Prague Twin

Sunday, April 06, 2008

A funny thing happened on the way to a balanced budget

Those of you who know this blog also know that I track the public debt as a proxy for the budget deficit. You see, the budget deficit doesn't include the wars in Afghanistan and and Iraq, and it doesn't include the interest that is paid to finance the public debt. There are a lot of other things the deficit figure doesn't include, but those are the big ones. Wouldn't it be great if we, as individuals or in our businesses, didn't have to count things like interest on our debts or "emergency" expenditures even eight years after their inception? That is exactly what the government does. But I digress.

The point is, I track the total amount the government owes each fiscal year and compare it to the previous year. Then I do the math. The difference is, in my mind, the true budget deficit. That figure has been roughly half a trillion dollars a year since Bush II took office. In 2006 it was $574 billion. Then, in 2007 it dropped to "only" $501 billion which left the total public debt at just over $9 trillion at the end of the 2006/2007 fiscal year which ended at the end of September.

Considering all of the back-patting the administration has been doing regarding "record tax revenues" and "halving the deficit" one would expect that six months into the 2007/2008 fiscal year we would be seeing some improvement. Hardly.

In fact, the public debt has increased by $430 billion in just the first six months.

The debt is out of control, and nothing can stop it now.... or can it?

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13 Comments:

  • Nothing can stop it, but your premise is wrong--the debt is not out of control, whatever that means, it is an acceptable percentage of GDP (as is what it takes to service it), we have been much, much higher in the past, like during WWII. What's out of control is entitlement spending--Social Security and the Medical ones. That is a tidal wave whic will swamp everything else if nothing is done. Fix that, if you can.

    By Blogger Roger Fraley, at 7:02 AM  

  • you keep using the terms debt & deficit as if they are synonymous.

    Or am I confused here?

    By Blogger Lysander Cadwalader, at 5:07 PM  

  • Roger,

    I don't suppose anyone can stop that. What we should be doing is socking some money away to meet those unavoidable needs, unless we want to be turning the poor and the sick out into the streets.

    Lysander,

    I thought I explained the difference and why I track the debt instead of the deficit. The budget deficit for this year is officially something like $270 Billion. However, the debt has increased by about $430 Billion in just six months.

    So I track the increase in the debt because it is a true measure of how much our expenditures are outpacing income.

    Follow?

    By Blogger Praguetwin, at 7:33 PM  

  • I don't think it can be stopped, or paid off.

    God Bless America, God Save The Republic.

    By Blogger David Schantz, at 8:30 AM  

  • PT

    In this statement:

    Considering all of the back-patting the administration has been doing regarding "record tax revenues" and "halving the deficit" one would expect that six months into the 2007/2008 fiscal year we would be seeing some improvement. Hardly.

    In fact, the public debt has increased by $430 billion in just the first six months."

    Are you not in fact suggesting that a reduction in deficit would necissarily dictate a reduction in debt?

    By Blogger Lysander Cadwalader, at 4:33 PM  

  • What I'm saying is that if you cut the deficit in half, the public debt should not be increasing twice as fast as it did the year before, unless you have a perverted system of accounting in place.

    You once said that the Clinton budget surplus is a myth. I'd agree with you since the best fiscal year under Clinton still resulted in a net increase to the public debt of $18 billion.

    So, we can can't my way and agree on Clinton, or we can count the government's way and agree that Clinton, in fact, ran a huge budget surplus in the final year of his administration.

    Take your pick.

    By Blogger Praguetwin, at 6:55 PM  

  • "perverted system of accounting in place." When I worked on carnivals I had a friend that was so good with numbers that he could add 32 and 64 and come up with 800 and make some folks almost believe it. If he was alive today I'd suspect he had a government job.

    Mike,
    I've got something I'd really like you to see when you have time to stop by. "An American Life Turned Nightmare."

    God Bless America, God Save The Republic.

    By Blogger David Schantz, at 9:45 AM  

  • PT

    So we are clear, you are saying that the only way you can cut a deficit in half and at the same time incure debt at a two fold rate is through the use of "a perverted system of accounting"?

    You did say you are working at an MBA, yes? I would hate for the phoneman to have to teach you macro economics.

    By Blogger Lysander Cadwalader, at 4:28 PM  

  • I'm saying the system is perverted, yes.

    By Blogger Praguetwin, at 11:19 PM  

  • Sounds like you want the system to BE perverted, but really dont know what your talking about

    By Blogger Lysander Cadwalader, at 1:48 AM  

  • Spoken like a true layman.

    Read the post: what I'm talking about is not counting interest on the debt or the war in Afghanistan or the war in Iraq in deficit figures.

    My point was, don't you wish you could simply disregard interest on your mortgage, or any other expense that was "unexpected" even if you initiated the action that led to the cost some 6 years ago, in your own family budget?

    Hell, I'd have a HUGE surplus if I could do that.

    The deficit figure is meaningless. That is my point.

    By Blogger Praguetwin, at 8:26 AM  

  • I don’t know where to start,

    If I could just ignore the interest on my current mortgage, I would (as would you likely) borrow against my equity and purchase a third piece of real estate, but unfortunately the tooth fairy and economic reality are mutually exclusive.

    Let me ask a question: Who has greater DEBT, Lysander Cadwalader? or Donald Trump? Now, what does your answer tell you about each of our economic viabilities? Nothing of course.

    You see PT, it is what Roger touched on. Without providing GDP (income) information, discussions on debt are silly and demagogic.

    So lets take the discussion to a higher lever and talk about "how the GDP has been spent"

    By Blogger Lysander Cadwalader, at 4:30 PM  

  • Wow it’s nice posting, I like it.
    Bathmate

    By Anonymous bath mateus, at 12:09 AM  

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