Deficits vs. Debt


Politicians are at their "best" when performing obfuscation. As an example, let's look at the goverment deficts/surpluses vs. our total debt.

But first, let's define terms:

DEFICIT: Spending more than one takes in.

SURPLUS: Spending less than one takes in.

TOTAL DEBT: How much one owes.

And, of couse there's:

BALANCED BUDGET/BALANCED SPENDING: Planning to spend/spending not more nor less than one takes in.

Pretty straightforward, wouldn't you say?

Our national debt is currently : Click Here.

Our national debt at the onset of the current president's first administration:

$10,669,804,864,612.13

Republicans like to tout that Obama and the Democrats are on tract to incur more national debt than all prior presidents/administrations combined.

And, they are correct. So, you almost never hear a Democrat addressing the national debt.

Instead, the Democrats like to speak about "deficits"; specifically, that Obama's deficits are less than the prior president, Bush II. Further, they like to tout that Bill Clinton was the only president in modern times who actually had a surplus. And, here, they also are correct. But, Clinton also increased the national debt - $1.4T to be exact. And, it should be noted that Republicans controlled both houses of Congress when the surpluses occurred.

So, what does a "deficit" really mean at the national level?

Firstly, having a balanced budget means accounting for all the goverment needs (and wants) to spend, including ONLY the interest on the debt, and ensuring that income equals that number.

Deficit means, as from above, spending more than the government's income. Remember, budgets only account for any interest on our debt - not paying off the principal.

Further, administrations supply the Congressional Budget Office (CBO) their budgets for assessment. The CBO "scores" the budget and provides the "what does that mean finacially?" answer(s).

However, the CBO must ONLY assess, or "score", a submitted budget based on the assumptions provided by the administration. The CBO is NOT allowed to factor in "reality". So, often times the old adage "garbage in, garbage out" is the result.

In addition, since higher deficits are (correctly) viewed in a negative light, administrations use what I would call "sneaky" measures. An example of this is where the Social Security funds are "borrowed from" to lessen the deficit. Internal borrowing, of couse, is perfectly legal within the government, if not a bit sleazy in my opinion. And, we wonder why the funds for Social Security are at risk!

Seems the government operates with rules (or lack of rules) unfathomable outside the government. For example, the above "borrowing from Social Security" type of action is known as "Mixing Colors of Money" if one has a contract with the government - and it is strickly forbidden. In fact, should a contractor to the government be caught doing this, people go to jail. Very serious business, this. But, not so for the government itself.

When there are deficits confronting the government, the government must borrow funds to make up the difference.

As stated, Bill Clinton had a "surplus". How was this possible as he also increased the national debt?

Fairly simply, actually.

He (i.e., his administration) borrowed what they needed while making sure that income was sufficient to pay expenses - including the interest on the prior + new debt. Looked good on paper, but such increased borrowing furthered our financial weakening - as have all other presidents/administrations done in modern times.

So, by increasing income (raising taxes, appropriating funds from inside the government, etc.) the current administration (or any administration) can have have lower deficits and still have large increases in debt. Not the way to go, I feel.

Back for a second on Bush II having a higher deficit than Obama. One should remember that in the last 2 years of Bush II's term as president, the times when Bush II's deficits were the highest, the Democrats controlled both the House and the Senate.

Notice any correllation between deficits and who is in control of Congress?

Now, all of us at some time have had to borrow money. Most often we needed collateral to secure the loan(s) - but not always. If one secures a loan based solely on "our good name" to solve a short term problem, this usually is not an issue for the long term.

However, if one CONTINUALLY needs such unsecured loans to "make ends meet", then one is in serious, serious financial straits.

Unfortunately, the US operates solely by borrowing on "its good name alone" as its "standard operating procedure" to make up for shortfalls in income.

So, which political party is "better" at handling the nation's finances? In my opinion neither is worth a damn. Although the Republicans of late seem to have the better record. Consider: the last (and only) time the US was without debt was 1835 under President Andrew Jackson - and that lasted for only one year. By the way, Jackson's "party" was the "Democratic Republicans" - go figure!

Quite a while ago I offered a "take" on "Can we ever pay off the national debt?". Since then the numbers have changed, of course - but not the concepts presented. It may be illuminating. Click Here for that analysis.