Common Sense: â€˜How did we get here?â€™
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Before I start on this week’s topic I wanted to say a few more words about last week’s column.
As pointed out by William Lee “Bill” Browder in a letter to the editor, Social Security and Medicare are not funded by general revenues, but have their separate trust funds. These trust funds are funded by Federal Insurance Contribution Act (FICA) or payroll taxes that are withheld from everyone’s paycheck every week.
He also rightly points out that if the $111.7 billion cost of the payroll tax cut were subtracted, the trust fund would be running a $700 million surplus.
There are also $2.6 trillion special Treasury IOUs in the Social Security trust fund created by past surpluses in the fund.
Now on to this week’s topic. I got the idea when I was talking to our publisher Janet Rail.
She asked me, “How did we get here?”
I thought, “That is the topic for next week’s column.”
The reason we are running up against the debt ceiling
is because we have run
deficits for a long time and particularly large ones recently.
According to the Office of Management and Budget, the federal government since 1931 has run deficits in 69 of the 81 years or 85 percent of the time.
It is not only in time of recession or depression that we have run these deficits. We have only been in recession or depression only about 20 years during this period.
Deficits are one matter upon there is bipartisanship in this period. Democratic presidents have run deficits in 37 out of 44 years or 84 percent of the time and Republican presidents have run deficits in 31 of 38 of the year or 86 percent of the time.
The most recent financial crisis hit in September 2008, one month before fiscal 2009 began.
At press time, both houses of congress had passed bills to resolve the crisis and they only await the president’s signature for passage.
Rep. Gabrielle Giffords, who was seriously wounded in a shooting in January, returned to the House to cast her vote in favor of the agreement.
Even if the agreement passes, the rating agency Standard and Poor’s said there was a 50 percent chance that the U.S. credit rating would be downgraded.
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