Quote:
Originally Posted by WTF
A little history. In 1968, in order to pay for the war in Vietnam and pretty up the numbers of a surging budget deficit, President Johnson arbitrarily decided to include Social Security in the budget. Social Security was then, as now, taking in more money every year from workers than it pays out to old folks. It helped LBJ produce balanced books
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Unfortunately your little history doesn't make sense. It's actually the "history" as developed by the Republican Party in the late 80's to smack down rising support for spending on social programs.
Here's why the theory doesn't hold up:
1. The timing is all wrong.
Johnson took office in 1963. The first unified budget, however, did not take hold until
1969 - the year Johnson left.
Johnson submitted the first unified budget to Congress in January of 1968. That was after all of the big social programs had already been introduced. It was also just six weeks before he announced his retirement from office. By the time Johnson submitted the first unified budget the gross federal debt had actually
declined under his administration. The deficits from the Great Society programs were still years down the road. Johnson literally had nothing to hide.
If Johnson was really just trying to hide the deficit then he also did it at exactly the wrong time. Johnson only served under the '69 unified budget for four months. He gained nothing from it. None of his earlier budgets was affected by the change. It was actually Richard Nixon who was the big winner of this practice. The deficits really took off under Nixon and Ford, not Johnson. It was the Republicans who followed him that benefited from the new practice.
So Johnson didn't even start talking about a unified budget until more than four years into his presidency and he gained zilch by putting it into effect. He got nothing out of the deal. The timing just doesn't add up.
2. Nobody bothered to change things.
Johnson's switch to a unified budget was an executive action, not a legislative one. There was never any law passed that said the President has to submit a unified budget to Congress or that Congress has to follow one. Johnson just started doing it.
That means that all the presidents who followed him also had a choice about it and, surprise surprise, all of them kept doing it to.
Nixon, Ford, Carter, Reagan *gasp*, and Bush the 1st all submitted unified budgets in one form or another. Any one of these presidents could have simply snapped his fingers and the great scourge of the unified budget would have instantly disappeared from the backs of the oppressed American people.
I think it's pretty telling that this didn't happen.
In fact, as I noted above, you really didn't hear anything at all about this topic until the Republicans started making a political issue out of Johnson during the Reagan years. It was only then that the great evil of the unified budget rose to the conversation list.
So I'm really left wondering how all of this is Johnson's fault. You had two Democratic presidents submit 6 unified budget. You had four Republican presidents submit 22 of them. And yet Johnson is the big, bad, boogey man who gets the blame for all our ills.
Again, it doesn't make sense, now does it?
3. There was a damn good reason besides the deficit to use a unified budget.
One thing that people today don't appreciate is that 1968 was still the Age of the Slide Rule. There were no PC's back then. No hand-held calculators. No personal color printers.
If you want to analyze the budget today you whip out your laptop, download a spreadsheet off the web, and pump out a graph in less that two minutes just like I did earlier in this thread.
Back in 1968 that process involved ordering the proper budget book from the Treasury, waiting two or three week for it to arrive by mail, sorting through hundreds of sheets to find what you wanted, working the analysis in pencil on a ledger-sized accounts book, and then running up the numbers on a 25 pound mechanical adding machine. If you wanted a visual you dug out the graph paper and a ruler and drew the thing yourself.
This led to huge problems trying to keep track of the numbers.
Every one who tried to analyze the effect of the trust funds ended up with a different set of figures depending on which accounting and actuarial rules they applied to reconcile and unify the separate general and trust fund accounts. Even the government itself didn't have a standardized way of looking at the numbers. There were at least three "official" accounting summaries of the federal budget generated each year that were often off from each other by a factor of ten. Congress spent so much time arguing about which set of numbers to use that it almost never got the budget out on schedule each year.
The unified budget solved this problem. Putting the trust funds on the ledger meant standardized accounting practices and the ability to see the numbers in their entirety for the first time in fifty years. The '69 budget was the first time people really knew for certain what the United States - and it's debt obligations - were actually worth. As I'll describe below, that was something necessary to the growth of the country after that point.
So, you see, the unified budget wasn't about
hiding the numbers, it was about
exposing the numbers. Maybe it did have the side effect of fooling a bunch of not-to-bright bulbs that the deficit was going down, but that was a side effect. The real point was to make the budget understandable again.
Now days, of course, nobody gives a shit if the budget is unified. By the time they forced the trust funds completely off ledger in 1990 everybody had a PC on their desk, a calculator in their drawer, and the budget came on a floppy disc instead of half a tree of paper. Nobody cares today if the budget is unified or not. Technology has solved that problem for us. It's a complete non-issue.
Back then, though, Johnson needed a unified, transparent budget. BUT, he didn't need it to "hide his deficits".
And that brings me to my next point:
4. The change to a unified budget fueled expansive government growth by stabilizing the US treasuries market.
On this point I realize that I hold a minority view and I perfectly respect others who disagree. However, I think time will tell on this one.
Before the introduction of the unified budget US Treasury Notes were effectively restricted to a small, specialized market. Before 1971 the treasury did not auction the notes and bonds as it does today. Instead, it published a set rate of return for each bond series and sold them by subscription to a fairly constant group of buyers.
That all changed in '71 with the introduction of the cash auction. After that point the market, rather than the Treasury, set the price and yield for each bond series and the yield curve across the maturities began to float. Once this happened the market for US debt exploded. Everybody got into the game. It was no longer a few stuffy old bankers buying a set amount every twelve weeks. From '71 forward the US had no shortage of people lining up to happily purchase US debt at any size or maturity.
Why is this significant to the unified budget issue?
Because without the introduction of the unified budget you could never have moved to the cash auction system and opened up the bond market the way we did.
If there's one thing that the bond markets hate it's uncertainty. They can live with risk - they do that every day. What they can't stand is not knowing what the risk is.
Not being able to evaluate the risk of US treasuries was a significant problem before the unified budget. As I explained above, nobody could properly calculate back then exactly what the long-term obligations of the government were so long as the trust fund data remained on a separate ledger. Even the government didn't know what the correct figures were. There was no way for somebody investing in US securities to know what kind of risk they were truly taking before the first unified budget in '69.
Unifying the budget changed all that by bringing greater transparency and certainty to the whole budget process. That took the lid off the treasuries market and allowed the US - starting with Nixon in '71 - to borrow to its heart's content from anybody who could show up at a treasury auction with a cashier's check and smile. It's at that point that government growth really took off. Once we handed the government a treasury auction credit card with no set limit there was no stopping what it would fdo with it.
So, you see, it wasn't Johnson trying to "hide the deficit" that led us down the road to ruin, it was his
unhiding the true status of the federal coffers that did it.
I don't know anybody outside of Alabama who's dumb enough to have fallen for what you claim Johnson tried to do. I do know lot's of people, however, who aren't anywhere smart enough to predict just how massive the growth in federal spending would become once the bond market was opened to auction. Accessing that borrowing power with the cash auction was the true reason we moved to unification. Once we got there, though, we just couldn't hang on to the spending genie once it was out of the bottle.
In a way I guess it may be correct to say that Johnson's policies did eventually lead to massive spending in future administrations. I think it's also correct to say that he never intended that to happen and assumed - as we all do every election cycle - that each new group of bozos we elect will actually be able to keep the credit card in their wallet for a change. I guess none of us ever learn.
It's unfair, though, to accuse Johnson of subterfuge in trying to hide the federal debt. He wasn't trying to pull one over on anybody as the conservatives like to claim. He was just doing what he thought was right for the country and failed through the same dumb-ass faith in the fiscal responsibility of politicians that we all have. To vilify him for the changes he made is just wrong. He wasn't a faker. He just didn't see the potential consequence of what he started.
And that's the way I see it.
Cheers,
Mazo.
Look I even bolded, italicized and underlined it for you. The IOUs have been placed in lock box has been placed inside another lock box which I buried in an undisclosed location on the lunar surface and gave Pawnstars Chumlee both keys.
