Tuesday, August 11, 2015

Deficit Vs Debt

I put this together for my niece, we were having a discussion about our countries Debt vs Deficit.

Okay I think that you might be interpreting the data incorrectly or you are looking at it correctly and not seeing the relevant number or on the down side you only care about the Debt and consider the Deficit (which is the boss) irrelevant.  That http://www.usdebtclock.org/ is a pretty cool chart and in the very top left box it shows the deficit amount which pretty much agrees with everything I have been saying.  

The most important # on that chart is the Deficit amount.  When that hits zero or negative we are balanced or have a surplus and can actually begin to decrease debt.
To your point.  Yes our debt has increased.  But our debt increases on a very regular basis.  Especially when we are engaged in warfare.  The debt historically substantially decreases after a war.  However a large portion of our excessive debt is a direct result of our having to bail out several of the largest banks and the single largest insurer of investments in the world.  That bail out all by itself was over $14 trillion.  This bailout was unavoidable as the global economy would have crashed without it. 

--- Taken from: http://www.motherjones.com/politics/2010/01/real-size-bailout-treasury-fed

Also, when Clinton performed ‘the budget miracle’ and balanced the budget, we still had an enormous amount of debt. Between 1998 through 2001 we had no deficit, we still had debt, as of September 30th, 2000 our countries debt was still over $5.6 trillion even though we had a $236.2 Billion surplus.  So even with a balanced budget we still had over $5 trillion in Debt and even with that surplus the debt figure continued to rise.  

--- Taken from:  http://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/

Nobody is lying or attempting to mislead you when they say that Obama has reduced the Deficit.

The deficit is the difference in the amount between Debt and Income. The Debt is never going to go down, unless we as a country surpassed our continuing debt with our income, which actually did happen during President Clinton’s last 4 years, the country was making more money than its amount of debt.  It is unlikely that we will see our debt go down unless, somebody balances the budget again. While there are some of the things that we could do to stop debt, it would have to be extremely excessive for that to even begin to be the case.  Such as:

Military spending and I am using the military as my prime example because it is one of our largest expenditures.   Military spending represents roughly 50% of our entire budget.  So military spending would have to become zero, especially no money for anything new, no RND, no new ships, planes, tanks, jeeps etc.  No new research into better technologies.  All of that remaining equipment could only receive very minimal maintenance, spare parts only.  They would have to ration existing fuel and we would not be able to continue to care for our deployed soldiers, no food, no medical supplies, no fuel for the ships and air craft.  No new equipment and no repairs or maintenance to any of that equipment, no patches for holes in clothing, definitely no new patches and awards could be made.  No ceremonies, no parties or celebrations, no commercials no new soldiers, no retirement pay or benefits this list can go on forever.

Those very same types of limits, in different ways, would apply to virtually every other expense we have:  No humanitarian aid ever to anyone anywhere, this includes the United States.  If a hurricane hits or there is a massive flood everyone is on their own across the globe and in our own country.  No more NASA at all, no satellite maintenance, no GPS after the existing satellites orbits decay or malfunction because they get no maintenance.  No more federal money to maintain any of our countries infrastructure.  No more money for the federal court system, no money to the prison system. Again this list could go on forever.
Yet despite the fact that our National debt is indeed over $18 trillion, the fact that our Deficit continues to decrease under Obama is very impressive.  We are getting closer and closer to the point where we again have a surplus like we did from 1998 – 2001 and actually begin the effort reducing the actual debt.  Because until the Deficit becomes surplus we can’t begin to reduce the Debt.
Also I believe it is important to point out that National Debt has 2 categories:
Public Debt is about $13 trillion
Intra-governmental Holdings is about $5 trillion.
Thus the Total U.S. National Debt is about $18 trillion.

I hope this helps you understand why decreasing the deficit is so important and why it is indeed an incredible accomplishment.

Other Helpful Links-

---Historical Debt Outstanding - Annual 2000 – 2014: https://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm