Here, a graph showing two measures of federal deficits. Surpluses appear above the zero level. Deficits show up below zero:
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| Graph #1: The blue line is FRED's FYFSGDA188S showing Surplus or Deficit as Percent of GDP. The red line shows the yearly changes in the Gross Federal Debt as Percent of GDP. The blue line shows a surplus in the latter 1990s; the red line does not. |
The annual increment of Gross Federal Debt (FYGFD) is not equal to the Federal Surplus or Deficit data I was looking at. There is a discrepancy.
I should have known. I did the graph over, figuring deficits as the annual change in "Gross Federal Debt Held by the Public". It's not perfect, but there is a lot less discrepancy:
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| Graph #2: The blue line is the same as above, except wider so it is visible behind the red line. The red line shows the yearly changes in "Gross Federal Debt Held by the Public" as % of GDP. |
This time both the red and blue lines show surplus in the late 1990s. In other words, the claim that the budget was balanced in those years only appears to be true if you base it on "debt held by the public".
Slick trick, naming the series "Gross Federal Debt Held by the Public".
Also, I don't like figuring the deficit this way, as the increase in a portion of the Gross Federal Debt. We could "balance" the budget every year if we move enough of the annual deficit out of the "held by the public" category.
It smells like chicanery to me, the kind of thing people do when they don't know how to fix the economy.
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From Alex Planes at The Motley Fool, September 30, 2013:
... most of the surplus was calculated from money flowing into the Social Security trust funds ...I think making use of Social Security funds that way is a brilliant idea. But I also think pretending it doesn't count as debt is idiotic.
2 comments:
Nothing in the law says SSI payment are guaranteed...Whatever is in excess to fund SSI payments are just transferred to the general fund for spending and back by an exclusive T bill with interest not held in the markets as an asset.
SSI payments are not guaranteed? Okay, but until the government defaults on them, they stand as an obligation of government, right? As a debt of the government. Part of the "Gross Federal Debt", but not part of "Federal Debt Held by the Public".
And it seems to me that the "exclusive T bill" you mention is evidence of the government's obligation to repay the borrowed SSI funds.
As I tried to say above, I don't like figuring the deficit as a portion of the unfunded addition to the Gross Federal Debt.
My complaint is only based on what I have been able to figure out for myself.
The Balance says:
"A budget deficit occurs when spending exceeds income... Each year's deficit adds to the debt."
The Treasury department says:
"A deficit occurs when the federal government’s spending exceeds its revenues."
Treasury also says:
"To pay for a deficit, the federal government borrows money by selling Treasury bonds, bills, and other securities. The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities."
So okay, maybe the "associated interest" creates the discrepancy, the gap between red and blue on Graph #1 above? But for this to be true, we would have to say "A budget deficit occurs when spending exceeds income" AND we would have to say that paying (or rolling over) the associated interest doesn't count as "spending". Yet the associated interest IS COUNTED in the Gross Federal Debt!
I'm not an economist, but if I pay interest on my debt, to me it counts as spending.
I think it is all smoke and mirrors, to count both gross debt and debt "held by the public". I think it is a way to let them say, for example, that the budget was balanced in the latter 1990s, when the Gross Federal Debt shows that it wasn't balanced (Graph #1).
The discrepancy, the gap between red and blue on Graph #1, at 25% of GDP, is today about three times what it was in 1970, as FRED shows. And that's just the discrepancy! It is obvious to me that economists and policymakers DO NOT KNOW HOW to get the debt and deficits under control.
Spending in excess of revenues is NOT THE CAUSE of deficits. As Treasury says:
"The size of the national deficit or surplus is largely influenced by the health of the economy and spending and revenue policies set by Congress and the President. The health of the economy is often evaluated by the growth in the country’s gross domestic product (GDP), fluctuations in the nation’s employment rates, and the stability of prices." And I recently showed that if GDP growth had continued at the 1946-1974 rate, the Federal debt today would be about half what it actually is as percent-of-GDP.
The economy slowed around 1974, and federal debt growth accelerated around 1974. That's not a coincidence.
And it's a good bet that if GDP growth remained at the 1946-1974 rate, spending on social programs would have grown half as fast, or less. GDP would have been bigger, and the federal debt would have been smaller.
(Thanks for listening!)
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