There is always a good chance that, when it comes to economics and government, there will be things I just don’t understand. As I’ve heard accountants say, “What do you want the number to be?” which is not very comforting. But I had assumed that, when we refer to national debt, we are referring to the accumulation of debt since the country began—anything that hasn’t been repaid. Whereas the budget deficit is the difference between this year’s revenue and this year’s budget outlays.
So, I looked it up to see if my assumptions were right. I found this site on the national debt clock. (The up-to-date debt clock itself can be seen here.) This site about the national debt was last updated in 2008, so proportions and numbers can be significantly worse now. But the principles, I believe, still hold. Ed Hall, who wrote this info, says:
The National Debt is the total amount of money owed by the government; the federal budget deficit is the yearly amount by which spending exceeds revenue. Add up all the deficits (and subtract those few budget surpluses we’ve had) for the past 200+ years and you’ll get the current National Debt [which is what I had assumed].
Politicians love to crow “The deficit is down! The deficit is down!” like it’s a great accomplishment. Don’t be fooled. Reducing the deficit just means we’re adding less to the Debt this year than we did last year. Big deal—we’re still adding to the Debt.
Hall includes this graphic of national debt up to 2008, which he made from government-provided data. Notice that in the three years since, national debt has climbed from $9 Trillion to $14.3 Trillion (which Obama is saying is simply not enough to get by). So you need to imagine a few painful sharply higher lines at the right of the graph.
Horatio’s question, I think, refers to an accounting practice that government is probably employing in how they budget for the current year and, in part, subsequent years, based on their legislation. If you recall the story of accounting for Obamacare, the new costs were spread out over 10 years, with much revenue being applied to it starting immediately, but with no outlays prior to 2014. So only six years of outlays would be accounted for, matched against 10 years of revenue—to make the outlays look less scary.
When the government enacts an expectation that costs the public, they may not put the total cost in that year’s budget, or even the total perpetual cost; they may just estimate it out in a way that makes it look less painful—and coincidentally might not show up in public view until after a reelection has taken place.
I’d like to see transparency, and accounting practices for government that are required for businesses. I don’t know how we get there from here.
Last night I was on my way home from listening to Susan Combs, Texas State Comptroller (I plan to share some of what she said in a later post), and had the radio on the Mark Levin Show. He was talking with one of my favorite economists, Walter Williams. I am paraphrasing, since I couldn’t write while driving, but Williams said that revenue has gone up 20 times since 1960 (in other words, revenue is 20 times higher now, in constant dollars). But spending has gone up more than 40 times. When your spending outpaces your income by that much, you’re going to have debt.
I like economics when it’s clear like that. You know what to do then: cut back spending to the levels of revenue to stop debt growth. And cut back spending to under levels of revenue to make a dent in the debt itself. (You can see how ridiculous stimulus spending really is.)_____
I know we’re focused on this national debt ceiling debate, but there’s a local debt problem I’d like an answer to as well. Bond elections come up every year or two, at least where I live. These are to fund schools, mainly. We all know that paying for capital growth through debt is more expensive than paying outright, because you must repay the capital plus interest. But I seem to be alone in thinking saving up ahead might be an option (it may even be illegal to collect revenue for something not already budgeted). So, let’s grant that debt is necessary for capital investment in local education, for building and improving school buildings.
But every time a new bond comes up, the only information we can get is how few cents per whatever unit related to our real estate values that we will be paying. Example: “the average household will pay just $116 dollars more per year.” But we had a bond that said that a year or so ago. And a year or so before that. And before that. If I understand correctly, each of these bonds is for usually 20 years, like a 20-year mortgage. But we never hear about a bond being paid off—even though the ones on the ballot 20 years ago must be retiring now, with a new one retiring nearly every year.
And we never get to see just how many bonds there are, and what our accumulated debt is for the sum total of them (until of course we pay our property tax). It is very much like taking out a second, then third, then fourth (and so on) mortgage every year or two, and only talking about what the new debt payment will be, without even taking a look at what the payments on the existing mortgages already are.
Bonds almost always pass on the ballot—because it’s for the children! But, really, is it too much to ask for full disclosure about what our debt already is?