Media are always reaching out to “experts” to help viewers, listeners and readers understand stories. These insights are often helpful because they come from individuals with experience in a particular area.
With that in mind, when the cable channels talk about the $1.3 trillion omnibus spending bill passed by Congress with bipartisan support and signed (reluctantly) by President Trump, they should have interviewed Bernie Madoff.
Of course, they would have to arrange to interview Madoff in prison, where he is serving life for defrauding thousands of investors, but his knowledge of how a Ponzi scheme works would be invaluable.
Madoff lured investors by promising big returns. He kept bringing in new investors, using their money to pay off those who had already invested. It is a fraudulent scheme because he constantly needed new investors to cover his promises.
And that’s how the federal budget works. Washington consistently spends more than it collects in taxes. Lawmakers simply “borrow” from the Social Security Trust Fund with a promise to pay the money back later.
Steady economic growth and low interest rates keep this version of the Ponzi scheme from collapsing on itself, but a day of reckoning is inevitable, especially since there is very little appetite in Washington by either party to get spending under control.
Republicans campaigned as opponents to profligate government spending, yet the just-passed spending bill explodes the red ink. As Fox News Politics Editor Chris Stirewalt reported, “Even in an era of robust economic growth, Republicans have already managed to add more than $1 trillion to the national debt (now approaching $22 trillion) in just 14 months.”
The Committee for Responsible Federal Budget (CRFB) projects that “trillion-dollar deficits will return permanently by next year and debt will exceed the size of the economy within a decade.” As the debt rises so do the interest payments on that debt.
The federal government must make $363 billion in interest payments next fiscal year, making it the fourth largest expenditure. The CRFB predicts that unless Washington’s spending patterns change, the annual interest payment will balloon to just under $1 trillion by 2028, surpassing spending on defense and Medicaid.
Politicians have promised, and Americans have grown accustomed to, lower taxes and an ever increasing litany of services and benefits. But this deficit spending is a form of taxation on the unborn. At some point future generations will be presented with a massive bill that will cause them to curse their ancestors for their prodigal spending.
The operators of successful Ponzi schemes know to skip town just ahead of defrauded investors and the law. Madoff didn’t do that. Perhaps he had nowhere to run. That makes his insights into the country’s finances even more relevant. America also has no safe haven from its extravagance unless its leaders embrace some fiscal discipline.
The only real difference between Madoff’s Ponzi scheme and Washington’s is that when the reckoning finally arrives, none of the people responsible for this epic deceit will go to prison.