Telesur: The Real Causes of Deficits and the US Debt

December 9, 2017 • Governance & Regulation, On Donald Trump Administration

By Jack Rasmus


With the Senate and House all but assured to pass the US$4.5 trillion in tax cuts for businesses, investors, and the wealthiest 1 percent households by the end of this week, phases two and three of the Trump-Republican fiscal strategy have begun quickly to take shape.

Phase two is to manoeuvre the inept Democrats in Congress into passing a temporary budget deficit-debt extension in order to allow the tax cuts to be implemented quickly. That’s already a “done deal”.

Phase three is the drumbeat growing to attack social security, Medicare, food stamps, Medicaid, and other “safety net” laws, in order to pay for the deficit created by cutting taxes on the rich. To justify the attack, a whole new set of lies are resurrected and being peddled by the media and pro-business pundits and politicians.


Deficits and Debt: Resurrecting Old Lies and Misrepresentations

The government then uses the social security surplus to pay for decades of tax cuts for the rich and corporations and to fund endless war in the middle east.

Nonsense like social security and Medicare will be insolvent by 2030. When in fact social security retirement fund has created a multi-trillion dollar surplus since 1986, which the US government has annually “borrowed”, exchanging the real money in the fund created by the payroll tax and its indexed threshold, for Treasury bonds deposited in the fund. The government then uses the social security surplus to pay for decades of tax cuts for the rich and corporations and to fund endless war in the middle east.

As for Medicare, the real culprit undermining the Medicare part A and B funds has been the decades-long escalating of prices charged by insurance companies, for-profit hospital chains (financed by Wall St.), medical devices companies, and doctor partnerships investing in real estate and other speculative markets and raising their prices to pay for it.

As for Part D, prescription drugs for Medicare, the big Pharma price gouging is even more rampant, driving up the cost of the Part D fund. By the way, the prescription drug provision, Part D, passed in 2005, was intentionally never funded by Congress and George Bush. It became law without any dedicated tax, payroll or other, to fund it. Its US$50 billion plus a year costs were thus designed from the outset to be paid by means of the deficit and not funded with any tax.

Social Security Disability, SSI, has risen in costs, as a million more have joined its numbers since the 2008 crisis. That rise coincides with Congress and Obama cutting unemployment insurance benefits. A million workers today, who would otherwise be unemployed (and raising the unemployment rate by a million) went on SSI instead of risking cuts in unemployment benefits. So Congress’s reducing the cost of unemployment benefits in effect raised the cost of SSI. And now conservatives like Congressman Paul Ryan, the would be social security “hatchet man” for the rich, want to slash SSI as well as social security retirement, Medicare benefits for grandma and grandpa, Medicaid for single moms and the disabled (the largest group by far on Medicaid), as well as for food stamps.

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About the Author

Dr. Jack Rasmus is author of the just published book, “Central Bankers at the End of Their Ropes? Monetary Policy and the Next Depression, Clarity Press, July 2017, and the previously published “Systemic Fragility in the Global Economy, also by Clarity Press, January 2016. For more information: He teaches economics at St. Marys College in Moraga, California, and hosts the radio show, Alternative Visions, on the Progressive Radio Network. He blogs at and his twitter handle is @drjackrasmus.

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