Where is the Government? Fiscal Problems

 Rabbi David Eidensohn - 12/31/03

            Recently, a fraud stole my identity and ran up bills as David Eidensohn. He then grandly announced that his new address is in New York, where I live, the real David Eidensohn. So, I got a letter in the mail from a lawyer that I had better pay up. After hours of work to clear myself, I had a long talk with the executive of the company defrauded in my name. I asked her how it is possible that I call the police, I call the FBI, the Credit Card companies have the exact address and phone of the thief, and he is so sure of himself that he places his Florida address on my Equifax credit file, and even adds his wife Mary to my account!

She told me that credit thieves are rarely caught or penalized. She encouraged me to go public with my complaints, and said that if I contact any politicians, I could invoke her name.

 Someone in a credit card company I discussed this with told me that a real criminal stole his identity. He had to go to court to prove his innocence. Only when the arresting officer told the judge this was the wrong person did the credit card person go free. Otherwise, the credit card person could have been put into jail!

According to the Federal Trade Commission Executive Summary of Identity Theft Survey Report, thieves stole the identity of over 12% of Americans in the past 5 years. This is 25 million people whose identity left exposed them to loss of their financial security and credit! Where is the government? Does it have nothing better to do than to write a report and file it?

    Of course, the government did respond to this crisis, it had to. What did it do? It passed laws that people robbed by identity fraud don't have to pay. But laws such as the Truth in Lending Act and the Electronic Fund Transfer Act do not save huge losses to American business. The businesses pass the loss on to the consumer. Thus, the government passes a law that guarantees higher prices, and calls it a day.

How much does business lose? The report says last year business lost 33 billion dollars to one level of fraud. The average case was a loss of ten thousand dollars. Another level of fraud was 50 billion dollars.

    What happens to the victim? The government makes it easy for them not to pay the fraud. However, the report states, "On average, victims reported that they spent 30 hours resolving their problems." One category of fraud required, on average, 60 hours to rectify. The report states that Americans spent about 300 million hours to rectify identity fraud. Where is the government?

We know the Federal government is busy cheering the latest Dow Jones numbers. However, at the same time, the states are staggering under impossible fiscal burdens. The Federal government is so tenderhearted that it passes laws that states much pay for this or that. The states can't. The Feds don't care, and the states are collapsing, and everyone is busy with election year. Does anyone know the position of any candidate on credit fraud?

Paul Krugman of the New York Times (12/30/03) writes that the Gross Domestic Product, the total economic production of America in 2003, rose by 8.2, a tremendous boom. At the same time, however, he notes that "wage and salary income, adjusted for inflation, rose at an annual rate of only .8 percent."

Krugman notes that the working-age population needed 150,000 new jobs monthly, but the boom produced only 90,000 new jobs. This means that forty percent of those needing new jobs did not have them. This, at a time when the Fat Cats are wallowing in huge profits. According to Krugman, one percent of Americans consumed the major share of the exploding economy's profits. How do they manage to do this? They are producing goods and selling them for great profit by cutting out the American worker.

This theme is taken up by Time's writer Bob Herbert (12/26/03) in "Economic Conditions and Trends: Unemployment." Herbert tells of plans by the Global companies to transfer white collar jobs out of the country to people who accept pennies, in India and China.

Thus, we have the trend. Global American companies make huge profits, drive up the stock market, give large contributions to politicians, and take jobs from Americans and send them to India and China. The rest of us, our faith in democracy and government unmoved by reality, just weep. However, it isn't that simple. You can't weep for free. You have to pay the monies the Feds have mandated for the states. And, although Washington doesn't really care, you have to survive and so does your community. You will pay, or there won't be roads, hospitals, schools and police.

Just how bad is the situation with the states? In a Fiscal Survey of the States, December 2003, the National Governors Associations and the National Association of State Budget Officers tell us the facts. To understand just how atrocious these stats are, keep two things in mind. One, populations generally grow larger, and this requires more financial outlay. Thus, if a state does not spend more, it is actually spending less per citizen, because of the growth in population. Secondly, inflation is about 4 percent a year. Thus, if a state does not increase spending by at least 4 percent, it is spending less.

The reports note that "between fiscal 2000 and fiscal 2001, general fund expenditures increased by 8.3 percent." However, after 2002 the increases were close to zero percent, or .02 percent. Remember, inflation is 4 percent. So .02 percent is a cut of about 3.8 percent. When we factor in population increase, as we mentioned before, we see the states are cutting 4 percent or more.

While the states are cutting their spending, "Medicaid spending increased by 9.3 percent in fiscal 2003." This leads 32 states to predict a shortfall in their Medicaid budgets. Higher taxes, anyone? 36 states increased taxes and fees.

Since 1984, states increased their annual budgets every year until 2003 and 2004, when they cut budgets. California cut over 2 billion dollars from its spending. Colorado and several other states half a billion. This is going to hurt. Don't worry, however. When the Globals get fed up with the deterioration, they can always go to Washington.