UP #1. The honest path to debt is by borrowing money through the sale of Treasury securities on the open market. Selling Treasury securities to individuals, organizations and countries willing to loan the government money in return for a profit.
Treasury securities may not pay the greatest return, but they are considered the safest investment in the world. And they are the safest for no other reason than that they are backed by the full faith and credit of every man, woman and child in America. It's the public that pays off this debt with annual income taxes. The federal government has no other source of revenue than taxes; i.e., interest and payoff money is not coming out of the pockets of the politicians who borrowed it.
UP #2. The dishonest path to debt is by borrowing or stealing money from Social Security, Medicare, gas taxes and other entitlements like the Inland Waterways Trust Fund or the Exxon Valdez Oil Spill Cleanup Trust Fund. Money paid by taxpayers for some specific service due.
This is dishonest borrowing or outright fraud and extortion not only because it takes money meant for specific purposes and spends it elsewhere, but because it forces the general public to pay the money back, redeem bogus bonds, through future income taxes.
Whenever Congress and the Administration take/steal/borrow entitlement money, they leave nonmarketable UOU bonds in the respective trust funds. These bonds automatically add to the national debt. Currently they account for 35 percent of the debt, over two trillion dollars.
DOWN: The only way to pay down the national debt is by taking money from the general fund Treasury, paying off maturing Treasury securities, and not issuing new bonds to cover this payoff or replace the money in the general fund. There is no other way to do it.
The Clinton/Gore plan
Having helped run up a debt of $5.7 trillion through an annual combination of #1 and #2 above, these two gentlemen now intend to pay off the national debt with the absolutely ridiculous idea of more theft/borrowing from #2 alone.
Remember, every time the government takes/steals/borrows money from entitlements the debt goes up. Last year, fiscal 1999, the national debt rose $130 billion from this cause alone and without any honest borrowing from #1 above.
Yet, in Al and Bill's mind they did pay down the national debt. They did this by paying down part of the debt held by #1 above, honest borrowing via marketable securities. And they did it with entitlement money, the so-called surplus or profit of Social Security. While this did not change anything in terms of the total amount of debt owed, it did reduce the interest paid against marketable securities.
Moving the debt from one credit card to another does one thing important to the Washington borrowholics. Interest paid in cash to holders of marketable Treasury securities has dropped from $253 billion to $229.7 billion. That's a savings of $23 billion for Congress and the Administration to blow on their pet projects.
And it doesn't matter one iota that they must pay an increase in total interest paid to entitlement trust funds—because there is no money involved in these interest payments. They simply hand the trust more nonmarketable bonds. Isn't that wonderful? Why don't you try this with your bank?
This is what Clinton and Gore mean by "strengthening" the Social Security Trust Fund. Piling up more debt for you, your children and grandchildren, the working public to redeem someday because Congress and the Administration misappropriated/stole your retirement overpayments. They call your retirement overpayments a "surplus" and feel that it's their money to do with as they please instead of putting it to use for better pensions.
How long can this go on?
This transference of debt from one credit card to another can go on until the entire $3.8 trillion debt currently held by honest borrowing, #1 above, is paid off. Until all the people who bought Treasury bonds, notes and bills on the open market have been repaid and the government has not issued new securities to take their place.
At that time, the entire debt of $5.7 trillion, plus everything they continue to steal from entitlement surpluses year after year until that time (like the $130 billion last year), will be in nonmarketable bonds held by trust funds.
Clinton estimates this to take about ten years, a time that just happens to coincide with the maturity of most ten year bonds held by investors. The most popular long term bond nowadays.
At that time, either of two things can happen.
Two future options
Option #1: Whoever is President a decade from now can step to the podium, apologize for the misbehavior of his predecessors, and tell the American people that nonmarketable bonds were a hoax all along. That they were a trick played on taxpayers and a plague on the public. He can save us all by simply wiping them off the books. Deleting them to the waving of flags and the release of thousands of red, white and blue baloons. We'll be free at last. Of course, we will have paid off the national debt with our retirement and Medicare overpayments. Oh well.
Option #2: Once all of the debt is held by entitlement trusts, the federal government can and probably will tell you that benefits must be cut even further and taxes increased substantially so that the general fund Treasury has enough money to redeem these bogus bonds as various entitlements need the money.
Either way, you will have the democratic ticket of the 2000 elections to thank for this. Your alternate choice from the oligarchy isn't a whole lot better, but it's better than this scam. A vote for Gore is a guarantee to be gored.