NYP: Tax refunds are raising the nation's deficit
By JOHN CRUDELE
Last Updated: 4:28 AM, March 25, 2010
Posted: 1:51 AM, March 25, 2010
It's lucky nearly everyone will soon have health care because what I'm about to tell you is gonna make you sick.
On March 2, 2009 the federal debt -- to the penny -- was $11,040,807,027,558.10.
As of March 3, 2010 -- which was a little over two weeks ago -- the debt of this country stood at $12,661,296,056,307.25.
So, the nation's total debt has grown from $11.040 trillion (and change) to $12.661 trillion in just one year.
No matter what kind of tricky accounting you'd like to use, the federal budget shortfall over those 12 months was $1.62 trillion -- the difference between those two numbers.
Washington likes to use $1.3 trillion as 2010's deficit, still an astronomical amount but apparently more pleasing to the eye.
The difference between my number and Washington's is simple.
The federal government regularly borrows money from the Social Security trust fund, which because of favorable worker demographics, is still running a surplus.
And Washington doesn't count these loans in its annual deficit figures.
But once Baby Boomers stop filling the retirement pool and start draining it, the funds borrowed from retirees will become just another onerous bill, like the money we owe the Chinese, the Japanese and OPEC nations.
Those numbers should make you nauseous. But I haven't gotten to the part yet that'll make you vomit.
According to the Internal Revenue Service, "overall refunds are running nearly 10 percent higher so far in 2010." That's one of the reasons that February's federal budget deficit was the largest ever for a single month.
It's swell, of course, if you are on the receiving end of those refunds. So, in an micro-economic sense it's hooray for the taxpayer.
But, taking a broader what-the-hell-is-happening-to-our-country perspective this isn't such a fine thing.
So far this year, the IRS says taxpayers have gotten $175.4 billion in refunds, compared with just $169.1 billion through the same week in 2009.
The Obama administration thinks tax incentives, like the first-time home buyers' tax credit and the like, are responsi ble for the larger re funds.
Maybe, in part.
But I've got an other theory.
A lot of people had jobs at the beginning of 2009 that they no longer occupied when the year ended.
So when 2009 started, workers were paying taxes based on what they expected to earn for the whole year.
When they got laid off, their tax rate fell and they are now entitled to a refund.
And that's probably why the IRS is seeing such a large increase in refunds.
OK, but I really wanted to talk about health-care reform.
To start out, I completely support the idea that everyone in this country should have affordable medical care.
I've known close friends who couldn't afford to see a doctor and it was heartbreaking. The Obama administration says it can cover medical benefits for another 32 million Americans without causing the budget deficit to rise.
Let's hope so, because the numbers are getting worse on their own. They don't need any help.
*
Once again I'll say it: Washington needs to change the laws on using retirement plans.
The National Association of Realtors announced this week that sales of existing homes fell another 0.6 percent in February.
That was the third consecutive month of declines, representing a 22 percent drop over that period. And yesterday the Commerce Department said new-home sales dropped by 2.2 percent for the month.
If the government doesn't fix the housing market, the rest of the economy doesn't have a chance, especially since foreclosures are still running at a frightening pace and most banks haven't yet bothered to put the reclaimed houses they now own on the market.
So, the government needs to allow Americans to invest their retirement money in real estate. Permit them to withdraw from retirement accounts not only without penalty but also on a tax-advantaged basis.
Last year Washington helped the housing market through tax incentives that increased the federal budget deficit. My idea doesn't increase the government's debt.
I spoke with Sen. Charles Schumer's* office two weeks ago about this. His tax expert seemed interested but was distracted by health-care reform.
john.crudele@nypost.com
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If you take anything I say as advice, you're crazier than I am.
