Why Do Democrats and The Media Use the WRONG Bush Deficit Numbers?

[ulTRAX]

I can see why Kerry understated the deficit... even if it was an issue that worked in his favor. He preferred using the unified budget figures so he could play his own games pretending to cut the deficit in half in 4-5 years when he would not count a trillion borrowed from the various federal trust funds. It was a way to sound fiscally responsible knowing war costs would go down and the economy would produce more revenue.

But why do people like Krugman use the bogus unified budget figures? NPR does it all the time. Chris Matthews a few weeks back was the worst... comparing the 04 Bush deficit of 413 Billion to Clinton's surplus of 87 billion. The problem Clinton's surplus was a true on-budget surplus and it sat atop a 150 billion surplus in the off-budget accounts. The only number that sheds some idea of the fiscal responsibility of the government is the on-budget balance. By this measure Bush's true deficit last FY was about 568 Billion... not 413.

The public is the best ally the Democrats could have in countering the Right's attempt to strangle government by sabotaging revenues. But the Democrats foolishly have preferred to pander to a spoiled public instead of talking straight... therefore helping advance the Right's plans.

[TahitiNut]

1. Yep. There's more than Social Security off-budget.

In any case, they'd be more honest if they talked in terms of the GDP. Notice how Clinton's numbers look better when using the "unified" numbers? That sword cuts both ways. It'll be particularly interesting when they start paying down the Trust Fund, as planned 20 years ago. At that time, if they're consistent, the off-budget 'deficit' will amplify the on-budget deficit.

[FloridaPat]

2. I'm sure I heard the liars say the debt was 3-4% of GDP - no problem.

[Deja Q]

3. And the more they tax cuts and spend more, 3-4% becomes 34% and then

more and more.

And 59 million American voters are the most despicable for wilfully wanting more of the same.

[ulTRAX]

5. the tax cuts serve two purposes....

The first is to sabotage the finances of the federal government. That is a strategic goal. But they also serve a tactical role... they help hide the fact that as the economy benefits the top 5% most and most quintiles are losing ground, the tax cuts help conceal that fact... and just long enough for the Right to strangle the beast.

[TahitiNut]

6. That's a lowball of the deficit level, not the debt.

I'd be willing to bet that, even on DU, at least 20% of people can't give a working definition of the difference.

The Federal Debt is near 70% of the GDP - the most it has been in 50 years.

[ulTRAX]

7. which federal debt?

There's the debt held by the public and the intragovernmental holdings.

Again I think the GDP argument is specious. Soon We The People are going to have to start repaying those SS IOUs...

BTW.. there's games being played here too. When Harry Reid gave his response to the state of the union address he only referred to the debt held by the public.

[TahitiNut]

9. The graph is 'stacked'. The gross Debt includes IGH Debt.

There's nothing specious about expressing the debt in terms of the same-year GDP, imho - it shows the same kind of "Debt/Earnings" ratio that consumers face.

[ulTRAX]

I meant specious in the sense of being pointless...

...not that the figures are in error.

For us deficit hawks what matters is not % of GDP... but the trends and how close we are to getting an on-budget surplus. The trends are very bad. It took 20 years to dig out of the revenue hole Reagan created. That surplus was fragile and was based on all the restrained spending, tax hikes, economic growth and good luck of having a record long economic expansion. All that just to break even. A mere 90 billion of the then $5.6 Trillion was paid down. The Right struck again and sabotaged debt paydown... and plunged the nation again into a sea of red ink.

If there's a number that people can understand is the absolute amount of debt in dollars... not relative GDP figures which the Right is using to excuse debt. The deficit/debt is abstract enough.

[TahitiNut]

14. It seems to me the 'trends' are clear in the GDP graph.

I think the trends are nearly invisible in a current-dollar graph like this:

[ulTRAX]

18. what I mean by trends.......

You continue to use charts that show aggregate budget numbers. Yes that debt trend in current dollars is terrible. But aggregating numbers inside larger budgets hides more than it reveals. Just take how using the unified budget figures can hide 155 Billion of internal FY04 borrowing. Even if Kerry promised to balance the unified budget in 5 years.... there would still be 1 trillion borrowed from the off-budget accounts during those 5 years that would be spent for on-budget accounts.

But there are other trends. Since the aggregate budget numbers don't provide much of a clue what are the trends in on-budget revenues. Is it trending towards bigger deficits or a surplus. If we ever get to a surplus again, what are the political trends in the nation? Will the next surplus again be sabotaged as Bush did in 2001?

[ulTRAX]

19. I didn't connect your statement to the chart n/m

[ulTRAX]

4. we have to concentrate on what pays down debt

Yes Clinton's numbers do look better when using the unified numbers but that 150 borrowed from the various trust funds still has to be paid back... so it's not correct to call it part of the surplus.

The only way our 7 trillion debt can be truly paid down is with an on-budget surplus... and the faster we concentrate on that number... the better.

BTW... the Right has been touting the GDP percentages as a way to justify Bush's fiscal responsibility. We should not help them minimize this issue.

[TahitiNut]

8. With on-budget interest outlays of $270 Billion in 2005 ...

... projected (in the Bush Regime budget!) to rise to $310 Billion in 2006, $350 Billion in 2007, $390 Billion in 2008, and so on, I couldn't agree more.

Compare those numbers to the total 'official' outlays for "National Defense" of $465 Billion in 2005 (which ignores billions for Iraq) and the magnitude becomes clear even for the arithmetically-challenged.

When interest rates start rising (the dollar can only be devalued so far), there'll be hell to pay.

[ulTRAX]

10. I suspect you're missing about 3.2 trillion in debt

I have total FY04 interest at about 321 billion.
http://www.publicdebt.treas.gov/opd/opdint.htm

I suspect you're just quoting figures for the debt held by the public.

http://www.publicdebt.treas.gov/

[TahitiNut]

11. There are on-budget trust funds and off-budget trust funds.

"901 Interest on Treasury debt securities (gross)" in 2004 was 321.7 billion, but "on-budget" trust fund interest receipts offset that by $67.8 billion. (Remember, Federal employee pensions are "on-budget".)

In addition to on-and-off budget trust funds, there're interest-earning programs (with reserves) in housing and education, as well as unemployment. (Federal UI has a "trust fund.") These had an additional $4.8 billion in offsets.

The federal budget numbers are set up like they were done by a shell-game street hustler.

[ulTRAX]

12. not sure your offsets matter

What matters is what is owed to what account. Interest I get on a bank account doesn't offset interest on a credit card loan. They are separate.

[TahitiNut]

13. Sadly, imho, they do matter.

While many state and federal trust funds are allowed to "invest in" (inflate) private equities, a majority of such reserves are held in federal debt. "Paying off" that (gross) debt has a downside - it's equities inflation. Thus, imho, there's really a three-stage payoff scenario. First and foremost, it's necessary to pay off the publicly-held debt. That's one place where ordinary taxpayers are enriching the wealthiest. Next, it'll be necessary to run a 'surplus' that at least covers the depletion of the OASDI Trust Fund beginning approximately 2018-2020 - in order to avoid converting that debt to public debt. If that's accomplished by anything other than a top-income tax increase, it'll be an abomination. The third stage of debt elimination would be to move various other trust fund holdings into something other than T-bills and notes. If that flows into the equities markets, we're gonna be in a world of hurt.


I'd personally prefer that state and federal trust funds be prohibited from "investing" in private equities (corporate stock). It creates an inherent conflict of interest. When the regulators of such financial activities have a vested interest in their "success" then they tend to avoid enforcement and do stupid things like bail out private corporations with taxpayer money. I'd strongly prefer such funds be held in residential mortgages, municipal bonds, and an array of foreign governmental debt instruments. That's not the way it is, however.


On edit: I should note that 'ownership' of private equities (corporate stocks) by state and federal trust funds (CalPers, Florida Teachers, etc.) are typically an empowerment of corporate management to the point of overriding public ownership voices in the governance of the company. The proxies are often, by law, granted to management. Thus, questions of Outside Auditor Selection, additional stock offerings, and even executive compensation are left to the executives themselves. State and Federal officials don't sit on Boards of Directors, no matter how much stock is 'owned' by government funds.

[ulTRAX]

16. My point is merely that we paid 321 billion interest on the debt

My point is merely that we paid 321 billion interest on the debt according to the Bureau of the Public Debt. Your 62 billion of interest received doesn't change this fact. I haven't checked your figures and you didn't provide a source but money received by any on-budget trust fund belongs to that trust fund. It's income as far as the overall budget goes... and by law it may even be diverted to meet on-budget expenses... but it doesn't "offset" the 321 Billion in interest paid to other accounts.

You started off disagreeing with my last post yet your response is on an entirely different topic of scenarios of paying off the debt. Color me confused.... but none of this really has much to do with the topic of this thread.

[GOPBasher]

15. This is why the Democrats are really pissing me off.

Why don't they attack harder on the fiscal crisis Bush has given us. Why do they keep letting him say, "I'll cut the deficit in half in four years!" First of all, that's not going to happen. Secondly, that's hardly a very good goal. The goal should be to run surplusses and cut the TOTAL DEBT, not just the annual deficit.

[ulTRAX]

17. Bush can't pay off the debt.......

Bush can't pay off the debt.... not that he wants to do anything but raise it.

Anyway, as soon as we get to a surplus... he'll say again any budget surplus... even if we're 10 trillion in debt... is proof of over-taxation... it's the people's money.

[usregimechange]

20. Because we have no leadership of our own. Dean may

change that. I am hoping.

[ulTRAX]

21. did Dean use the correct numbers when he was running?

Did Dean use the correct deficit estimates when he was running a year ago? I'd have to research that.

[ulTRAX]

22. it's not a matter of leadership..... but one of honesty

THAT'S a major failing of the Democratic Party.