Today’s the day where America stops spending the money you’ve given it and instead starts spending the money you haven’t given it yet.
Inspired by the Tax Foundation’s well-publicized Tax Freedom Day – determined by how many days it takes for your tax commitment to the government to be paid off each year – James R. Harrigan and Antony Davies calculated how many days it takes the government each year to run out of that money and start spending on credit. And today is that day for 2012. They wrote about the process at RealClearMarkets:
If the federal government were to spend the same amount of money each day starting on January 1st, it would run through all of its tax revenue by September 10th. Everything the government spent from then until the end of the year would be on credit.
If lawmakers produced a balanced budget, Deficit Day would occur on December 31st, when the government spent the last dollar of its annual tax receipts at the stroke of midnight on New Year's Eve. But we haven't seen a balanced budget since the Eisenhower administration.
The earliest the day has come so far was in 2009, when it hit in early July. That means nearly half of all government spending in 2009 was on credit. The latest it has fallen in recent years was in the last year of President Bill Clinton’s administration, where they made it all the way through mid-December before deficit spending began.
Speaking of Clinton, Harrigan and Davies take a dim view of the conventional wisdom that he ran surpluses:
It is true that the debt held by the public-which excludes money the government borrows from the Social Security trust fund-declined by $433 billion from 1997 to 2001. But, over those same years, the government borrowed $827 billion from the Social Security trust fund. In other words, the only way to claim that the Clinton administration ran surpluses is to admit that the government has no intention of paying back that $827 billion it borrowed from Social Security.
Based on that argument it’s probably safe to say the government is going to count those surpluses. The authors put the last decade in sharp focus to show how just how much of what the federal government has done this century has not been paid for:
Last year, the government borrowed to pay for 132 days of operations. The year before that, 159 days. Over the past decade, the government had to borrow money to keep itself in operation for a grand total of 1,061 days. That's almost three full years of government that our children and grandchildren will have to pay for-in addition to paying for whatever the government does in the future. It's a devastating blow to their economic freedom and their future welfare.
Drink up to celebrate Deficit Day! Perhaps select a bitter ale watered down and salted with the tears of a non-Keynesian economist. Finding a non-Keynesian economist might be a challenge, but once you do, the tears will probably come easily.