The Deficit: Comparing 2010 to 2000 when we had a surplus

[Toro]

Did the national debt go down or up during the Clinton years?

It is irrelevant whether or not the national debt went up as it pertains to whether or not there was a surplus. A surplus is when receipts exceed expenses.

Tradable debt fell.
Net debt fell.
Gross debt rose.

The net balance of the United States financial condition improved at the end of the 90s.

Why is the government owing itself more money better than the government owing money to someone else? The way I see it that money the government borrows from itself is owed to us anyway, unless you think the SS trust fund is actually the governments money.

That's a different argument. SS should be run like a real pension fund, IMHO. You would fully fund SS and give people a tax cut if you did.

 

[Sactowndog]

The actual debt, however, increased every single year. That tells me that they did not actually have a surplus, and I am far from the only person that sees it that way.

Like you, I think the real number that matters is the actual debt, including the money the government owes itself. After all, the SS trust fund is supposed to be our money, and letting the government use it to claim they are balancing the budget only causes trouble in the future.

So we have the same accounting background and not that I care that much but I can increase my debt and still run a surplus. Using a real example I increased the loan on my house to generate revenue at low rate for a future obligation I knew I would have (college). My expenditures and revenue were also in a surplus position as I was saving for the future however my total debt also increased.

The point being increasing the debt doesn't 100% mean you ran a deficit in any one year. Clinton may or may not have been increasing debt at low rates to pay a future obligation.

In terms of SS security, I would like to see the government go to an accrual system of accounting and have to account for future obligations, But realize it also would reduce spending as a portion of the budget would be assets subject to depreciation instead of being expensed all in one year.

Now can we get back to how do we reduce the current deficit however we chose to account for it

 

[DontBeStupid]

Did the national debt go down or up during the Clinton years?

Having not read all of your rants, according to TreasuryDirect.gov the national debt did go up every year Clinton was in office. I fail to see how that negates his surplus though. You do know that debt can go up and we still have a surplus, right?

 

[Sactowndog]

As can clearly be seen, in no year did the national debt go down, nor did Clinton leave President Bush with a surplus that Bush subsequently turned into a deficit.

Since this has been explained by people farly knowledgeable in accounting multiple times are you just being purposefully obtuse in restating the same point?

 

[Trajan]

What is relevant is the net debt plus the unfunded liabilities.

so, if I recall we never hashed this out, are we in trouble, or not? when do the unfunded liabilities take us down?

If Medicare and Medicaid continue to grow at their current rate and we do nothing about it, we are in trouble. By estimates I have seen, it becomes a real problem at the end of the decade.

ok so what exactly will happen? I mean financially?

how does the liability which is now due to be paid work? in terms of how you explained the relationship deficit debt liability's etc. it in your last thread in dec..... will we borrow to pay it and then it will become part of the deficit?

 

[Sactowndog]

Did the national debt go down or up during the Clinton years?

Why is the government owing itself more money better than the government owing money to someone else? The way I see it that money the government borrows from itself is owed to us anyway, unless you think the SS trust fund is actually the governments money.

Do you really not understand or are you just trying to derail the thread which you have already successfully done?

 

[DontBeStupid]

As can clearly be seen, in no year did the national debt go down, nor did Clinton leave President Bush with a surplus that Bush subsequently turned into a deficit.

I would like to think we could all agree, that the 10-year projection Clinton left was for a decade of surplus, and that that projection quickly reversed once Bush took office.

 

[Sactowndog]

That's a different argument. SS should be run like a real pension fund, IMHO. You would fully fund SS and give people a tax cut if you did.

Yeah but the problem is how do you get there since the money that should be there to fund existing recipients was long since spent my my Grandfather's generation.

On a different topic.... what do you see must be done to dramtically reduce the deficit. To me it is clear as day but I would like your opinion.

 

[DontBeStupid]

so, if I recall we never hashed this out, are we in trouble, or not? when do the unfunded liabilities take us down?

If Medicare and Medicaid continue to grow at their current rate and we do nothing about it, we are in trouble. By estimates I have seen, it becomes a real problem at the end of the decade.

ok so what exactly will happen? I mean financially?

how does the liability which is now due to be paid work? in terms of how you explained the relationship deficit debt liability's etc. it in your last thread in dec..... will we borrow to pay it and then it will become part of the deficit?

We don't necessarily have to borrow to pay those obligations. We could raise taxes and pay it that way.

 

[Trajan]

"...does not mean he is knowledgable about the topic."

To anyone who notes that the debt continues to climb, it is more than counterintuitve to claim that there could be a real surplus.

No matter his vocation, it is his argument that makes more sense than the counter. You, of course, may define a surplus into existence...but that hardly means that one exists.

Economics is not a science, although euphemistically called the 'dismal science,' as is indicated by your attempts to use same to show that the debt increases, but there is a surplus...

I understand how an individual who is not trained in financial analysis nor understands government accounting would think it is counterintuitive that a rise in total gross government debt would imply a deficit. But bear with me.

I asked you the question earlier about what happens to the gross nontradable liabilities of the Treasury when there is a surge in employment and payroll tax receipts? Do you think such liabilities would go up or down? Intuitively, one would think they would fall, right? After all, a rise in receipts should mean a fall in liabilities. In fact, it is just the opposite. Gross nontradable liabilities rise when there is a surge in payroll tax receipts.

Think of a mutual fund company that runs your 401k. Let's say you contribute $1000 a month to your 401k. At the end of the year, because you're such a good worker, you get a $10,000 bonus. Being the smart and responsible woman that you are, you put $5000 of your bonus into your 401k. The cash is sent to your mutual fund company and the mutual fund now owes you an extra $5000 on top of the $12,000 you socked away during the year. So for the year, the mutual fund owes you $17,000 (plus whatever your investments gained or lost, which for simplicity's sake, we'll assume is $0 for the year).

Now STOP!

At this point, is the mutual fund better or worse off? After all, it now owes you $17,000? After all, the gross debt of the mutual fund company has risen because it owes you another $17,000. So it must be worse off, right?

This is where you stop in your analysis of the government debt. It is incomplete.

Of course, the answer to the above question is "no." A mutual fund contracts with a management company, which invests your money. The mutual fund company has a liability with you but the $17,000 it has invested with the management company is an asset. Net net, they balance out. The mutual fund company owes you $17,000 but has a $17,000 asset with the management company. So its gross debt rises by $17,000 but its net worth does not change.

It is the same with the government. When SS receipts rise, the gross liabilities of the Treasury rises because it owes you the money (plus interest) it has received from you in payroll taxes. But that doesn't mean the Treasury is worse off because it has an asset in the social security trust. Net net, there is no change in the balance to the Treasury. The Treasury is credited with the amount taken through payroll taxes but those funds are debited to the social security trusts. They offset. That's what you are seeing when total debt rises. It doesn't take into account changes on the other side of the balance sheet, and has no bearing on cash inflows and outflows through the Treasury. Cash inflows exceeded cash expenses in the last part of the 90s. That is the definition of a surplus.

I get that this is a confusing and counterintuitive issue. And I expect someone who is dug too deep in the argument and confused like QW to pipe in that "Government accounting is not the same!" In this case, there is no difference in how the accounting offsets assets and liabilities.

A mutual fund contracts with a management company, which invests your money.

humm ok, so, who is our "mutual fund mgt. company" investing in or with?

 

[Toro]

ok so what exactly will happen? I mean financially?

how does the liability which is now due to be paid work? in terms of how you explained the relationship deficit debt liability's etc. it in your last thread in dec..... will we borrow to pay it and then it will become part of the deficit?

Future medicare costs not yet accounted for are the unfunded liabilities you hear about, that are, what $50 trillion? $75 trillion? or whatever enormous number you hear. From an accounting standpoint, what will happen over time is that the trusts will grow deeper and deeper into debt, which means the taxpayer will have a greater liability and we will eventually have to pay for it. Medicare and Medicaid are ticking time bombs structured as they are and they must be reformed, unless everyone wants to pay higher taxes or spend less on the military, social security, etc.

What might save Medicare is that healthcare cannot continue to grow 2%-3% faster than the rest of the economy. Mathematically, it simply cannot. So that $75 trillion in unfunded liabilities may be an exaggeration. Or, then again, maybe not.

 

[Toro]

Yeah but the problem is how do you get there since the money that should be there to fund existing recipients was long since spent my my Grandfather's generation.

It is actually not that difficult. As of a certain date, all new monies for social security would stop being invested in social security. Social security would "run off," meaning that all monies paid into SS would paid out over time. Since SS is not fully funded - meaning there isn't enough money currently to fund all future obligations - it will have to be restructured. You would do that by raising the retirement age by a couple of years and claw back benefits to those who are wealthy and don't need it.

All new monies after that date would be invested into a new pension plan that would invest like a real pension fund - in stocks, corporate bonds, international investments, real estate, etc. Everyone would have to contribute into the new fund until they are 40 years of age. At 40, you would have the option of cashing out of this new pension fund and getting your own investment account where you could invest on your own. You could not access this money until retirement age and you would still be forced to save until you retire.

Social security is an enormously inefficient system. Essentially, it is a pension fund that invests 100% in government bonds. There is no other pension fund in the country that I am aware of that invests like that. Every pension fund has an asset mix of stocks, bonds, real estate, private equity, commodities, etc. Over long periods of time, the typical pension fund compounds at 7%-8% a year. Social security compounds at about 4% a year. $1 billion compounding at 4% a year equals $4.6 billion in 50 years. $1 billion compounded at 8% a year equals $46 billion in 50 years. You would wipe out the unfunded liability of SS and have oodles of cash left over to give people a tax cut if the fund was run like a real pension plan.

On a different topic.... what do you see must be done to dramtically reduce the deficit. To me it is clear as day but I would like your opinion.

That's easy.

1. Cut spending.
2. Raise taxes.

I'd cut $3 for every $1 raised in taxes, or thereabouts.

In truth, the reason why the deficit is so high is because of the slow economy. If the economy were growing at capacity, the deficit would be $600-$800 billion, still high but not $1.5 trillion. So if the "real" deficit is $800 billion, I'd look at cutting $600 billion and raising taxes by $200 billion. I don't think that would be too difficult.

 

[Sactowndog]

ok so what exactly will happen? I mean financially?



What might save Medicare is that healthcare cannot continue to grow 2%-3% faster than the rest of the economy. Mathematically, it simply cannot. So that $75 trillion in unfunded liabilities may be an exaggeration. Or, then again, maybe not.

The problem is much of medical costs are not constrained by demand curves.

If you think back to your macro econ class, demand curves require a concept called diminishing returns to function. Meaning at some price you are willing to forgoe the product. But for much of medicine diminishing returns don't function as no one can name a price when the would chose to deny their kids medical care.

So essentially the demand curve is structured at the point people declare bankrupty which isn't really the concept of demand curves.

 

[NYcarbineer]

Did the national debt go down or up during the Clinton years?

Down, according to the CBO, in 98, 99, 00, 01

http://www.cbo.gov/budget/data/historical.pdf

Now, aren't you the dunce who screams "Liar! Liar!" is one slips up and makes a mistake?

Oh, yes...that would be you.

Well, that would entitle me to call you a "Liar! Liar!" - if I were so inclined. Why???

1. Your link does not in any column list national debt.

2. So...are you prepared to take your own medicine? Are you a liar...or simply wrong?


waiting.....



3. OK, Ok....due to your condition, I'll cut you some slack, and explain it to you:

There are, actually, two kinds of government debt, public debt, which we owe to bondholders and other investors, and intragovernmental debt, which is debt the government owes to itself. National debt is actually the total of the two.

Now, take a peek at the last column....yes, the one labeled "Debt Held By The Public."

See, that is also known as 'public debt.'

See "Debt Held By The Public." is actually 'public debt.'
And vice-versa!

Hey...did you just slap yourself on the forehead??

OK...See? It is not the national debt.

Get it?

Now, wipe that egg off your face......

I just love when your karma just bites you in the butt....don't you?

Folks like you are like the toy Slinky....not good for much, but they bring a smile to your face when you push 'em down the stairs.

You're wrong. Clinton had a budget surplus. A budget surplus is when your budget is less than the revenue you take in.

You don't include off-budget items in the budget.

The clue that most people use to figure that out is the term 'off-budget'.

 

[Quantum Windbag]

It is irrelevant whether or not the national debt went up as it pertains to whether or not there was a surplus. A surplus is when receipts exceed expenses.

Tradable debt fell.
Net debt fell.
Gross debt rose.

The net balance of the United States financial condition improved at the end of the 90s.

Why is the government owing itself more money better than the government owing money to someone else? The way I see it that money the government borrows from itself is owed to us anyway, unless you think the SS trust fund is actually the governments money.

That's a different argument. SS should be run like a real pension fund, IMHO. You would fully fund SS and give people a tax cut if you did.

How they run SS is a different argument, but buying T-bills with government money and calling it revenue is lying. If that was all it took Congress could buy up $15 trillion in T-bills with new money and declare the debt eliminated.

 

[NYcarbineer]

Did the national debt go down or up during the Clinton years?

Having not read all of your rants, according to TreasuryDirect.gov the national debt did go up every year Clinton was in office. I fail to see how that negates his surplus though. You do know that debt can go up and we still have a surplus, right?

It's simple. She's trying to redefine 'budget surplus' in a way that no one outside of some fringies use.

The funniest part is, and it's funny EVERY time she pulls this, and this isn't the first time,

even if you use her own loony concoctions and loony math,

it still turns out that Clinton's numbers were FAR closer to balance than

Reagans, Bush Sr's, or GW's.

It's the same game as the wingnuts around here who try to switch to U-6 unemployment numbers when talking about UE under Obama to try to make it look like Obama's numbers are up in the high teens.

It's the standard practice of people like PC because they simply cannot debate on the facts.

 

[Quantum Windbag]

The actual debt, however, increased every single year. That tells me that they did not actually have a surplus, and I am far from the only person that sees it that way.

Like you, I think the real number that matters is the actual debt, including the money the government owes itself. After all, the SS trust fund is supposed to be our money, and letting the government use it to claim they are balancing the budget only causes trouble in the future.

So we have the same accounting background and not that I care that much but I can increase my debt and still run a surplus. Using a real example I increased the loan on my house to generate revenue at low rate for a future obligation I knew I would have (college). My expenditures and revenue were also in a surplus position as I was saving for the future however my total debt also increased.

The point being increasing the debt doesn't 100% mean you ran a deficit in any one year. Clinton may or may not have been increasing debt at low rates to pay a future obligation.

In terms of SS security, I would like to see the government go to an accrual system of accounting and have to account for future obligations, But realize it also would reduce spending as a portion of the budget would be assets subject to depreciation instead of being expensed all in one year.

Now can we get back to how do we reduce the current deficit however we chose to account for it

The difference is that the government borrowed from itself, not a bank. That would be like you taking your mortgage payment, using it to pay off your car, and telling your bank it counted toward your interest.

As to reducing the current deficit, I have outlined that more than once.

 

[Quantum Windbag]

Why is the government owing itself more money better than the government owing money to someone else? The way I see it that money the government borrows from itself is owed to us anyway, unless you think the SS trust fund is actually the governments money.

Do you really not understand or are you just trying to derail the thread which you have already successfully done?

If you do not like my posts feel free to ignore them.

 

[Quantum Windbag]

As can clearly be seen, in no year did the national debt go down, nor did Clinton leave President Bush with a surplus that Bush subsequently turned into a deficit.

I would like to think we could all agree, that the 10-year projection Clinton left was for a decade of surplus, and that that projection quickly reversed once Bush took office.

I think we could all agree that projections are all full of shit.

 

[Quantum Windbag]

If Medicare and Medicaid continue to grow at their current rate and we do nothing about it, we are in trouble. By estimates I have seen, it becomes a real problem at the end of the decade.

ok so what exactly will happen? I mean financially?

how does the liability which is now due to be paid work? in terms of how you explained the relationship deficit debt liability's etc. it in your last thread in dec..... will we borrow to pay it and then it will become part of the deficit?

We don't necessarily have to borrow to pay those obligations. We could raise taxes and pay it that way.

No we can't. If we raise taxes on the rich to 100% of their income, and they kept earning the same amount of money, which will not happen, we would only be able to pay our current deficit, not the accumulated debt.