Question: Martin, when we first talked in 1992 about "Government Waste from A to Z," did you have any idea back then that things would be as bad as they are now?

Answer: It gets worse every day and the reason is, we have a dysfunctional government. We had four presidential candidates recently and none of them said anything of intelligence regarding the government. There are two businesses they are in -- one is politics and the other is government. In politics, they are brilliant. In government, I would say that, by and large, presidential candidates, congressmen and senators are ignoramuses when it comes to government. They know almost nothing about the government. Most of their activity focuses on whatever is in the headlines for the moment.

Q: So what is the reality?

A: The reality is, it is the most dysfunctional government in the Western world. And there is a reason for that. The federal constitution gave the federal government very little power except for defense, commerce between the states, etc. And the federal government since Franklin Roosevelt has built this giant superstructure based on basically nothing.

There are no controls on it as there are in parliamentary systems. In a parliamentary system, the man who passes the law for job training, for example, the minister of labor, also executes it. So he doesn't want to have more than one or two job-training programs because there is no sense in loading-up the bureaucracy with things it doesn't need.

Q: What we have really ended-up with is more form than substance. Is that correct?

A: Exactly. We have 154 different job-training programs. At no point does anyone even claim that they get any jobs. They had a cosmetology job-training program that cost $148,000 per license. We have a job corps that costs $25,000 per kid, the residential program. They said 46 percent of the kids finished the program until the inspector general came in and said, "No, you're lying; only 14 percent completed it." We have job-training programs in all 14 cabinet agencies. And, when I said it was $17 billion wasted, when Nancy Kassenbaum took over in '95 as head of Education and Labor, she said, "No, no, it's not $17 billion; it's $25 billion."

The government makes no sense whatsoever. There isn't a single program in the United States government that works except for the FHA for housing. And the reason it works is because the homeowner buys a private insurance policy and, if the house is in default, the insurance company pays.

Q: On the other side of the coin, though, HUD paid out $900 million in rental subsidies.

A: That's extra. That's $900 million they were not supposed to pay. Because of bookkeeping and inefficiency errors, they paid out $900 million to landlords who were getting money under Section 8 for subsidized housing for the low and middle class. The Social Security Administration paid out $3.2 billion it wasn't supposed to -- a lot of it to dead people. The food stamps program paid out $1.4 billion to dead people.

In most countries in Europe, they have one or two programs for teenagers, sometimes three for alcohol abuse or for drug abuse. The U.S. government has 127 different teenage programs in eight different cabinet agencies doing the same thing. The Department of Justice has nine programs doing the same thing. The reason is, the government doesn't work! It's like a Three Stooges operation. You see, each congressman wants to get credit for the program so he gets up and passes a bill. By law, the executive branch has to set up a bureaucracy. After that happens, he has no contact with it and couldn't care less. The General Accounting Office writes a piece saying this is ridiculous and wasteful, and they just throw it in the wastebasket.

Q: Every year I talk with Tom Shatz from Citizens Against Government Waste. How much pork is eaten-up every year?

A: About $15 billion. Let me give you an example of pork. The General Accounting Office wrote a report that the courthouses in America were not being used efficiently. Courtrooms are used for trials only 27 percent of the time and, with non-trial usage, courtrooms are empty 42 percent of the time. So they were, in effect, warning not to build more courthouses.

Q: So what did Congress do?

A: They passed legislation in the past three years to build 44 new courthouses (that cost several billion dollars) and these are all mausoleums that are not needed. Up in Boston, the thing is a block and a half long. It was supposed to cost $150 million; it cost $230 million. Then they found-out you literally couldn't get there because they put it on the waterfront. So they built a one-mile subway, which is now under construction. It was supposed to be $287 million (80 percent federal).

I called Mr. Burke, who is in-charge of construction for Boston Transit, just recently, and I said, "What's it up to now?" And he replied, "The subway is up to $601 million." You see, it is a government that has no concern, no knowledge.

Q: It's other people's money, Martin. It's not their money.

A: It is ad hoc. You see, they invent it as they go along. The highway bill was supposed to be, under the balanced budget amendment, $184 billion (for 6 years) for new highways. So the transportation committee says, 'No, no, we want to spend more money, because we want stuff for our home districts'. So now it's up to $218 billion. They broke the balanced budget amendment on just that one thing by $30 billion. Each congressman threw one little deal into the pot. One guy from Vienna, Va., had the chutzpah to spend $2.5 million to fix the potholes on Maple Avenue. You're paying for their potholes! Half the activity of the government could be cut-out and no one would know it was missing.

Q: Well, in addition to that, they also steal the money from Social Security.

A: Absolutely. This scam is known to Fritz Hollings from South Carolina. It is known to me, known to Sam Nunn, Warren Rudman, Citizens Against Government Waste, National Taxpayers Union, the Concord Coalition, Citizens For Sound Economy. But, apparently, it is not known to Congress or the president who lie, lie, lie every day when they say, "We're going to fix Social Security; we're going to save it." Hollings says, "Don't save it. Stop raping it!" Not a single word about Social Security from America's politicians, especially presidential candidates, is true. The reality is very shocking and very simple.

Q: Talk about the alleged surplus.

A: You need very little mathematics to understand it. They talk about a surplus. There is no surplus. The surplus is actually a debt held by the people in the so-called Social Security fund. It works this way: in 1983, they raised the FICA tax 25 percent to get money for the baby boomers who start coming on in 2008 and reach a peak in 2013. After 2013, less money will be coming in for Social Security than going out. Right now, it is the reverse. Since 1983, because they raised the FICA taxes, there has been a giant surplus. The surplus to date is $1 trillion. By 2008, it will be $2.5 trillion. By the year 2013, it will be $4 trillion.

But there is no money. There are only IOUs. Why? Because they decided to spend every nickel of the Social Security money in the general fund for welfare, for tanks, for pizzas and retirement plans for the congressmen.

Q: Martin, how and when did this happen? This money was vertically targeted for one purpose yet it is being used for something else. When did they bait and switch us?

A: 1983. It was the first time they could do it because that is the first time you had a giant surplus. The surplus this year was a $130 billion. The cumulative surplus is $1 trillion, of which, they have spent every nickel. So if you go into the Social Security fund, there are zero dollars -- and $1 trillion of debt. You won't believe this, but the president's 2001 budget says the following: "Debt held as an asset."

Q: Hold on. That's assuming facts not in evidence, that the money is there to be an asset.

A: Exactly. There is a debt there but, of course, they say it is really an asset because there is the "good faith" of the federal government to someday convert it into money. Let's go to the following scenario. It's the year 2013 and all you baby boomers go on-line for Social Security. They are supposed to send you a check but there is nothing there except pieces of paper. They have robbed, looted every nickel of it. Warren Rudman says this, Sam Nunn says this, I say this, Hollings says it, Concord Coalition says it, Citizens Against Government Waste and, oh yes, the Congressional Budget Office says it.

Q: What does the Congressional Budget Office say?

A: They say there is no surplus. We keep telling them they are using the Social Security debt as a surplus. It's a fakeroni. When that time comes, you have three options, because there is nothing there. One, you raise the FICA taxes to get the money. If you do that, you have a revolution. Number two, you raise the federal income tax to do it and our dear president (who is also a congenital liar) said that that is one of options he intends to use -- use the general treasury to pay Social Security since the money in the fund has been stolen.

Q: But he's going to be gone by then so it won't be his problem anymore.

A: Number three, default on the debt. We have just done that. We passed legislation phasing in 65 1/2 , 66, 66 1/2 and 67 as the retirement age. So you have defaulted on a large percentage of that because you have stolen two years of money from the people; plus you have more debt. So, actuarially, you are not producing. We have the highest retirement age in the history of the Western world and there is no real solution unless you keep raising the taxes and reducing the benefit, which breaks the promise to the people. The major break was when they stole all of the surplus Social Security money. They count the stolen money as an asset and that is where the surplus is.

Q: Where did you go to get hard figures?

A: I called up the Bureau of the Public Debt. The Bureau of the Public Debt, part of the Treasury Department, is the only honest organization in the United States because it deals with Wall Street and, if it lies, then we are totally out of business. So I asked, "The government claims there is an $83 billion surplus. What is the actual figure?" They said, Mr. Gross, we can't talk politics, but we'll tell you this. That year ('98 - '99), we were $113 billion negative, not $83 billion positive.

That's a $113 billion deficit. The deficit is a little smaller now; it's about $70 - 80 billion, but there is no surplus whatsoever. It is faked bookkeeping and cooked books.

The national debt -- now here's the final analysis. If you have a surplus, the national debt goes down. The national debt was $5.3 trillion in 1997, $5.5 trillion in 1998 (when we had our first so-called surplus), $5.65 trillion in 1999 (when we had a BIG surplus), and it continues to go up! This year, it was $5.75 trillion and the president's new 2001 budget has a chart showing the federal debt at $5.9 trillion. By the year 2013, with supposedly $4 trillion in surplus, the debt will be $6.8 trillion. Now, why is there a supposed $4 trillion surplus? Because that is the amount of money stolen and they are counting the debt, the IOUs, as cash.

There are three kinds of people in the federal government: ignoramuses, liars and a handful of honest and intelligent people you can count on your fingers.

Q: Please speak a little to the alleged welfare-reform programs.

A: I testified before the Untied States Congress five times, recently to the House Oversight Committee. I try to educate them a little; it isn't easy. I read from a book that said welfare in America consists of 81 different programs, not one but 81 in six different cabinet agencies. That there is no central computer. That no one has any idea how many programs the people are on, or how much they are taking in, and that the cost was $350 billion, representing 17 percent of the entire federal budget and about 30 percent of the discretionary budget.

Q: What was the reaction?

A: The congressman from New York jumped-up, put his finger in my face and virtually called me a liar. He said he read in the New York Times that welfare was only one percent. Where did I get this 17 percent? That's larger than the entire Defense Department and 71 percent of the total was federal and 29 percent was state. So, he said, "Where did you get that stupid book?"

I looked at it and said, "Oh, you wrote it. This is from the Congressional Research Service. It's called "Cash and Non-cash Benefits for People of Limited Income," and it just came out."

The cost has gone from $350 billion to $391 billion -- that was as of December, so it is now over $400 billion and it is the largest item in the United States budget, including defense. So the so-called reform costs us more money. It also points-out in the book early on that there is no way to know how many people are on welfare in the United States and it mentions there are 30 million on Medicare and 28 million on food stamps.

Q: Wait a minute! The government is sending them a check. They should be able to count noses, shouldn't they?

A: The trouble is, there are some people on three programs, some people on two, some people on one. You can't get an undifferential number.

Q: Well, if you had a central computer you could.

A: Exactly, but every agency has its own thing. They don't talk to each other. They're not related to each other and that's because it's not really a government. It's a series of accidents waiting to happen. It has been created by people with no concept of management, who have no idea of what they are doing, because it is a political racket rather than a real government. Any real government would know who is on welfare, how much it costs and how many programs there are, right?

The rest of the testimony was chaos because they didn't believe what I said even though I merely showed them their own book.

Q: Some people just don't want to be confused with facts that contradict their preconceived opinions.

A: You can cut this government in half tomorrow and no one would notice. It's a fake government.

Q: We have to touch on the Department of Education.

A: The Department of Education doesn't educate a single child. I told this to someone from France and he laughed at me. He said, "That's ridiculous. We have a department of education, and it educates everybody." I said, "We have local government." He said, "Then why do you need a department of education?" I said, "We don't."

There are $32 billion in programs. One of the programs, Title One for disadvantaged children, costs $8 billion a year. So, I called the Department of Education. They sent me the report that said it has had no value in raising the performance of minority children since 1965. It has cost us an ultimate fortune and it has no value. The government says it has no value. There is no significant increase in the performance of minority children as a result of the program.

The Small Business Administration is another fraud. It costs us $1 billion a year. Only one sixth of one percent of small businesses get on the program and they are not so small. But if you have a real small business, a contractor with four employees, they laugh at you. They won't give you a nickel.

Q: What's with Intel and Chrysler and Pillsbury? Why are they getting $75 billion a year?

A: Well, because the government is crazy. They give $240 million a year to Ford, Chrysler and General Motors to improve their engines. But they keep the money.

Q: Last year, the president gave Bangladesh $100 million. This year, he's gifting them $200 million. What can we get from Bangladesh?

A: And the money doesn't go to the people. We have an aid program in Miami that talks American businessmen in Florida into leaving the United States and moving their businesses to Honduras and Guatemala and shipping their factories there. See, there isn't a sensible human being running this government. You can count on your fingers the people who understand what is going on.

NAFTA was supposed to be great. Now we have a training program for people who have lost their jobs because of NAFTA and the government has announced four out of five got no job and the fifth got a job at lower pay than the one he had before. And the government is proud of this training program.

The reason for all of this is the Constitution doesn't permit large government run federally -- centrally. It permits only activity by the states with certain limited functions to the government. The 10th Amendment says if the federal government doesn't receive the powers under this Constitution, they are reserved for the states.

They have broken that amendment.