The national debt is not as dire as it's being portrayed (Vanity)

My letter to the editor of every major paper | October 21, 2003 | Peach

[Peach]

Despite the barrage of negative press regarding the national deficit, a little research reveals the news is far less dire than it is being portrayed.

The gross domestic product (GDP), which forecasts the amount of money taken in through taxes by the government versus the amount of government spending, is best looked at in percentages as the nation's economy continues to grow each decade. According to the Office of Management and Budget, a comparison of administrative deficits for the last 20 years is as follows:

Reagan 1983 $208 billion deficit 6% GDP

Bush 1992 $290 billion deficit 4.7% GDP

Clinton 1993 $255 billion deficit 3.9% GDP

Bush 2003 $374 billion deficit 3.5% GDP

What the majority of articles bemoaning the national deficit do not remind people is that the terrorist attacks of 9/11 cost our economy a minimum of $500 billion including $150 billion in reduced GDP. This does not include the cost of fighting the war on terrorism. The cost for that is approximately 3% of GDP versus approximately 10% GDP during the height of the Cold War. Considering two years ago our nation endured its largest attack at the heart of its financial center, as well as an expensive war on terrorism, two tax cuts and numerous corporate scandals,

A 3.5% deficit in GDP does not seem unreasonable and on a percentage basis is still lower than we’ve seen in 20 years.

In addition, the record deficits in California continue to have a negative impact on our national economy. California is the world's fifth largest economy and their breathtaking social experimentation in recent years has resulted in a state dangerously close to needing a national bail-out.

The majority of economists have attributed the recent strength in consumer spending to the Bush tax cuts. We have already seen tremendous growth in the last quarter, and most of that has been attributed to people having more money to spend.

Contrast the Bush tax cuts with the money the Democrats would spend if they had the majority. In the last 3 years, The Democrats, who say they want to reduce the deficit, have tried to add nearly $2 trillion in budget bills, more than all of Bush's tax cuts combined.

[Peach]

We'll see if the mainstream press can handle a little honesty and integrity when bemoaning the "record breaking deficit".

[Peach]

A shameless ping.

[jd777]

2003 isn't over yet

[CPT Clay]

Mainstream press does not want to get this right.

[Peach]

Those are numbers taken from the Office of Budget and Management and published in USA Today (today). If it's good enough for them, it's good enough for my editorial.

Regardless, you can see that thus far, the deficit as it relates to GDP is lower this year than any time in 20 years. I think since we've had the worst attack on our country in our history, a war on terror, two major tax cuts and corporate scandals - that's a pretty good number and deserves to be trumpeted.

[Peach]

They probably won't accept the letter but I've used the contacts here and some of my local papers to send it in.

We can't depend on the lamestream press to do what's right but if they hear from enough people, perhaps they will feel forced to print some GOOD news for a change. (hope springs eternal)

[RedWing9]

2003 isn't over yet

In case you didn't know, the Federal gov't is on an Oct 1 to Sep 30 fiscal year. 2003 is most definetly over...

[k2blader]

Where exactly did you find your deficit and GDP data? Thanks in advance.

The chart at the top of this page shows the current (?) budget deficit at 4.2% of GDP.

Also note the chart at the very bottom of the same page illustrating "The Real Fiscal Danger: Shortfalls in Medicare and Social Security, along with debt held by the public, pose genuine fiscal challenges that must be confronted."

[Ramius]

The other thing to drive home, and I rarely see it done, is that there was NO SURPLUS budget ever seen in the 90's. There was a "projected" surplus in the "out years" (unbudgeted years) but since the bubble burst in the stock market and the economy tanked at the end of the Clinton regime, those "projected" surpluses evaporated.

[Peach]

I got the information from USA Today which annotated that it got their information from the Office of Management and Budget.

[Tennessean4Bush]

Peach, you are absolutely right. While debt is never something to be desired, a little perspective is what is needed. $87 Billion is peanuts to what a major terror attack over here will cost us. And right now it looks like a bunch of the terrorists are flocking into Iraq to take the fight to us there instead of flocking here.

Bush could solve this real quick by merely holding the rate of growth in non-defense related items to 2% instead of 4%.

[Peach]

Excellent point(s). If I write more letters, I'll include that little tidbit!

[k2blader]

Ah, thank you.

[Peach]

Rumsfeld a month ago or so talked about these numbers as well and made your exact point - that spending $87B to fight the war on terror is peanuts compared to the $500B the 9/11 attacks took out of the economy.

Hey - Rummy - is that you?

[Peach]

You're welcome. I'd expect the number to perhaps go higher next year, but I don't think on a historical comparison basis that it's quite the big deal the media is making it out to be.

[Willie Green]

Expressing the deficit in terms of GDP is an irrelevant and misleading statistic.
It totally ignores the magnitude of debt that has already been accumulated by the federal government, as well as debt that has been accrued by state and local governments in addition to private sector and individual household and consumer debt.

It is more appropriate to look at what proportion of federal revenue must be allocated to servicing the interest on the National Debt. The last I looked, that figure was approximately 18%. The federal government should NOT be accumulating more debt when it is already devoting nearly 1 out of every 5 tax dollars it collects merely to make interest payments.

"I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country."

-- President Andrew Jackson - (1824)

"Think what you do when you run into debt;
you give another power over your liberty."

-- Benjamin Franklin (1706 - 1790)

[tet68]

Every time I hear about "the Deficit" I am heartend by part of a story by james Fenimore Cooper entitled, "The Crater".
A great story with a lot of universal truths to it but in this instance , the story is set in the late 1700s,early 1800s two of the main charactors are arguing about the deficit and how it's going to be the ruin of the country and how shocking it was with it at $180,000.
After that I ceased to worry about it.

[Flyer]

there was NO SURPLUS budget ever seen in the 90's

Not to mention that a surplus means we are being over taxed. I NEVER want Government to have a surplus.

[k2blader]

Well, I like what this chart shows (straight from the OMB website)!




...And just to (hopefully) spark some interest, here's the other chart I referenced:

[annyokie]

Re #5

Damn right!

[Elliott Jackalope]

"California is the world's fifth largest economy and their breathtaking social experimentation in recent years has resulted in a state dangerously close to needing a national bail-out."

Yes, let's reward the idiots who have bankrupted that state by bailing them out. Then, when the other 49 states start getting tired of tightening their belts, they too will instead follow the brilliant example of California by spending themselves into bankruptcy to obtain their federal bailouts. It is pure genius! Bankrupt yourself to prosperity!

[WhiteGuy]

The congress is still spending the Social Security surplus every year.

Social security goes broke in a few years.

The national debt has risen every year, including the "surplus" years.

Our elected government officals spend far more than they have the right to.

It is our money.

To me, this is why the "record breaking deficit" is a critical problem to be solved.

[WhiteGuy]

The congress is still spending the Social Security surplus every year.

Social security goes broke in a few years.

The national debt has risen every year, including the "surplus" years.

Our elected government officals spend far more than they have the right to.

It is our money.

To me, this is why the "record breaking deficit" is a critical problem to be solved.

[Koblenz]

The % of GDP is going to go over way too many people's head. Another way to make this argument is to make an analogy to Gone With the Wind. It's the biggest grossing movie of all time if you adjust for inflation. Otherwise, in raw dollars, it's Titanic.

[ChadGore]

Good post! Here's a thought:

Could the proper title for this thread be:

"The national debt national deficit is not as dire as it's being portrayed"

Deficit being the overspending in each year.
Debt being the total acrued debt we owe.

[Brian S]

And you fail to mention the $400 billion which will actually be $1.4+trillion, prescription drug program being promoted and pushed by "our" current Administration.

Search on "medicare" for current FR updates...

[Tennessean4Bush]

Expressing the deficit in terms of GDP is an irrelevant and misleading statistic. It totally ignores the magnitude of debt that has already been accumulated by the federal government, as well as debt that has been accrued by state and local governments in addition to private sector and individual household and consumer debt.

You have a point, but it still does not preclude Peach's point, which is merely a relativistic one that argues for perspective. Look, I would love it if Bush would institute a rigid austerity and hold the rate of growth in non-defense to that of inflation (or less) instead of the 4% he trumpets. I mean, they gore him about the 4% not being enough, would they make it any tougher if he held it to 2%? That would represent a real reduction in the size of government and a fiscal legacy of which to be proud.

[Peach]

Oh sugar. I wish I'd posted before I sent those letters out!

Thanks for the correction. Regards, Peach

[annyokie]

Yawn. I have been hearing this canard since I was 16-----30 years now!

[Peach]

Loved the analogy. And couldn't agree with it more. That Titanic was awful - walked out.

[Peach]

Thanks - hope those projections are right!

[Peach]

Great story. That's why people need to look at the percentages and not the #'s (which you've obviously known for years).

[WhiteGuy]

Canard?

Which of my points did I lie about?

[WhiteGuy]

Don't remind me.

I'm in denial, if I actually belive that our socialist congress would do such a thing, I'd go mad...........

[Ramius]

Expressing the deficit in terms of GDP is an irrelevant and misleading statistic. It totally ignores the magnitude of debt that has already been accumulated by the federal government, as well as debt that has been accrued by state and local governments in addition to private sector and individual household and consumer debt.

Sorry Willie, but you're wrong about that. Expressing the deficit and debt (two different things, by the way) as a percentage of GDP is the ONLY meaningful way to compare them across decades. To compare such amounts over different administrations ignores not only the relative size of government, but also the time value of money.

I hope you don't believe that the "national debt" includes state and local as well as consumer debt. It doesn't.

[annyokie]

No one said you lied, but the idea that SSI will ever be defunded is so much bullstuff.

2.1 % increase next month (eg: average $19 a month) would be an indicator.

[Peach]

Yes - I thought of that lower interest rate payback after I sent my letters.

Perhaps I'll revise them. Thanks for the suggestion.

[WhiteGuy]

A canard is a lie.

defund social security?

the alternative is confiscatory taxation to the point that it doesn't make sense to "work".

We were warned about this during the Reagan administration, (which was probably before your time young lady!)

And the problem worsens daily.

We have been fed one "crisis" after another for 15 years, as we rush headlong toward the end of the republic.

[Willie Green]

Sorry Willie, but you're wrong about that.

Horsepucky.

Expressing the deficit and debt (two different things, by the way)

No fooling, gunga din. The National Debt reflects the cumulative obligations accrued by years of deficit spending.

as a percentage of GDP is the ONLY meaningful way to compare them across decades.

If you want to discuss National Debt as a percentage of GDP, I may be more open to the comparison. But calculating the deficit as a percentage of GDP is irrelevant. A bank doesn't lend money to ANYBODY without consideration of how much is already owed.

I hope you don't believe that the "national debt" includes state and local as well as consumer debt. It doesn't.

Of course not. That's exactly why I pointed it out. It's irresponsible to even discuss the National Debt's relation to GDP without recognizing all the other forms of debt obligations that must ALSO be serviced by domestic economic activity.

[Brian S]

I'm in denial, if I actually belive that our socialist congress would do such a thing,

Most here are, but I have a solution...if you have a dime!

[annyokie]

Oh, grow up. I first voted in 1977. This IS a canard. I dislike SSI as much as the next sane person, as well as the welfare for oldsters prescription program being entertained.

That said, my 75 year old aunt (whose dimbulb husband (DEAD)didn't believe in insurance)could never have had her wrenched knee repaired. My elderly mother couldn't get her kidney stone lasered.

Many times we must put aside our ideology for the sake of
others. I don't mean welfare. I fully expect to collect my $200 a month in SSI. It would be more, but I opted out of the work force to raise my kids.

Stop trying to be superior to those you know nothing about.

[Ramius]

You're splitting hairs, but since you started...

OK... deficit *as a percentage of budget* might be a more useful number, but debt as a percentage of GDP is the only meaningful number. Deficit as a percent of GDP is just a somewhat diluted version of the former.

The truth is that deficits don't actually matter so much as the total debt (as a percent of GDP). That's where debt might have some effect on interest rates. It might or might not have a measurable effect. Though now, with interest rates at all-time lows, how can one argue that the debt is a meaningful part of the equation? It just isn't.

[TheBattman]

Clinton 1993 $255 billion deficit 3.9% GDP

I thought Clintoon claimed a budget SURPLUS - he didn't have "no stinkin' deficit".

Of course, the rest of us knew the truth. Unfortunately, the idiot sheeple in the US are too lazy and dense to see or find the truth.

Also - just because the deficit is a smaller portion of the GNP doesn't mean that we shouldn't be concerned about it. In fact, we should still be very concerned. Regardless of what the % of GNP the deficit is, someone has to pay for this debt. That would be those of us who actually have a job and pay taxes. I don't know about you, but I cannot afford any more taxes, but that is where this will eventually lead.

At a time when many Americans are tightening their belts with the slow economy, why shouldn't the government also tighten it's belt?

[Willie Green]

Though now, with interest rates at all-time lows, how can one argue that the debt is a meaningful part of the equation? It just isn't.

Sure it is, no matter what the interest rates are.
The government is no different than any other organization or individual who borrows money.
The lenders are gonna look at three things: the borrower's income, outstanding debts, and assets that can be used as collateral.
If they see that you're already over your head in debt and paying 1/5 of your income just to make interest payments, most reputable firms will refuse to lend you any more until you get your financial affairs squared away. Less scrupulous firms and loan sharks will loan you the money anyway, just so they can squeeze the lifeblood out of you and eventually foreclose and seize your assets.

It's time to get our government's financial house in order rather than sinking ourselves deeper in debt.

[Ramius]

I wouldn't disagree that we should try to get our house in order and focus on less debt rather than more. Of course we should.

But federal debt *is* different from ordinary consumer debt. Partly because of sheer volume, but mostly because that if there is a loss of confidence in federal debt we all have way bigger problems than the scope of this discussion can contemplate.

[Mulder]

There are two main reasons for the massive budget deficits.

Less money is coming in due to a poor economy. Some of this is cyclical. Some is due to corporate scandal, as you pointed out. But a very large portion of it is due to the globalist "free trade" policies that both parties support, where the American technical and manufacturing base is shipped offshore. And a lot of that is due to the massive regulatory and taxation schemes heaped upon American businesses. Neither party is addressing either of those, except for a little nibbling on the tax code, which long term may hurt more than help since while the tax cuts decreased individual and capital gains rates (good), they also decreased the number of taxpayers (bad).

The other reason is the massive increases in spending that have occured in the last 3 years. During the 90s, the GOP Congress held the line on gov't spending, much to Klinton's disapproval. But no real progress was made towards long-term budget reductions. The surpluses of the 90s were only because of the stock market bubble.

Now that the bubble is gone, and Bush is spending money like a drunken sailor, massive budget deficits have resulted.

I expect the deficits to get bigger for the following reasons:

-- There is no guarantee that the economy will improve. Keep in mind that these deficits are occurring in an economy that is supposedly growing between 2-4%. Should the growth rate drop below 2%, the deficit will skyrocket. If it goes negative, I would not be surprised to see $1 trillion annual deficits.

-- Both parties are continuing to increase spending at a rate not seen since the failed "great society" programs of the 1960s. Neither party (at the top) is interested in restraining the growth of the federal budget.

-- The spending in Iraq will continue to increase. There is no exit strategy.

-- Bush wants to add yet another entitlement (prescription drugs). Like the other programs, this will cost much more than what they are telling us.

-- Last, but not least, the debt/deficit numbers don't count unfunded liabilities that are really going to accelerate next decade. That's only going to make things worse.

The only solution to this problem is to deal with both the revenue side and the spending side. Revenues can be increased by reforming the tax and regulatory code. Instead of pursing "free trade" between nations, "free trade" between American citizens and their employers should be sought after.

On the spending side, massive reductions in redistributionist programs need to be enacted. Something like the Grace Commission could be set up to find waste, fraud, and abuse.

[Mulder]

We have been fed one "crisis" after another for 15 years, as we rush headlong toward the end of the republic

Yep. The politicians will always find an excuse to not reduce spending or downsize government.

As a somewhat depressing exercise, can you imagine ANY Republican in a leadership position saying what Reagan did in 1981 ("gov't is not the solution to our problems, gov't is the problem")? Or any Republican proposing to abolish 4 cabinet level department like the Congressional candidates did in 1994?

Unless course is quickly reversed this country is screwed.

[sixmil]

The entire GDP is the government's money? God Lord, where have all the conservatives gone? The debt and deficit should be compared to the budget, which should in turn be compared to GNP. So, here goes it roughly - 400BN deficit on a 2.2TN budget, that's almost 20%. The debt is something like 3 times the yearly budget. Imagine if these were your personal finances, would you be worried?
salary is 22K per year
you spend 26K every year
and you still owe 70K for school loans

[Willie Green]

Government borrowing merely extracts capital OUT of the financial markets.
I think we should not only discontinue deficit spending, we should also pay down the debt. All that capital would then become available for investment opportunities in the private sector.