The truth about the deficit {and rebuttal}

Thw Washington Times ^ | 6/20/2003 | UNK

[George Frm Br00klyn Park]

Clearly, America's fiscal posture has changed dramatically in recent years. The 10-year unified budget deficit for fiscal years 2002 through 2011 was once projected to be $5.6 trillion. No longer.

As it happened, fiscal 2002 began three weeks after September 11. That same September, moreover, marked the end of three consecutive quarters of contraction in the nation's economy, another development that had not been foreseen by budget forecasters. Meanwhile, the stock market was in the second year of a collapse in equity prices, which took away hundreds of billions of dollars in expected tax receipts. Several months earlier, President Bush shepherded a 10-year, $1.35 trillion tax cut through Congress.

[George Frm Br00klyn Park]

All, Above is an article/commentary by UNK at The Washington Times. "Unk" must be one of the most recognized {by the establishment leadership and their lackeys in the media of the masses} economists of today. Someong 'splain to me how those "budget surpluses" of the past few years occurred while the National Debt rose each and every year, as shown by the Dreasury Dept.'s website on "The Debt To the Penny".

This phenomena is truly bipartisan. Leadership of both{?} parties parrot it incessantly. But. It just ain't so! Peace and love, George.

[George Frm Br00klyn Park]

"The truth about the deficit"
---------------------------

Guys, As the guy said, there are "lies, damn lies, and government statistics". And as the other{?} guy said, "If a lie is repeated long enough, it will become 'truth'". Nice company our leaders associate themselves with. Peace and love, George.

[grumple]

In assessing the "swing of more than $9 trillion," it is wrong to blame "the Bush administration's tax cuts" for the deficits, as Democrats do. This only pertains to those who are listening...as to those who aren't it's still Bush's fault. What a nation of idiots.

[jackbill]

Someong 'splain to me how those "budget surpluses" of the past few years occurred while the National Debt rose each and every year, as shown by the Dreasury Dept.'s website on "The Debt To the Penny".

OK, but put your green-eyeshades on.

The "Debt to the Penny" is the total national debt. It is made up of two components - the Public Debt and the Debt Held by Federal Government Accounts.

The Public Debt is that debt held by the public, through T-Bills, T-Bonds, etc..

The Debt Held by Federal Government Accounts represents the IOU's that are placed in the various trust funds - Social Security, Medicare, Highways, federal civilian and military pensions, etc.. These IOU's are actually "Special" Treasury Bonds that are not sold to the public. They're just kept in a drawer at the Treasury.

The "deficit" that is discussed is the amount by which the Public Debt goes up or down. During the late 1990's, when the politicians talked about a "surplus", what was really happening was that money was coming into the trust funds so fast that the government couldn't spend it so some of it was used to pay down some of the Public Debt.

As a consequence, when the politicians talked about the debt going down, they were only talking about that Public Debt. What was happening was that the IOU's in the Debt Held by Federal Government Accounts was still going up faster than the Public Debt was going down. As a consequence, the "Debt to the Penny" kept going up.

For 2002, it was estimated that the Public Debt was $3.478 trillion and the Debt Held by Federal Government Accounts was $2.660 trillion.

The Public Debt has been going up for years. Then the following happened:

1994 - $3.433 trillion

1995 - $3.605 trillion

1996 - $3.735 trillion

1997 - $3.773 trillion

1998 - $3.722 trillion

1999 - $3.633 trillion

2000 - $3.410 trillion

2001 - $3.320 trillion

2002 - $3.478 trillion

As you can see, there were surpluses from 1998 until 2001.

[mpreston]

So even in a bubble economy the total debt continued to increase. Therefore with the current debt accummulation rate plus a more realistic growth rate we will never be able to reduce total debt. The only other option is to debase the currency? Geeesh .. The only way we are able to sustain this party is because the rest of the world is less secure and the only safe place for international investors is U.S. investments. If that ever changes watch out.

[A Vast RightWing Conspirator]

I believe it's changing. Didn't you notice that more prefer the Euro these days? Voting with their wallets.

West Europe is viewed as the island of prosperity and stability now.

[jackbill]

So even in a bubble economy the total debt continued to increase. Therefore with the current debt accummulation rate plus a more realistic growth rate we will never be able to reduce total debt. The only other option is to debase the currency? Geeesh .. The only way we are able to sustain this party is because the rest of the world is less secure and the only safe place for international investors is U.S. investments. If that ever changes watch out.

You are correct, we will never stop adding debt unless we do something. One thing to do is to partially or wholly privatize Social Security. If we did that, a lot of the growth in the Debt Held by Federal Government Accounts (DHBFGA) would not be there. It would be in individuals' accounts, invested in reall assets.

Inflating the currency won't help much because most of the programs that are piling up debt in the DHBFGA - Social Security, Medicare, federal civilian and military pensions - are indexed to inflation.

[dfwgator]

As George Carlin puts it, the word "bi-partisan" means some larger than usual deception is being carried out.

[dirtboy]

As George Carlin puts it, the word "bi-partisan" means some larger than usual deception is being carried out.

And two sets of hands are reaching into your wallet.

[berserker]

Graphically, what has happened looks like this. Whatever the cause, a big change has happened in the government finances.

[ex-snook]

Semms like we have "GOP gone wild". Oh for the good old days of gridlock.

[George Frm Br00klyn Park]

FISCAL Year Total $ 195,034,167,089.72

JB, Above is the interest paid on our debt this year. It buys nothing but gravy for lenders. These people must have gone to the same schools as those at Emron. Peace and love, George.

[jackbill]

FISCAL Year Total $ 195,034,167,089.72

JB, Above is the interest paid on our debt this year. It buys nothing but gravy for lenders. These people must have gone to the same schools as those at Emron. Peace and love, George.

That's just the interest on the Public Debt. The government is also required to pay interest on the trust fund IOU's (the Debt Held by Federal Government Accounts). That means (if the interest rate is identical) another $157 billion. But all they have to do is credit the trust fund and then borrow it back immediaterly and spend it.

When they borrow it back they call it "Undistributed offsetting receipts". Can you imagine even an Enron getting away with that?

[mpreston]

So if we privitize social security the government can no longer 'borrow' with IOU's. Then if we use a real rate of growth, not the bubble of the late 90's, we get a better persepective on the what the governments budget should be. Correct?

- Mark

[remember]

Someong 'splain to me how those "budget surpluses" of the past few years occurred while the National Debt rose each and every year, as shown by the Dreasury Dept.'s website on "The Debt To the Penny".

The reply from jackbill explains it well. I've posted the various deficits at http://home.netcom.com/~rdavis2/deficits.html. As you can see from the first graph, the deficit that is most often discussed, the Unified Deficit, was actually a surplus from 1998 through 2001. This is very nearly equal to the Public Deficit, which equals the change in the Public Debt (there are very minor accounting differences between the Unified and Public Deficits). The Gross Deficit, which equals the change in the Gross Federal Debt (or the "National Debt"), has not seen a surplus since 1969. It very nearly reached balance in 2000, reaching a deficit of "only" $23.2 billion. It's currently projected to be in the $500 to $600 billion range through 2008.

At http://home.netcom.com/~rdavis2/debt40.html, you can see the corresponding debts. As can be seen from the first graph, the gross federal debt, as a percentage of GDP, is starting to increase again. This is especially disturbing because the Boomers will start retiring within ten years. If you really want to see something really disturbing, look at the government's own projections for the rise in spending and the public debt at http://home.netcom.com/~rdavis2/pro2004.html. Obviously, something will have to give (likely, future taxpayers).

[remember]

FISCAL Year Total $ 195,034,167,089.72 JB, Above is the interest paid on our debt this year. It buys nothing but gravy for lenders. These people must have gone to the same schools as those at Emron. Peace and love, George.

That's just the interest on the Public Debt. The government is also required to pay interest on the trust fund IOU's (the Debt Held by Federal Government Accounts). That means (if the interest rate is identical) another $157 billion. But all they have to do is credit the trust fund and then borrow it back immediaterly and spend it. When they borrow it back they call it "Undistributed offsetting receipts". Can you imagine even an Enron getting away with that?

$195 billion is above the previously projected total in the 2004 budget. That is not too surprising since the estimated deficit has gone up as well. In any case, you're right that it includes only the interest on the Public Debt. As the following table shows, the "Net Interest" which is reported is currently only about half of the "Gross Interest".

NET INTEREST OUTLAYS BY PROGRAM (billions of dollars)

                                         Actual  Estimate
Function and Program                       2002    2003    2004    2005    2006    2007    2008
-----------------------------------------------------------------------------------------------
Interest on Treasury debt securities...  332.54  328.32  352.34  392.93  427.63  459.17  491.64
Interest received by social security...  -76.82  -83.58  -88.70  -96.77 -106.12 -117.00 -129.25
Civil service retirement and disability  -35.90  -37.29  -38.72  -39.99  -41.39  -42.69  -44.10
Military retirement....................  -14.00  -14.28  -14.52  -14.81  -15.11  -15.42  -15.76
Medicare trust funds...................  -16.69  -16.41  -17.32  -18.56  -20.18  -22.00  -24.04
Other on-budget trust funds............   -9.91   -5.95   -4.98   -4.84   -5.02   -5.36   -5.66
Total, Other interest..................   -8.27   -8.81  -10.81  -12.95  -14.27  -15.85  -17.76
Private holdings, Railroad Retirement..    0.00   -0.57   -0.90   -1.00   -1.02   -1.02   -1.01
------------------------------------------------------------------------------------------------
Total Net interest outlays.............  170.95  161.44  176.40  204.03  224.53  239.84  254.07

Source: Budget of the United States Government, FY 2004,
        Analytical Perspectives, Table 25-2

[WOSG]

" Above is the interest paid on our debt this year. It buys nothing but gravy for lenders. These people must have gone to the same schools as those at Emron."

Did you pay cash for your house, or do have a mortgage?

Properly applied, debt has its uses.

The public debt is lower now than in 1995. A public debt of $3.4 trillion is manageable under 40% of GNP, although we should restrain spending so it doesnt grow out of bounds.
The current deficits are worrisome mainly because they are not sustainable and the Federal level doesnt seem to have the discipline ot restrain spending.
But we should not fear public debt totally.

[WOSG]

I highly recommend the posted links in post #15. They are a very good presentation of the data.

"In order for the public debt to stabilize at 36
percent of GDP, the public deficit needs to stabilize at 36 percent
of the projected growth in GDP (about 5 percent). This works out
to about 1.8 percent of GDP."

this is a point worth noting - a 'steady state' debt situation could tolerate a certain deficit level. I would point out though that grwoth rates average more like 3%, so the deficit should be no more than 1% of GDP to maintain public debt/GDP ratio of around 35%.

Also, in the projections for deficits, that the swing in the deficits from prior projectsion is more due to spending increases than tax receipt reductions ... we are spending our way into deficits.

[George Frm Br00klyn Park]

"Did you pay cash for your house, or do have a mortgage?"
Properly applied, debt has its uses.
The public debt is lower now than in 1995.
=========================

WOSG, Most people do borrow for large expenditures. But, governments are borrowing money for "everyday expenses" also. AND, it is NECESSARY, as Treasury Secretary Snow testified to Congress, for the U.S. of A. to borrow money in order to "service" debt payments. In other words, borrow money to pay lenders for borrowed money and interest thereon. That is why the debt "ceiling" "had" to be raised by Congress and signed into law by the President. This is NOT good!

I would venture that the "reason" for the public debt being "lower now than in 1995", {IF SO?!?! See: The Debt To the Penny}, is the "taking off budget" {taking off of the "books"} of social security and other federal pension money by legislation signed into law by The first President Bush as a lame duck

An up to date related article is posted HERE. Peace and love, George.

[remember]

http://www.publicdebt.treas.gov/opd/opdpdodt.htm http://www.publicdebt.treas.gov/opd/opdpdodt.htm

"Did you pay cash for your house, or do have a mortgage?" Properly applied, debt has its uses. The public debt is lower now than in 1995.
=========================
WOSG, Most people do borrow for large expenditures. But, governments are borrowing money for "everyday expenses" also. AND, it is NECESSARY, as Treasury Secretary Snow testified to Congress, for the U.S. of A. to borrow money in order to "service" debt payments. In other words, borrow money to pay lenders for borrowed money and interest thereon. That is why the debt "ceiling" "had" to be raised by Congress and signed into law by the President. This is NOT good! I would venture that the "reason" for the public debt being "lower now than in 1995", {IF SO?!?! See: The Debt To the Penny}, is the "taking off budget" {taking off of the "books"} of social security and other federal pension money by legislation signed into law by The first President Bush as a lame duck

In dollars, the public debt is higher than it's ever been. It did go down from a high of $3.7723 trillion in 1997 to $3.3196 trillion in 2001. But it's now up to a new record of $3.8138 trillion. The arguably more important gross federal debt (which includes money owed to Social Security and other trust funds) is increasing even faster. It has increased every year since 1969. Even measured as a percent of GDP, both the public and gross debts are increasing. What is most disturbing about this is that we are currently in the "good years". That will change when the Boomers start to retire within the next decade, greatly increasing the spending on entitlements.

Regarding the mortgage example, we are in effect paying a mortgage. The question is, where is the grand house that this mortgage has bought us?