Fantasyland Thinking
Please recall Trump’s preposterous claim that he will use tariffs to pay down the national debt.
..Because of Tariffs we will be able to start paying down large amounts of the $21 Trillion in debt that has been accumulated, much by the Obama Administration, while at the same time reducing taxes for our people. At minimum, we will make much better Trade Deals for our country!
— Donald J. Trump (@realDonaldTrump) August 5, 2018
That is truly Fantasyland thinking. In fact, it is so preposterous, one has to wonder if it is a purposeful lie. Then again, we are talking about Trump, so perhaps he does believe it.
Data for these charts from US Government Debt, not an official government website.
Projections vs Reality
In nearly all cases, the increase in national debt is way higher than projected deficits. Why?
Because the projected deficit does not include all of the amount owed to the Social Security Trust Fund. That amount is called off-budget. But when the calendar year rolls over, the difference magically appears on the balance sheet as actual debt.
Actual and Projected Debt
Projected Deficits vs Projected Increases in Debt
That picture is where lie meets reality. Let’s total it up.
Projected Deficits vs Projected Increases in Debt Totals Through 2023
The total projected debt increase for 2018-2023 is $6.826 trillion.
The total projected deficit increase for 2018-2023 is $5.352 trillion.
Deficit Scam
Excluding Social Security from the deficit is an accounting scam.
The cumulative deficit lie for the years 2018-2023 is $1.473 trillion.
Expect Much Worse
The story is even much worse. Those numbers assume no recession through 2023.
Mike “Mish” Shedlock
So basically the politicians are lying, since increase in debt is, by definition, a deficit.
Progressives are monolingual Newspeakers. Like children yet to learn that words adults utter, can have specific meanings. To progressives, words can mean exactly what it suits them at any given time.
The discrepancy between the increase in debt and the deficit doesn’t just apply to projections, but also to the past. In fact, increases in debt were substantially larger than the announced deficits even when social security receipts were still in surplus.
“I wouldn’t expect the budget deficit to track the change in what is commonly reported as total debt.”
It tracks every year as I stated. What I believe you mean is the total of future unfunded liabilities. Yep, that doesn’t track because they don’t count until they happen.
I wouldn’t expect the budget deficit to track the change in what is commonly reported as total debt. The total debt that is commonly reported includes (to my annoyance as an accountant) debt that the government owes itself for things like Social Security and Medicare (“Intragovernmental Holdings”). Intragovernmental holdings are irrelevant because this so-called “debt” is exactly offset by “assets,” and it is a wash. A corporation would properly eliminate these “intercompany” accounts, but governments don’t hold themselves to the same standards of logic.
The relevant debt is the “Debt Held by the Public.” Of course, this isn’t the only liability owed by the government. There are also things like accounts payable, accrued wages & benefits, the massive present value of expected entitlement benefit payments, etc. There are also changes in assets, such as purchases or sales of government land, buildings, etc.
You might find the Financial Report of the United States Government interesting. Click on the “Current Report” link:
” Intragovernmental holdings are irrelevant because this so-called “debt” is exactly offset by “assets,” and it is a wash.”
Really…. I sure wouldn’t hire you as my accountant,,, there are no offsetting assets… the money was spent on God knows what, bullets, welfare, subsidies….
Social security and Medicare have spent more than they’ve taken in for some 8 years or so now…. and where does the money come from to make up the difference,,,???? Well it’s borrowed from the public sector and and added to the National debt
On paper it’s gone from being some strange intra governmental accounting number to real no sh*t debt that we pay interest on,,,, and one day Uncle is going to default on that debt, and the bondholders are going to be very unhappy, especially since their are no offsetting assets to pay them back….
PS,,, kinda like borrowing from your 401k to balance your household budget and then telling your wife the budget is balance… when your 401k goes to zero and their are no assets to balance what are you going to do… take the IOU you stuck in your IRA lockbox to the bank as collateral for a loan,,, lots of luck with that…
Sorry, but I am 100% correct. I have found that this issue is often hard to visualize for nonaccountants (and even some accountants).
The IOUs are the intragovernmental holdings. When the trust funds redeem the IOUs, they are collecting on the intragovernmental holdings, and the debt goes away.
The easiest way to think of it is as a household. If a wife loans her husband $100, the wife has an asset (a loan receivable) and the husband has a liability (a loan payable), but the financial position of the household as a whole hasn’t changed as a result of the “loan”. And when the husband repays the loan, the financial position of the household doesn’t change. The reduction in the husband’s loan payable is exactly offset by the reduction in the wife’s loan receivable.
The government is like a household in this regard. You can break down the government household into as many household members as you want (e.g. Social Security and Medicare trust funds, etc.), but it doesn’t make any economic difference to the financial position of the government as a whole. When you count the intragovernmental holdings, it’s as if you include the husband’s loan payable and ignore the wife’s loan receivable, which obviously doesn’t make any sense when you are concerned with the household net worth.
Cheney said that Reagan proved deficits don’t matter.
Neither political party has any intent of balancing the budget. Both parties are gaming the public.
“Cheney said that Reagan proved deficits don’t matter.”
That quite nicely demonstrates what standard of “proof,” is required to convince a nation of progressively indoctrinated dupes…….. No wonder math isn’t Americans’ long suite…
So much winning.
Yes. I’m tired of it.
According to CBO, February tax receipts rose 10% to $171 billion. From WSJ – “The February revenue rise outstripped even a 7.3% spending increase from a year earlier, so the deficit declined by $12 billion in the month.”
link to wsj.com
This reminds me of the BS story that Clinton had a surplus in 2000. The debt grew in 2000. There was no surplus. I think the difference was they didn’t include interest in the calculation. Not bad by comparison, but it was mainly due to a 1 off surge in capital gains taxes from the tech bubble.
So…raise taxes? Maybe just back to Reagan levels?
The US has tried a variety of tax systems over the years, sometimes with very high maximum tax rates, sometimes with lower marginal rates. Democratic Congresses and Presidents have been in charge at times, Republicans at other times, and a mix between them at still other times. Remarkably, the total tax receipts have always remained nearly constant at about 17-18% of GDP (they do rise right before recessions, and fall during them):
If tax receipts are always 17-18% of GDP, and spending is 25% of GDP, do you have a taxing problem, or a spending problem?
I would add to my post above that some other countries do succeed in collecting a higher percentage of GDP in taxes than the US does, but those countries collect it via other taxes, such as VAT or sales taxes, rather than collecting it as income tax.
I don’t disagree. And I was being somewhat facetious. Obviously no one is going to raise taxes.
Just as obvious though should be an acknowledgement that no one is going to cut expenditures. Hasn’t happened under a number of all GOP Congresses, certainly won’t happen under the Democrats.
I just kind of think its funny that after decades of cutting taxes and running ever higher deficits, that we still have these discussions.
I’m old enough to remember when the first sleaze balls said tax cuts would pay for themselves. They kept that up for decades. Even GWB’s administration pulled that one out of its pocket. Trump cut taxes and everyone said deficits would be a trillion or more out as far as they could see. Nobody even cares anymore. We just shrug our shoulders and pocket the cash.
If all the tax cuts and massive debt have proved anything, it’s that MMT is probably true. Thanks GOP!
Well, given that tax receipts as a percentage of GDP rose steadily after the Reagan tax cut, it would be difficult to argue that they didn’t “pay for themselves”. Tax receipts have generally been somewhat lower since the Bush, Jr cuts, however. It’s too early to reach any conclusion on the Trump cuts.
What I find beyond bizarre is that there is never, ever, any serious discussion about spending, except for discussions of new ways to spend more. Don’t get me wrong, I fully understand that in a Republic, spending always grows until the Republic collapses, but I’m still shocked that there aren’t any voices of reason out there calling for Fiscal prudence. Instead it is always “we need to soak the rich” or “it’s all because of the Fed”. No, it’s the spending, stupid.
The era of broad-based and massive growth in productivity brought on by industrialism is over. Not that there isn’t some out there, it’s just miniscule compared to say 1870 – 1970. So the era of a massive and broad-based growth in per capita income is gone with it.
That leaves us in an era where if people want to grow there income, the easiest way is to take it from someone else. That makes for dangerous times. So I like to think of federal spending and regulating as the mechanism designed to keep people passive enough that they won’t look for extreme solutions to their problems. I’m betting that those who have real wealth and power understand this.
And Reagan’s tax cut were in the biggest economic collapse since the Great Depression. Federal income tax as a % of GDP were destined to grow as the country pulled out of the recession. Not saying that they didn’t help, they were just done at a time that makes it difficult to tell their impact.
Nope. Cut them. To Washington levels. Washington was a better President than Reagan, after all….
Then default on all that debt. With reasonable tax levels, it’s unpayable anyway.
Which will neatly solve the deficit problem as well, the only way it will ever get solved. Two birds in one stone, beats no birds in an infinite number of stones, any day.
Jubilee! When I was a kid my grandparents watched a show called Hee Haw. They always played the old country song Jubilee!. So, I’m with you. Default on the debts. God says so, it’s in the Bible.
Interestingly, I read a book where the author says the original federal debt was used to force the new constitution by paying off all of the individual state’s debts. Apparently Washington and the other revolutionary war generals were each give $10,000 in federal debt to help them see the value of using their armies for something other than installing themselves in power.
It’s not so much a Jubilee, as it is a recognition that those who signed on the loan documents aren’t even within orders of magnitude of being able to pay what they signed for.
While those who are supposed to be robbed at gunpoint to do the paying, never signed for any of debt at all. Hence are third parties to the whole mess; no more responsible for the debt repayment, than random Papua New Guineans and Martians are.