This Weekend’s Unanswered Question 1 (021106): On Surpluses, Deficits, and the National Debt

This is another installment in a nearly-regular series of mysteries and pseudo-mysteries (usually 3-4) this inquiring mind would like to have answers for (some links included may require free registration). This week’s questions are being spread over three posts.

QUESTION 1: Why is there a disconnect between reported deficits or surpluses and changes in the national debt?

You didn’t know there is a disconnect? There is: This past month, the national debt went up, even though there was a budget surplus.

First the news on the surplus:

The federal government ran a $21 billion budget surplus last month, the best January showing in four years, as both spending and tax receipts set records for the month.

The Treasury Department said the government spent $209 billion last month, a record amount for January and up 7.9 percent from January 2005. Government tax receipts, however, also set a record for the month of $230 billion, up 13.7 percent from January 2005.

….. For the first four months of the budget year that began on Oct. 1, the deficit totals $98.3 billion, an improvement of 10.2 percent from last year’s pace when the deficit totaled $319 billion.

But when you go to the Bureau of Public Debt’s “The Debt to the Penny” page, you will see the following two figures for the total national debt:
- January 31, 2005 — $8,196,070,437,599.52
- December 30, 2005 — $8,170,424,541,313.62

Huh? The national debt went UP by $25.6 billion..

Why is that?

What follows is a revised version of a post from last year. I can’t promise that it will cheer you up.

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Four Reasons NOT to Be Impressed with the “Falling Deficit”

Deficits reported by the government have been coming down a bit. Last fiscal year’s reported deficit of $319 billion (for the 12 months ended 9/30/05; 6th paragraph at link) was an improvement over the $427 billion originally predicted, and was lower thanks to higher collections as the supply-side tax cuts worked their predicted “magic.”

Am I relieved? Sure, it’s beats deficits going in the other direction. Is it real improvement? Yes. Does it indicate that President Bush is on track to keep his promise to cut the annual “reported deficit” in half by the time he leaves office? Yup.

All well and good. But I can’t get too excited, for four reasons:

1. The past year’s reported deficit will “only” be a bit more than $1,050 for every man, woman and child in the country (vs. a projected $1,400 before the 9/30/05 fiscal year began). That’s a big additional burden.
2. Notice I’ve said “reported deficit” a couple of times now: Contrary to what you would expect, the officially reported deficits don’t equal how much the national debt has actually increased. The government incurs debt in all sorts of additional ways, too detailed to go over now, that are considered “off-budget” (something you and I could never get away with, of course). For proof, go to The Bureau of Public Debt’s “The Debt to the Penny” web page; I would suggest bookmarking this very sobering link. Here are the key stats of the moment (don’t you just love how the government can be so precise about some things, and not have a clue about so many others?):

   

   To prove that a lot of non-budget spending that adds to the deficit is taking place, you only need to note that:

   – The national debt rose $554 billion from Sept. 2004 to Sept. 2005 ($7.933 trillion minus $7.379 tril), even though, as noted above, the “reported deficit” was $319 billion.

   – The January 31, 2006 national debt is $263 billion higher than it was in Sept. 2005 ($8.196 tril minus $7.933 tril), despite the fact that the “reported deficit” for the first four months of the current fiscal year was $98 billion.

   – While we’re looking at this, note that the national debt never went down in any fiscal year, despite all the noise about the “trillions in surpluses” that supposedly started happening in 1999 and 2000.

3. Unrecorded actuarial liabilities: The Nodometer on the left essentially represents the present value of unfunded promises the government has made to future Social Security recipients. That $1.76 trillion is NOT in the July 15, 2005 figure above. And the Nodometer is only the tip of the iceberg–there’s Medicare, the presecription drug benefit, military and government pension obligations, etc., ad nauseam. (By the way, companies have to record these liabilities in their financial statements–where’s Elliot Spitzer when you need him?)
4. Perhaps most important, thanks to the poor example the GOP has set during the past four-plus years, and despite the recent talk of reducing pork-barrel spending, we as a country are philosophically defenseless to argue that getting spending under control and at least reducing the REAL annual deficit to zero are good ideas. If we ever get close to an annual break-even, the “demands” of the people who want to open up the spending spigots even more will be difficult to resist (”Aren’t you the guys who said ‘deficits don’t matter’?”).

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So, if you don’t mind, I’ll have a beer to “celebrate” the January results. Just hold the champagne.