Excerpt: CHAPTER 4
De Facto America, For the Love of Money
Today of course we have the WTO, NAFTA, CAFTA and even the newly proposed North American Union, all of which have the demonstrable ability to trump national sovereignty. Furthermore, all of these entities are, in essence, created out of and controlled by commercial agreements. The North American Union is but the latest, and in many ways most frightening, attempt to unite the U.S. with Canada and Mexico under one corporate system with its own constitution and set of rules and laws.
Currently, this is being accomplished under the new “Security and Prosperity Program,” which is part of the proposed North American Union. Through the SPP, all U.S. administrative law is being quietly rewritten in order to “harmonize” it with the laws of Canada and Mexico. This is occurring without Congressional oversight or review, even as the entire undertaking remains well under the radar of the American public, despite the best efforts of a handful of Congressmen - and even one intrepid mainstream media pundit by the name of Lou Dobbs - to bring this to light.
To be sure the North American Union project needs to have some very bright light shown on it very soon, and hopefully before We the People are forced by deception and lack of information to abandon once and for all our own extremely precious unalienable rights guaranteed by the Constitution and Bill of Rights. We have to ask, what is the real purpose of this North American Union? Could it serve as the latest expansion of the “invisible” or de facto government, created in the aftermath of the Civil War, and exponentially expanded by the New Deal?
This use of a “second” government to operate the government of the United States is not a new concept. Interestingly, this concept of “two” governments became apparent on Jan 3, 1934 when FDR's Presidential budget message revealed that two separate “governments” were in effect - and being budgeted for. One of these “governments” was the general government which funded various traditional departmental and legislative functions. The other “government” was the “emergency government” created in response to the economic crisis of the Great Depression.
This “emergency government” included those agencies and departments created by FDR's New Deal legislation, including the TVA, the Farm Credit Administration, the Agricultural Adjustment Administration, the Federal Land Banks, the FDIC, and the Public Works Administration. In 1934, funding for this “emergency government” amounted to $6,357,486,700 while funding for the “general government” amounted to $3,533,691,767, excluding interest charges on any debt that would be incurred as a result of funding the total amount.
In this “emergency powers” environment, the emergency government was funded through deficit spending. Because of this, federal borrowing of new money, in the form of debt backed currency, became inevitable. Deficit spending, of course, forces the government into borrowing debt backed money from the Federal Reserve in order to finance “emergency operations.”
A noteworthy refinement of this unusual system of accounting is known as the “Comprehensive Annual Financial Reporting” accounting structure, set up in 1946 by a private organization of businessmen. It has since been officially adopted by some 85,000 state and local governmental entities, including school districts, city, county, and state governments, and other similar entities throughout the United States. By 1981, according to one researcher by the name of Walter Burien, the federal government mandated that all local governments prepare a “CAFR” - or Comprehensive Annual Financial Report, and essentially set themselves up as corporate entities.
Within these CAFR statements is the “operational” budget which includes information concerning annual expenses and tax revenues received. The “operational” budget is the portion we as taxpayers generally see, hear and read about, and accounting reports provided to citizens will refer only to the operational budget. But the operational budget only accounts for approximately 50% of a total governmental entities' expenditure and, more importantly, revenues.
Kept out of public purview is the fact that - in addition to the annual expense and tax revenue data for the annual operating budget - the CAFR statements contain information revealing how annual surpluses, instead of being returned to the taxpayer or carried over to the next budget, have instead been used over the years by these local entities to purchase revenue producing assets, or to set up a variety of revenue streams to support various and sundry programs. Notably, these programs can and sometimes do include what can best be described as “pork” or “boondoggles” which are used as a ploy to get an official re-elected, however unsound a particular “boondoggle” program may be for the long term health of the community.
No longer is it “fiscally responsible” for a governmental entity to simply operate and maintain a public asset, such as a toll road, or water system, or other public utility solely for the benefit of the public. Instead these assets, purchased with taxpayer dollars must become revenue producing, through user fees and similar tools - also paid for by the taxpayer - or by selling these assets to a private business group or corporation. Each asset is placed in its own accounting fund, which is kept apart and separate from the “operational” budget we all know and hear about. Any surplus that may occur within a specific asset fund can also be used to invest in a variety of stocks and bonds, and an assortment of other “revenue-producers.”
Thus these assets, which again are to be structured so as to be revenue producing, include such things as toll roads, bridges, utility companies, sports complexes, golf courses, ownership of corporate stock and government debt instruments such as “muni” bonds, investment in corporate debt instruments such as derivatives, and similar items. Again, the sale of these assets, together with revenue streams created by interest income, toll charges, user fees, sale of government bonds or corporate stock, and other similar mechanisms, can be used to purchase still more assets, or to dabble in the futures markets, and so forth.
This seems to be just what Orange County, California was doing in 1994 when it announced that its investment pool had suffered a loss of $1.6 billion as a result of investing in derivatives and leveraging its portfolio to the max. This was, and remains so far, the largest loss ever recorded by a municipality. Due to the built-in incentive to engage in “revenue producing” activities, it is likely to be just a question of time before another such mammoth local governmental loss will again splash across our front pages.
Because the financial data of each asset is contained in its own separate fund account, and the operational budget is the only one publicized, these CAFRs function as a “second” set of books. Furthermore according to Walter Burien, a former Wall Street commodities trader, when the operational budget suffers a shortfall the taxpayers are asked to fill the gap with a tax increase.
Moreover, says Burien, two thirds of actual total revenues belong to local governments, and one third to the federal government. These revenue-producing assets in combination yield trillions in revenue each year, now totaling an estimated 60 TRILLION dollars on local through the Federal level. Burien maintains that there is enough revenue produced by these cumulative funds to pay off the federal debt, accumulated state and local debt and cut everyone's taxes for years to come.
Yet, only rarely is even one dollar ever returned to the taxpayer who footed the bill in the first place. Instead, whenever shortfalls occur within the operational budget, the public is asked to approve tax increases for a variety of public projects and services. At the very same time the taxpayer is charged a variety of toll and user fees, registration fees and the like – all for the use of assets he paid for in the first place.
Importantly, says Burien, only a select few, including political insiders, investors, bond traders and the like, are aware of the “second” set of books - opening the opportunity to use these revenues as personal “slush funds.” The worst of it however is the fact that a whole lot of people are making a lot of money from government debt and investments, and this may be a key reason why nobody wants to acknowledge that there is a problem.
A town adjacent to mine illustrates the unanticipated results of revenue producing assets being carried to a new level. The issue concerns the shared water supply system of our local towns, which most people assume are publicly owned and operated - for the public benefit, not as a revenue producer. In this particular case, the quality and expense of the public water system has been at issue for the entire twenty seven years I have lived here, with many residents referring to it as “liquid gold.”
Over the years ownership of this system has gone from public to private to international, and our bills have steadily gone up. Currently, we - like 125 other communities across the state - get our water from Illinois American Water, which is a wholly owned subsidiary of American Water, itself “the largest and most geographically diverse provider of water services in North America.” American Water in turn is a subsidiary of RWE AG of Essen, Germany, “a leader among international energy companies and a global technical leader in its core businesses of electricity and gas.”
Ownership of our local system went through several phases before coming under control of Illinois American and its parent companies. Once our system was privatized, or sold to private interests located in our state, a new layer of fees was added to the water bills of affected residents. These fees were required in order to pay the costs to the corporation for management of the water system, plus provide a profit to shareholders of the corporation. Today, there are three layers of corporate profits which must be paid by residents, plus the amounts needed to support local officials and their lawyers who must act as a liaison between Illinois American Water and local citizens, as well as oversee operations.
This story in some ways at least parallels, on a much smaller and more benign scale, what happened in California during the recent “energy crisis” which was then depicted in the documentary “Enron: The Smartest Guys in the Room.” Officials scrambled furiously as they tried to unravel and explain the problem. Finally in frustration they ended up pointing fingers at each other, while the citizens got taken to the cleaners. When the dust finally settled not all that much had changed, even if superficial changes have occurred. Meanwhile the march toward more privatization of public resources, and the sale thereof through bonds and other debt instruments continues.
In my adjacent town's case, when the last takeover by the German company RWE Ag occurred, residents immediately began experiencing skyrocketing water bills, with many experiencing bills in excess of $600 per MONTH. The town officials were, not surprisingly, besieged with angry complaints and set about to “open lines of communication” between consumers and Illinois American Water, who in turn has two more levels of control above it. Some of the town, and state, officials have even proposed new legislation to ease the resident's plight, which is the primary means available to them to deal with the current “emergency.”
This however is only a band-aid because a corporation's first and primary responsibility is to its shareholders, not the consumer, much less citizens in the community, irrespective of their being endowed with unalienable rights. With water prices expected to increase to three times current levels over the next five years, the choice we are now confronted with is whether we will look at access to potable water as an unalienable right for all humanity, or as an investment opportunity for the few who can afford to take advantage of it.
Importantly - and due in no small part to the lack of substantive media coverage - this privatization of public utilities has been going on for years all over the United States, just as it has in third world countries. Dennis Kucinich made a name for himself some 30 years ago as “boy mayor of Cleveland” when he refused to cave in to bankers' demands that he privatize the city's public electric company. When the bankers called in their loans to the city thus plunging the city into deep financial distress, Kucinich was sent packing – only to be recalled ten years later and presented with an award for his part in saving the city's electric company as well saving the consumers great sums of money.
All too often our federal and local government officials participate in these privatization efforts even though they are not always fully knowledgeable of the ramifications that result when our public resources become privatized, or sold to the highest bidder through bond offerings. Many even are led to believe that the revenues produced from such ventures can only help provide the public with important services, particularly when these officials are faced with increasingly restrictive budgets and increasing demand for more and better services.