Wednesday, February 27, 2019

Another good answer from Kimberly Amadeo

The Federal debt is the sum of the Federal deficits. But when you actually look at the numbers, the debt is not equal to the sum of the deficits.

Why?

There's a good explanation in US Budget Deficit by President by Kimberly Amadeo at The Balance:
Each year's deficit adds to the debt. But the total amount a president adds to the debt each year is usually more than the deficit. All presidents can employ a sleight of hand to reduce the appearance of the deficit. They can borrow from federal retirement funds in off-budget transactions. For example, the Social Security Trust Fund has run a surplus since 1987. There were more working people contributing via payroll taxes than retired people withdrawing benefits. The Fund invests its surplus in U.S. Treasury notes.

The president can reduce the deficit by spending these funds instead of issuing new Treasurys. That makes the deficit by year less than what's added to the debt by year.
Find an off-budget agency that runs a surplus, and borrow from them. Neat trick.

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