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U.S. Deficit and Debt: Truth in Numbers

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This is a Guest Post.  Please feel free to submit your article for consideration.  Mr. Stiltner’s previous article was titled Walls of Fear and Prejudice.

U.S. Deficit and Debt:  Truth in Numbers

By Kirk Stiltner

We need to start with a mutual understanding.  The debt is the total money our country owes as a result of borrowing to pay our bills, year after year(Today’s total is about $16 trillion).  Deficits are the amount of money overspent, or borrowed, in any one year(this year’s deficit is about $1 trillion).  Any year’s deficit is added to the total debt and any year’s surplus reduces the total debt.  Each year, we collect revenue and use it to pay bills.  For many years we have spent more than we have brought in through taxes.  We borrow the money primarily from ourselves(example: the Congress has borrowed about $2.5 trillion from the Social Security fund), but also from foreign investors(example:  we have borrowed $1 trillion each from Japan and China).

If we wish to discover where the overspending has occurred, we must look at new spending items created over the last decade.  To listen to our present debate, however, we would think that new spending had nothing to do with our current debt.  We would also think that the present lawmakers had nothing to do with the problem.  We would think that this snuck up on them and someone handed them this massive debt issue.
The politicians want us to argue over policy, without looking at the actual numbers and timing of the spending.  They want to hide the actual budget busting details by turning the debate into a debate over policy and social issues, rather than focus on the actual costs that created the massive debt in the first place.  The truth is that the lawmakers knew that they were issuing new spending without paying for it.  They knew they were creating a future problem.  They took the easy path at the time, spend on credit.

Look at debt history.  President Carter turned over a debt of $900 billion and an annual deficit of $74 billion to President Reagan.  After 8 years, the Reagan administration handed the Bush administration $2.86 trillion in debt and $155 billion in annual deficits.  Those were huge increases resulting in a tripling of the debt.  President George H. W. Bush turned over a debt of $4.1 trillion and an annual deficit of $290 billion to President Clinton’s administration in 1993, thereby doubling the annual deficit.  8 years later, the Clinton administration turned over a $5 trillion debt and an annual SURPLUS of $400 billion dollars to President George W. Bush’s administration, paying down the debt by creating a surplus.  After 8 years, the George W. Bush administration turned over a debt of $11.9 trillion and an annual deficit of $1.4 trillion to the administration of President Obama.  Those annual deficits or surpluses continue year after year, unless cuts are made or revenues are increased or decreased.  The present deficit is about $1 trillion.  The Obama administration has cut the deficit, not added to it.  He inherited the more than $1 trillion dollar deficits.  On the other hand, the George W. Bush administration was handed a $400 billion dollar annual surplus and then spent the surplus into an annual deficit of $1.4 trillion in 2009, leaving the massive annual deficit and doubled debt to the Obama administration.  So how was the budget busting money spent and who was primarily responsible?

The  new budget items during the time period, 2001-2007 were:  An increase in defense spending from $300 billion in 2000 to $700 billion in 2009.  A war on terror, a war in Iraq and a war in Afghanistan at a cost of about $1.8 trillion.  A medicare drug program passed in 2003 at a cost of about $700 billion through 2010.  A new department of homeland security and a takeover of airport security by the federal government at a cost of about $300 billion.  A tax cut for the upper 2% of Americans at a cost over 10 years of about $1.6 trillion.  And finally, in 2008 an $800 billion bank emergency bailout.  Those increases in spending and new spending items and tax cuts account for budget increases of about $5.7 trillion. No votes were taken to cover the new costs.  And who was in control of our government during this borrowing and spending spree?  The Republican party controlled the Presidency, the House of Representatives and the Senate from 2001 to 2007!  House Republicans did not revolt against spending when their party put forward the spending bills.  They did not demand cuts, equal to the new spending.  Now, many of those same politicians and their supporters want us to blame Social Security, Medicare, welfare, education, research and development, the state department, farm subsidies, etc. for the over spending problem.  The lack of logic is laughable.  Let’s compare to a somewhat normal household.

Let us assume our take home income is $3000 per month and our house payment is $800.  We have a car payment of $300, insurance costs of $150, college loan repayments of $100, an IRA of $150, supplemental health insurance of $100 and household utilities of $500.  This amounts to $2200 of fixed monthly costs.  That leaves $800 for food, gasoline, medical expenses and all optional spending.  Now, a new year passes.  In October, we realize that we are borrowing on credit cards and through bank loans to cover the costs of our monthly expenses.  We are going into debt!  What happened?  What is the actual cause of the over spending?  We had $800 spending money per month, just last year.  As we look at our line item spending we find that this year we bought a boat, on credit, for $150 per month, we spent $3000 on a vacation, an average of $250 per month, we bought a home security system for $100 monthly. we began giving $50 per month for a new church fund and we sent our daughter to a private school, rather than the free public school for $300 per month.  That is a total of $850 in new spending per month.  We were not borrowing and creating debt last year.  So what caused the problem this year?  To follow the logic provided by the present political argument, the problem is that our house is too expensive, we cannot afford to save for retirement, college costs are killing us and insurance and healthcare are breaking our household budget.  The real truth is obvious.  Get rid of the boat, put our daughter back in public school, cut the tithing, and forego the vacation.  Seriously, we can all see the line items and what the new spending without new revenues did to our budget and we can all answer this question.  Cutting those new, optional expenses gave us relief and if we get a raise, the revenue creates even more breathing room.  Can’t we do the same with the nation’s budget?  Of course we can!

If we apply the same logic to the debt created in the last decade, we would be looking for new budget items which increased the debt.  If we can figure out the problem with the household budget described earlier, then we can figure this one out as well.  The cuts and reductions must take place over a decade of time and not all at once.  The problem has built over 30 years and must be solved over 30 years.  We need to head in the right direction but do not need to arrive overnight.

Republicans claim to be the budget hawks.  They claim that Democrats and the Obama administration are spending the money at record levels but as we showed earlier, his deficits were largely inherited.  The new health care law has not yet gone into effect, so has added nothing to the deficit, yet they yell about the future cost, keeping us from a focus on actual causes.  The only real addition to debt, by the Obama administration was the one time cost of the stimulus package, about a third of which was paid back to the government.  That one time charge was about $800 billion and was not recurring.  The other side yells about the trillion dollar deficits and more than 3 trillion dollar annual budget, but fail to mention that those numbers were inherited.  The Republicans and the Bush administration created the first $3 trillion dollar budget and the first $1 trillion dollar annual deficit.  Neither party is blameless and neither party has always acted in good faith when it comes to spending and paying, but Republicans were in charge during the spending spree of the last decade.  No, you cannot say that it is too late to blame the other guy.  Those numbers belong to the other guy.  That doesn’t change.  The clean up belongs to the present administration and it continues.  If the Obama administration turns over a smaller deficit than inherited, then we are moving in the right direction.  The only administration of the last 33 years to accurately claim that record, is the Clinton administration.  Republican presidents Reagan, George H. W. Bush, and George W. Bush and their administrations each significantly increased the debt and annual deficits.  The actual numbers from the actual budgets, coupled with the votes to spend those dollars tell the accurate story.  Again, they tell the truth, the whole truth and nothing but the truth.  Political spin does not work on the math.

Almost daily you can hear someone name Social Security as one of the entitlements that is causing our financial crisis.  If we could cut Social Security, we could cut into the debt and deficit.  The problem is that Social Security is NOT AN ENTITLEMENT.  Social Security is also NOT A PART OF THE FEDERAL BUDGET, by law!  Social Security is a separate fund and cannot be included in the general budget of the U. S. nor can it be counted as revenue nor expenditure.  It does not affect the debt nor deficit.  The FICA tax is collected separately from each worker’s paycheck and you pay, in advance, for your Social Security benefits.  If a short fall in revenue is imminent, then Social Security fixes are made separate of the federal budget.  The FICA tax(presently 6.2% paid by the employer and the employee) can be raised.  The income limit for FICA can be raised(presently the limit is $110,000 earned).  A means test for payments to wealthy recipients can be enacted.  The age of qualification can be raised.  Again, none of this has anything to do with the federal deficits or debt.  Why do the politicians include it despite this knowledge?  Because it provides coverage for their failures.  It clouds the message and makes it easier to hide.

The figures in this article are not made up, they are taken directly from the CBO and Treasury department.  Anyone can look them up.  You must use a government, non partisan web page to get real numbers.  All partisan groups move the numbers around to fit their narrative.  Those sites, conservative or liberal, are not interested in the truth, just in their own point of view.  No one reading this article is unaware of the new costs which were created by the Bush administration.  We all know the wars and medicare drug program and airport security, etc. cost a lot of money and we also know that taxes were reduced.  These expenditures were all paid for with credit.  Voters are intentionally misled and confused by false representations of the causes of the debt and deficit.  These false representations are made because they ignore the actual spending which ran up the debt in order to argue over political viewpoints.  Political decisions made years ago about how to spend our money and how much revenue would be needed to provide balance, are the culprits of debt and deficit.  Debt and deficit is the result of money already spent and is not the result of future spending.  The same politicians who spent the money without objection and run up the debt rather than pay for the expenditures as they vote for them, are still in Congress.  Those yelling the loudest to stop the spending and cut benefits to ordinary Americans are the ones who voted to spend and borrow in the first place.  They are shameless in their duplicity.  They were clueless about budgeting then and they are clueless now!

As we approach yet another fiscal battle of false proportions, that is, the entirely made up debt ceiling debate, we should blow away the smoke and break the mirrors to see that the argument is dumb and getting dumber.  The debt ceiling is a debate about whether to pay the incoming bills for money that has already been spent on items voted into existence by the same people who are now arguing about whether they should pay the bill or not.  Our heads should be spinning!  Using our home argument again, you would now debate whether to pay the bill for the car you bought.  We know what will happen if we do not pay the bill.  Why have the debate?  It again, provides political cover for those who actually spent the money.  They want us to focus on the political fight, rather than their actions which created the bill in the first place.  This departure from the actual Constitutional budgeting process is harmful to our economy.  It is harmful to us.  It is carried out by self serving politicians who know they are the ones who voted to spend the money and now try to cover by arguing over whether to pay the bill.  They vote to spend, but force the other party to defend paying the bills.  It’s a neat trick, but only a trick if we allow it.  We are also the losers if we allow this.

Pay the bills without debate and fight the future of our budget and our spending in the actual budget battle itself.  When we do not spend the money in the first place, then we do not need to fret over paying the bill.  When we do vote to create programs and expenditures, we cannot the fight over whether to pay the bill.  It really is simple when we apply simple logic.  The long, hard fight over spending and taxes, reductions and cuts and the programs, themselves, is part of the budget discussion process, not the bill paying process.  Demand that our lawmakers do their jobs, on time, and in logical progression.  We do not need the heart ache nor head ache of false battles and false logic.  It is proper and normal to debate healthcare, Social Security, Defense, Education, and Social issues.  It is healthy to debate political viewpoints.  But it is not healthy to debate whether or not to pay the bills after voting to spend the money in the first place.

 

 

Posted in: Economics, Featured

2 Comments on "U.S. Deficit and Debt: Truth in Numbers"

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  1. KP says:

    Incredibly clear and well written. Thank you Mr. Stiltner.