Re: A 2/1/2003 CITS DEBT WATCH ALERT -- "A reckless fiscal policy"

While I endeavor to reduce e-mail "clutter" and, therefore,
keep mailings to a minimum, Mr. Hugh Catherwood of the
Federal Fiscal Policy Foundation of Denver, CO, had these
important observations about the Diamond letter.

Mr. Catherwood specializes in the study of "federal accounts"
and is best known for his article "The U.S. National Debt," 
Journal of the Association of Government Accountants, June, 2000       

Here is his commentary:

  The article is quoted as saying that the 2003 deficit is forecast as
  "361 trillion."  This of course should be "billion".

Mr. Catherwood goes on to make these clarifications:

  First, the "off budget, on budget" distinction is a purely political
  distiction without accounting difference. The Constitution requires
  that no money be paid out of the Treasury except upon appropriation by
  the Congress. A budget is merely somebody's plan and all outlays must
  be first appropriated. Nothing is really "off budget".

  Second, he refers to the use of Social Security surpluses to mask the
  true deficit. He is right that they do but the masking is by use of
  the "excesses" of all trust funds, not just SS. In 2002, for example,
  the two Social Security funds had earned surpluses of $159 billion.
  But altogether the trust funds earned a surplus of $201 billion, which
  is the true masking figure used to cloak the 2002 loss of the general
  funds of $360 billion. The true deficit was $360 billion.

Mr. Catherwood can be reached at 303-777-6730 and his e-mail
(included above) is hrcatherwood@mindspring.com should anyone
wish to make further inquiries of his important studies.

***

I also note that Mr. Rob Arnott (ARNOTT@firstquadrant.com)
commented:

  Diamond ignores the fact that Social Security is a transfer
  system masquerading as a prefunded pension plan.  Mr. Arnott has
  articles on this subject, available from him, upon request.

***

Finally, I intentionally do not "blind carbon copy" this list, as
I believe in openness and accessibility.  So, kindly refrain
from doing a "Reply All."  I will, as I do here, filter and
forward items back to this list.  Thank you.

W. Curtiss Priest, Ph.D., Editor and Publisher
CITS DEBT WATCH
Member, American Economics Association
-- 


           W. Curtiss Priest, Director, CITS
      Center for Information, Technology & Society
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