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National Deficit and Debt Continue to Grow

WASHINGTON (Reuters) - The White House has estimated that the U.S. budget deficit for 2005 will total $427 billion.

"In the 2006 budget that we release on February 7, OMB will estimate that the 2005 deficit, including the outlay effects from the supplemental we are discussing today, will be 3.5 percent of GDP or in nominal terms $427 billion," said a senior administration official in a news briefing on Tuesday.

Many look at these staggering figures and assume a crisis is imminent. However, conservative financial analysts have praised the Bush administration for stimulating economic growth through tax cuts which in turn increased tax revenue and reduced the anticipated 2004 deficit (shortfall). Others chime-in that as a percentage of national income the current U.S. debt is less than half of what it was during World War II. Great, this is good news as long as the national income continues to grow.

The bad news is that the United States' debt has steadily grown during both good and poor economies and is currently in the neighborhood of $7,617,000,567,690 ($7.6 trillion). That's approximately $26,000 per man, woman and child assuming a U.S. population of $295 million people. The estimated $427 billion deficit in 2005 translates to $1400 per person. The interest on the national debt during 2004 was $322 billion.

On the social security front it is notable that the trust funds are commingled with the Treasury's general fund and comprise the largest portion of the $3.2 trillion intra-government loan. In other words, the "assets" held by the two Social Security trust funds, the public pension, are actually un-funded liabilities having been "borrowed" and spent. CEOs in the private sector go to jail for less. [Source: Institutional Risk, HT: Mises Blog]

The intra-government loans are notable because they enabled President Clinton to claim a huge "surplus" when in reality the total national debt increased during each year of his presidency. Similarly, the budget deficit in 2004 was $412 billion yet the national debt somehow increase by $596 billion.

Tax cuts do stimulate the economy, I'm all for them. In a time of prosperity a balanced budget doesn't seem unreasonable and this means spending less. However, spending less means not borrowing from other government trust funds and recognizing that our deficit is approximately $200 billion more than is commonly reported.

Note: for those motivated to raise taxes in an effort to balance the budget consider this perspective from Conservative Life.

Posted by tim at January 25, 2005 9:05 PM

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