July 20th, 2008The United States Has Not Had A Balanced Budget Since 1957!
In September 27, 2000, CNN wrote that that:
the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history and topping last year’s record surplus of $122.7 billion.
I’m not sure where CNN finds their White House correspondents, but they obviously know nothing about government accounting. CNN is not the only clueless news narrators of course; MSNBC, The New York Times, ABC, CBS, USA Today and virtually every other national news agency got it wrong then, and continue to get it wrong today.
Here is a tip for the mainstream news agencies: when reporting on US government budgetary issues, check the source. The source I’m referring to is the US Government’s Treasury Direct website. For all the pilfering the US government does of the tax coffers, at least they are honest about it. They accurately and honestly report the largest accounting scandal in world history. CNN just doesn’t understand the numbers.
As of July 17, 2008, the current US Government Debt is nearly 9.518 Trillion dollars. From the Budget of the United States historical tables (pg 31), the United States tax revenue for fiscal year 2007 was only 1.86 Trillion dollars when the social insurance and retirement receipts are subtracted out. For those of you who think that your money is 100% safe in United States treasuries, consider the fact that the debt to revenue ratio of the United States treasury is over 5 to 1! (9.518 trillion total debt divided by 1.86 trillion in tax revenue).
Looking back, here are the historical US government debt numbers from 1986 through 2007:
Bill Clinton was president of the United States from 1993 to 2001 and although he made significant progress toward fiscal responsibility, he did not balance the budget. If you don’t believe me, (that means you CNN!), then kindly point out two consecutive years in the table above where the total US debt actually decreased from year to year.
Here is another view of some of the historical debt numbers, and the corresponding annual deficits. As you can see, the United States has not had a balanced budget since 1957, the year that Dwight Eisenhower was in office.
So how do CNN and so many others repeatedly and incorrectly report of budget surpluses? They simply do not comprehend the numbers. The US government debt is broken down and reported in 2 components:
- Debt held by the public
- Intragovernmental holdings
The number that matters is the TOTAL of the two components above!
Before going further, let’s take a step back and consider the analogy of an 4 member household. Jack and Jill are married and have two kids. Together they have a total income of $65,000, but expenses are high and they spend a total of $70,000 per year. The annual budget deficit of this household is $5,000, which they finance on 2 credit cards – Jack’s Visa and Jill’s Mastercard. During the past year year, Jack paid down his Visa balance by $1000 (surplus) but Jill increased the balance of the family mastercard by $6000 (deficit). CNN ignores the Mastercard and reports a $1000 budget surplus for the Jack and Jill family!
Back to the United States. Why do they separate the total US debt into two components – debt held by the public and intragovernmental holdings? It’s because the current demographics of the United States make it convenient for them to hide the truth of their Enron style accounting from the American Public:
In 1960 there were 5.1 workers paying into social security for every 1 worker collecting a benefit. That ratio is gradually declining and is expected to hit 2.1 workers per retiree by the year 2032. The current demographics of the United States are causing social security surpluses, but over time those surpluses will turn into deficits.
The social security surplus for fiscal year 2007 was $283 billion dollars. Rather then investing those surpluses for future retirees, as every other American pension system is required to do, the United States budget office “borrows” the surpluses and records them in an Enron style fashion as “intragovernmental debt”. This trick lowers the reported deficit on the “Debt held by the public” side and increases it on the “Intragovernmental debt” side (see VISA and Mastercard analogy above). The trick is also very effective in fooling CNN (not hard to do!), who only looks at easy to read one page reports such as the Joint Statement of Henry M. Paulson, Jr., Secretary of the Treasury, And Jim Nussle, Director of the Office of Management and Budget, on Budget Results for Fiscal Year 2007. But the trick will only work until the United States demographic time bomb completely explodes, and the social security surpluses turn into social security deficits. I’m very curious to see what new tricks the United States budget office comes up with when that happens!
According to the joint statement report, the fiscal year 2007 budget deficit was only $163 billion dollars. In actuality, when you add in the pilfered social security surplus of $283 billion, plus other United States pension system raids (other federal government worker retirement programs), the 2007 budget deficit was actually $500.7 billion dollars, and not the $163 billion dollars that news agencies report from the joint statement. The total US Government debt did increase by $500.7 billion dollars from September 2006 to September 2007. 1957 was the last time the United States recorded a true surplus, where the total outstanding debt decreases from year to year. Thank you Mr. Eisenhower! As for the CNN reported $230 billion surplus for fiscal year 2000, it was actually an $18 billion deficit. Although still in the red, that too is deserving of my thanks to Mr. Clinton. He may not have achieved balance but he came pretty darn close!
For additional reading, I recommend the following:
The National Debt of the United States 1941 to 2008, 2d ed by Robert E. Kelly
One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe by Robert E. Wright