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Friday, October 14, 2016
Hey, Millennials, Do Deficits Matter?
Jon N. Hall
Progressives have said that "deficits don't matter." Even a few conservatives have said as much. Some, however, like Speaker Paul Ryan, worry that the sharp recent rise in the national debt could lead to a "debt crisis," a situation in which there are no painless choices, a situation where we must act, but all of our options will leave us weakened. Call it a fiscal "zugzwang."
If one goes to the Debt to the Pennywebpage at Treasury Direct, one can see what the debt is today. And if one looks at the "Go to page" box at the bottom of the chart, types in "39," hits Enter, and then scrolls down a bit, one can see what the debt was on the day President Obama was first sworn into office, Jan. 20, 2009. On that day the Total Debt was $10.625T and on Oct. 5, 2016 it was $19.688T.
So the so-called "total debt" grew by 85.298 percent; it hasn't quite doubled as some on TV contend. But, if one looks at the Public Debt, the situation is rather different. On Oct. 5 this year the Public Debt was $14.191T, but on the day Obama first took office the Public Debt was $6.307T.
So the public debt, the real debt, has grown by $7.884T, or 125 percent, over the Obama presidency and we have more than three months left to go. If Obama spends just $116B of borrowed money over the next three months, which seems quite doable for this president, he will have presided over an escalation of the debt that averaged an even trillion a year. (Everyone needs something to be proud of.)
At the second presidential debate in St. Louis, Mrs. Clinton said: "I watched my husband take a $300 billion deficit and turn it into a $200 billion surplus." Clinton is no doubt referring to the fiscal 1992 deficit, which was actually $290B, and to the fiscal 2000 surplus, which was actually $236B, (see Table 1.1). In fact, there were four back-to-back "total" surpluses at the end of Bill Clinton's tenure, from 1998 through 2001. But here's what Mrs. Clinton didn't tell you: most of the money for those overall budget surpluses came from off-budget surpluses run by Social Security, which isn't subject to the budget process. Less than 16 percent (about $88B) of the four total surpluses at the end of the millennium came from on-budget receipts, i.e. income taxes and such. The rest of it was from off-budget programs with their own dedicated taxes, like Social Security.
And, Millennials, here's something else you need to know about the deficits and surpluses in the last decade of the last millennium: Democrats were in charge of Congress in fiscal 1992 and Republicans were in charge in 2000. So Democrats are responsible for the $300B deficit and Republicans are responsible for the $200B surplus that Hillary refers to. You see, budgets are legislation, they come out of Congress. It was only after Republicans captured Congress in 1994 that we saw real improvement in the budget.
Hillary Clinton was unwittingly making an argument for the retention of the Republican majority in Congress.
The total deficit for fiscal 2015 was $438B. The deficit for 2016, which ended on Sept. 30, is estimated to be around $616B, which is higher than was predictedat the start of that fiscal year. After making nearly a trillion dollars of progress on the deficit -- mostly due to the Republican House, I might add -- we're headed the wrong direction again.
What accounts for this reversal? Most of it comes from entitlements, the federal programs that aren't subject to the budget process, like ObamaCare subsidies and the expansion of Medicaid. Such spending is "automatic."
Also, the off-budget surpluses that created the overall surpluses that Clinton cited in the last debate are gone. In 2006 the off-budget surpluses reached a record of $186B, but in 2016 they're estimated to be about $7.9B. And the off-budget side of the ledger is expected to post a -$1.7B deficit for fiscal 2017. So there are no Social Security surpluses for Congress to use as its own slush fund anymore. Nonetheless, there are Democrats in Congress who will tell you that Social Security doesn't affect the deficit.
Not only that, but our economic expansion, anemic though it is, has been going on for about seven and half years, since the middle of 2009. That's fairly mature as expansions go and we may be due for a slowdown, perhaps a recession, which would mean less tax revenue, and a call for more deficit spending.
But Hillary Clinton is proposing a slew of new spending programs: more free healthcare, free college, debt forgiveness, etc. These would be bad ideas even if the budget were balanced; they'd be bad ideas even if we had no federal debt. But with so much debt coming due so soon, they're not just irresponsible, they're insane.
In "Millennials and the Obama Legacy" I examined government data that show how imminent our fiscal difficulties are. More than half of the federal debt is coming due in the next four years. If debt and deficits do indeed matter, then the next Congress may have to contend with a debt crisis.
Democrat congresses gave us the trillion-dollar deficits, the "mandatory" spending programs that are mushrooming out of control, and ObamaCare, an unwanted program they forced down our craw which is proving far more expensive than advertised. America needs to elect a Republican Congress to manage the budget and control spending… regardless of who is elected president.