surpluses Social Security has been generating and put them in a real trust fund that did nothing more than draw simple interest, cash that wasn’t invested anywhere, then we would now have $1.7 trillion in real money to draw upon. As it is, we have nothing but that amount in debt to pay off someday.

Real trust funds have negligible “transition costs.” We could put Social Security’s surplus in a real trust fund at practically no cost. As it is now, the Social Security trust fund is 22.2 percent of the entire national debt (53 percent of Intragovernmental Holdings), and debt pays for nothing.

In other words, the tax paying public doesn’t seem to see the problem because they can’t see the forest for the trees. Most are swallowing the false story that the Social Security trust fund will sustain the system until 2042 when it really means that you will be double taxed once the draw begins.

What’s so unique about the December increase to the national debt is that it happened without any money whatsoever involved. The Treasury simply handed the so-called trust funds more nonmarketable paper.

The Beltway Bandits think nothing of adding these future taxes to your or your children’s indebtedness. As far as they’re concerned, it’s a necessary part of the cover story that they “borrowed” or “invested” your surplus premium payments when they actually stole them and spent them elsewhere. It’s part of the fantastic fiction that it is possible to both spend and save the same money.

We might as well have walked into the U.S. Treasury, plunked down piles of our hard earned cash and said; Here, give me some debt, and don’t forget to add annual interest to the tab that I’ll pay you later. It’s that simple and that ludicrous.

We are buying debt. And when the time comes, we’ll be buying back our own money plus interest.

Shortly before 9/11, everyone was questioning the value of the Social Security trust fund and dozens of economists were telling us that if it ever became necessary to draw upon these “holdings” the government would have to (1) raise taxes (2) borrow enormous amounts, or (3) cut programs. The latter includes cutting Social Security benefits.

Even President Clinton told us; "Trust Fund balances are available to finance future benefits...but only in a bookkeeping sense...they do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes or borrowing."

This is exactly the same position we would be in if the Social Security trust fund didn’t even exist. But it does exist and its bogus holding serve one, and only one, very important purpose – it allows the government to raise taxes or borrow without legislation.

If President Bush had a War Trust Fund, he wouldn’t have to ask Congress for another $100 billion to spend in Iraq . He could simply borrow the money while claiming to be drawing on the trust in order to carry out his mission unaccomplished. 

By the way, we still don’t know what happened to the $89 billion that was in the State Department’s “Unconditional Gift Fund” trust in fiscal 2002, another part of Intragovernmental Holdings that has completely vanished. Want to bet on how we got the coalition of the willing?