Balanced Budgets and Trust Funds

The fact is, there is a lot of creative work with numbers in the budget. Congress and the Administration are playing fast and loose with definitions. Certain expenditures that count are "on budget" and other expenditures that don't count are "off budget." "On budget" expenditures are counted in the Federal budget. Revenue allocated to finance projects "on budget" often finds it way into the general fund and can be spent any way Congress sees fit.

"Off budget" expenditures are exempt from the normal controls in the congressional budget process. Revenues remain attached to the particular project being funded and cannot be redirected for other purposes. In FY 1997, more than $350 billion, or 22 percent of spending, was off budget.

Social Security Trust Fund?

One might believe that the hundreds of billions of dollars rolling in to the Federal government through excess Social Security contributions is being placed in a trust fund. It should be saved there for a time when it is needed. But, no! Instead, this money goes directly into the general fund and is counted as income to help balance the budget. In FY 1997 Social Security pulled in an excess of $81 Billion into the general fund. In FY 1998 it added $100 Billion to the general fund.

What's placed in the Social Security trust fund to replace the excess revenue collected? Nothing more than IOUs in the form of non-negotiable treasury bonds. Senator Earnest "Fritz" Hollings has indicated that "The truth is that the Social Security Trust Fund has already been stripped bare. There is no trust and no fund." Not only is the trust fund bare, but the liabilities of the Federal government grow larger as the amount of bonds in the fund increases.

The fact is, the money in your Social Security trust fund is nothing more than numbers on a computer somewhere.

Other Trust Funds?

There are 150 trust funds. The majors ones include Social Security, Civilian Retirement, Military Retirement, and the Highway trust funds.

The Highway Trust Fund is just another trust fund whose cubbard is bare. The revenues generated by the gas tax are deposited in the Highway Trust Fund. In 1969 President Johnson and Congress changed the trust fund from "off budget" to "on budget." This allowed the government to place the excess gas tax money (not used for highways) into the general fund in an effort to hide the true cost of the Vietnam War. Today, this excess money helps hide the budget deficit. In place of this excess money, the government put in Treasury Bills or bonds, which are merely IOUs, payable by future tax revenues. If the government ever really spent this surplus, it would appear on paper as an increase in the size of the budget deficit.

If the Highway Trust Fund were moved "off budget" the excess revenue from the gas tax could not be funneled into other programs. Pete Domenici (R-NM), noted that if transportation funding were moved off budget, "fiscal discipline would not apply, and the growth of [transportation] programs would be unchecked while other programs within the unified budget would bear the burden of additional deficit reduction in order to balance the federal budget." That is, other programs in the "unified budget" would need to be funded in their own right.

Of course, the Social Security trust fund is not the only trust fund the Federal government maintains. There are a number of trust funds. Practically each one is a bare as the next. Here are some of them:

• AID trust funds
• Airport and airway trust fund
• Agricultural Marketing trust funds
• Appalachian Regional Commission trust funds
• Animal and Plant Health Inspection trust funds
• Aquatic resources trust fund
• Black lung disability trust fund
• Bureau of Land Management trust funds
• Civilian Retirement trust fund
• Coastal restoration trust fund
• Coastal wetlands restoration trust fund
• Cooperative work trust fund (Forest Service)
• District of Columbia Federal pension liability trust fund
• Federal hospital insurance trust fund
• Federal pension liability trust fund
• Federal supplementary medical insurance trust funds
• Financial assistance corporation trust fund
• Foreign military sales trust fund
• Foreign national employees separation pay trust fund
• Foreign national separation liability trust fund
• Forest Service trust funds
• Harbor maintenance trust fund
• Harry S. Truman memorial scholarship trust fund
• Highway Trust Fund
• Hospital insurance health care trust funds
• Host nation support for relocation trust fund
• Indian Affairs trust funds
• Inland waterways trust fund
• Judiciary trust funds
• Leaking underground storage tank trust fund (EPA)
• Military Retirement trust fund
• Miscellaneous highway trust funds
• National Archives trust fund
• National Park Service trust funds
• National security education trust fund
• National security trust fund
• Oil spill liability trust fund
• Other DOD trust funds
• Payment to tribe, Lower Brule Sioux trust fund
• Peace Corp trust funds
• Public Health Service trust funds
• Radiation exposure compensation trust fund
• Railroad unemployment insurance trust fund
• Reclamation trust funds
• Reforestation trust fund
• Science, space, and technology education trust fund
• Social Security trust funds (OASDI)
• Special Trustee for American Indians trust fund
• Superfund trust fund (EPA)
• Surcharge collections, sales of commissary stores trust fund
• Unemployment Trust Fund
• USIA trust funds
• Vaccine injury compensation program trust fund
• Violent crime reduction trust fund
• Voluntary separation incentive trust fund

It's time we leveled with the American public about the creative financing taking place in our government. As a working person, if my company's pension fund was "invested" in the company's non-negotiable corporate bonds rather than free market investments, I would demand that irresponsible corporate officials be arrested and charged with the crimes they deserve. Our Congress, however, gets away with spending the money that should be in the Social Security "trust fund" without a word.

The misstatements about the viability of these many trust funds must stop. New leadership in Congress is required to tell our citizens the truth.

In order to maintain the economic viability of the United States we must balance the budget, which includes all spending programs. We must:

• We must end the practice of keeping some programs off-budget. All expenditures must be counted as expenditures.
• We must pass a balanced budget amendment that provides a clearly defined budget target for Congressional spending. The budget target for the "current" Congressional session should be the average of all Federal revenues for the last three years. This will allow some years of slight deficits and some years of surpluses. In a growing economy, on average, most years will yield a budget surplus.
• Create an annual financial report that plainly describes Federal revenues and expenditures so the American people will understand where we, as a nation, stand.