The Federal Budget Deficit Has Disappeared! (Not Really.)

Seeing deficit doves, government lovers, and goofballs of all persuasions hyping this new Forbes column, apparently based largely on its eye-catching headline "The Federal Budget Deficit Has Disappeared. Really."

Reason for that claim? The projection of a monthly surplus for October.

But on a year-by-year measure, the way we usually think about deficits? This article boldly declaring the non-existence of the federal deficit sort of coughs in the middle that the likely "deficit for all of 2014 will be about $500 billion."

That's a mere non-existent, disappeared half a trillion dollars, a larger deficit than in all but a handful of years of this nation's history, as you'll learn if you look at Office of Management and Budget Historical Tables. 

And their projections for the next five years will have the federal government deficit-spending its way to a pretty solid extra $2.5 trillion in more debt.

Comments

[MegaloMonocle]

Amazing, seeing as we ran up another trillion-dollar deficit with two months left in the fiscal year.

http://treasurydirect.gov/NP/d.....dYear=2014

I was pretty confident in March, when the CBO issued its asinine prediction that the deficit would be under $600BB (or whatever fantasy number they had), at a point when the deficit was already that high, that we would have a $1TT deficit again this year.

[Swiss Servator, Lucerneriffic]

Total Public Debt Outstanding
08/29/2014
17,749,172,392,528.10

10/01/2013
16,747,478,675,335.18

What deficit?

/Progtard

[The Last American Hero]

I'll one up that:

Total Public Debt Outstanding
1/17/09

10,628,881,485,510

Or if you want to blame BOOSH:
10/1/09
11,920,519,164,319

Note that the recession ended in June 2009. All those Keynsians should have been shouting to settle down on stimulus.

9/16/2014
17,741,170,643,844

That's some real austerity there.

But Obama is a deficit hawk, I'm told.

[Mike M.]

Jack Lew should be called Joke Lew and mercilessly ridiculed every time he shows his punchable dweeb face in public with his shameless lying and unprecedented number-fudging.

[Knarf Yenrab!]

The deficit also disappears every year on April 15. If only every day could be April 15, the federal government would be solvent.

[Francisco d'Anconia]

Congress could pass a law making every day 15 April.

[Francisco d'Anconia]

And then one curing cancer.

[Aloysious]

Good thing there are no negative consequences to a massive, unpayable debt, right?

[John]

$500 billion dollars is still larger than any year of the Bush Administration. The largest deficit under Bush was $458 Billion in 2008.

One of the more blatant lies of the left is to claim 2009 was really a "Bush year". There wasn't a budget in 2009 and the Congress didn't pass a CR for the year until after Obama took office. 2009 belongs entirely too Obama.

[Idle Hands]

To be fair some progtards maintain that Obama never took office, and bush is still responsible for everything gone sour 6 years in.

[sarcasmic]

Everything was Reagan's fault until Bush came along, and everything will be Bush's fault until the next two-term Republican president.

[Drake]

Everything after 2006 was passed by a Democrat Congress. Bush pretty much rubber-stamped their bad ideas.

[John]

That too. The budget is about Congress not the President. Compare deficits by which party controls the House and you see what is really going on.

In Fy 94, the last year of the Dem controlled Congress the deficit was 203 billion dollars. In 95, it immediately dropped to 160 and continued dropping until it hit a surplus in the late 1990s through 2001. We went to war in 01 and the deficits went up but peaked at 420 in 04 and had dropped to 160 in 2007, the last budget passed by the R controlled Congress. Then in 08, the first budget after the Dems retook Congress, before the crash remember, it went to 458 and up from there to 1.4 trillion in 09, 1.2, in 10 and has been slowly dropping since.

There seems to be a bit of a correlation there between which side controls Congress and the deficit.

[robc]

There was never a surplus.

The best year had a very, very tiny deficit, but it was still a deficit.

[John]

There was on a strictly cash basis. We can argue forever about the semantics of that. But it doesn't really affect the larger point that bigger deficits are correlated to Democratic control of the Congress. The President is almost a bystander when it comes to the deficit.

[robc]

On a cash basis, there wasnt a surplus if you include intergovernmental debt.

Now if you are talking GAAP, and including future obligations incurred during the year, we were so far from balanced to not even be funny.

[Restoras]

robc is right. There never was a surplus, and national debt continued to grow in the years where a 'surplus' was claimed.

[MegaloMonocle]

$500 billion dollars is still larger than any year of the Bush Administration.

I can't figure out where these deficit numbers are coming from. I assume that the Treasury's Debt to the Penny site is authoritative, and it shows over a $1TT so far this fiscal year.

Why is that number totally absent from any writing, by anyone, on this subject?

[John]

That must include future obligations or not count social security revenues. The deficit numbers are coming out of OMB and are the result of straight cash based accounting.

[robc]

No, it includes intergovernmental debt.

The only one that includes future obligations is the GAAP based accounting, and that hasnt been done in about a decade, IIRC.

[Drake]

Spending is the problem. Paying for it with taxes, borrowing, or printing currency is of secondary importance. Whichever combination we choose, wealth is transferred from citizens and businesses to the government.

As my Macro-Econ Professor stated: "The drag-effect of government is the Net-Present-Value of expenditures minus transfer payments".

A decade ago the Feds were spending $1.2 Trillion a year less - and the economy was much stronger.

[The Last American Hero]

Taking a look at tax revenues as a percent of GDP since WWII, it should be obvious you can't tax your way out of this mess. That time frame includes periods of war, peace, recession, expansion, high rates, low rates.

The amount collected as a percent of GDP is incredibly stable over that time period. We know how much we can collect, we should adjust our spending habits accordingly.

[John]

Even though the economy is in the shitter, the feds will collect more tax revenue this year than any other. And we are still $500 billion in the whole.

But we don't have a spending problem. No sir re. No spending problem here.

[MegaloMonocle]

And we are still $500 billion in the whole.

I think we're $1TT in the hole, according to the Treasury. Who should know.

[John]

Not on a cash basis we are not.

http://www.usgovernmentspendin.....chart.html

[robc]

Way, way more than a trillion by GAAP.

[Restoras]

If you start including future obligations the national debt is a mere $100-$150 trillion.

[John]

Which part of "on a cash basis" do you guys not understand? I am well aware of this debate. I just don't want to have it because it doesn't really go to the point I am making.

[Ken Shultz]

Someone should also pipe up that even if we weren't piling on any more national debt, we'd still have the debt already in the pile.

[sarcasmic]

We're way past the point of even pretending that the debt will ever be paid.

[Restoras]

Yup.

A great confiscation is coming. Say goodbye to all your savings, my friends.

[some guy]

That's why I have hardly any "savings". It isn't safe unless it is in something that is relatively immune to currency manipulation over the long term.

[sarcasmic]

I don't know about that. I imagine it will start with a wealth tax. Write a check based upon a percentage of what they say you are worth. Don't have enough cash in the bank? Time to sell something you planned on leaving to your kids.

[Restoras]

It'll be confiscated via a massive, one-time currency devaluation. You'll wake up one day and get, I dunno, $0.10 on the dollar.

[sarcasmic]

Why do it all at once? In the last hundred years the dollar has been devalued to just two cents compared to what it was worth when the Fed was created.

I seriously believe it will start with a modest wealth tax, similar to the property tax, except it will be on net worth. It will be done in the name of equality. I mean, it's not fair that some people have all this wealth while others are poor! We must tax this wealth and spread it around! Except that it will be rigged so the wealthy keep their wealth, and the little guy trying to save for retirement is screwed.

[Drake]

Exactly. They don't need to send people out to collect your stuff or raid your bank accounts. They have printing presses. Just keep printing and spending that Fiat money and the confiscation takes care of itself without any messy confrontations.

[MP]

FFS Doherty, that's some serious reading comprehension fail. The headline is referring to the deficit as a headline policy issue

the federal deficit has almost completely disappeared as an issue

The article at no point is claiming that next month's black ink, which is typical, means that the deficit has "disappeared".

[Francisco d'Anconia]

See, wagging the dog works.

[Knarf Yenrab!]

Why do you think the Forbes editors selected that particular headline for a column written by a UCB grad with a degree in public policy?

[The Laconic]

But the claim is that it has disappeared as an issue BECAUSE it has "fallen". That is, the author clearly thinks these monthly figures are significant. I don't think it's such a comprehension fail.

[MP]

Are you disputing that claim? Is Doherty? The author isn't claiming that it shouldn't be an issue. He's just claiming that it isn't an issue because a downward trajectory lacks sex appeal, even if the numbers are still sky high. The Administration will stay mum because highlighting it opens them up to attacks on the nominal side. The stupid party will stay mum because highlighting it opens them up to attacks about how the messiah is succeeding by reducing the deficit.

[John]

If people were not completely ignorant of civics and how the government works, they would credit or blame the Congress not the President over the deficit.

[Mike M.]

Five hundred billion dollar deficits are the new "balanced budget".

Even though there's absolutely no inflation, mind you.

[Sevo]

I've seen this guy on street corners with three cards; you can win big money!

[The Immaculate Trouser]

Shrike-bait.

[concerned cynic]

The carrying cost of the Federal debt is the interest on that debt, expressed as a % of GDP. The first number is interest paid to domestic parties, the second is interest paid to foreigners.

1955 1.8% 0.02%
1985 4.4% 0.5%
1998 3.2% 0.8%
2009 1.8% 0.6%
2013 1.9% 0.6%

The domestic carrying cost of the Federal deficit is no higher today than it was under Eisenhower. The foreign carrying cost is about what it was under Reagan. The era where the total carrying cost of the debt was at its highest, was under Reagan and Bill Clinton, when interest rates were high. The carrying cost of the debt is moderate today, despite the high level of Federal debt, because interest rates are among the lowest in American history. Should interest rates surge, the USA will have a problem. But not until then.

[concerned cynic]

The August 2014 national income accounts say that the 2013 Federal deficit was about 700B, down from an all time high of about 1500B in 2009 and 2010. Further reduction in the deficit will occur until the next recession.

This is not to say that all is well in the Federal fiscal picture. Social Security Disability will be insolvent in 2016. Medicare will be insolvent by 2030, unless the payroll tax is raised. I predict a Medicare payroll tax of 4% for wages under 250K, and of 5% for wages above that amount. Social Security will be insolvent by 2040, unless changes are made. One change I advocate is making Old Age benefits fully taxable.

A very big problem the USA public sector faces is unaffordable state & local govt. defined benefit pensions. Reform here is proving intractably difficult; I suspect that participants in these DB plans are silently hoping for a Federal bailout.