The Real Deficit

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The Real Deficit

Postby tacticool » Sat May 26, 2012 3:22 pm

http://www.usatoday.com/news/washington/story/2012-05-18/federal-deficit-accounting/55179748/1
The typical American household would have paid nearly all of its income in taxes last year to balance the budget if the government used standard accounting rules to compute the deficit, a USA TODAY analysis finds.

Under those accounting practices, the government ran red ink last year equal to $42,054 per household — nearly four times the official number reported under unique rules set by Congress.


Image

Keep in mind that's only the annual deficit, not the total debt that grows by the deficit each year.

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Re: The Real Deficit

Postby Jumping Frog » Sat May 26, 2012 5:49 pm

tacticool wrote:Keep in mind that's only the annual deficit, not the total debt that grows by the deficit each year. .

The annual deficit already includes the interest expense for the existing debt.
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Re: The Real Deficit

Postby MeMelYup » Sun May 27, 2012 7:33 am

Please explain how our deficet can be lower in 2011 that 2010 when the congress had to raise the debe ceiling?
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Re: The Real Deficit

Postby The Annoyed Man » Sun May 27, 2012 7:36 am

MeMelYup wrote:Please explain how our deficet can be lower in 2011 that 2010 when the congress had to raise the debe ceiling?

Voodoo Econ 101.
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Re: The Real Deficit

Postby Middle Age Russ » Sun May 27, 2012 9:43 am

Please explain how our deficet can be lower in 2011 that 2010 when the congress had to raise the debe ceiling?


The "statistics" shown, while being voodoo economics like TAM says, are fairly simple to explain on that point. What is presented has nothing to do with debt ceilings. It is simply the yearly, not cumulative, debt for each year. Keep in mind that each of these yearly figures adds to the cumulative figure you seem to be thinking about. I don't really care how liberal/progressive, etc... a person may be, it isn't hard to imagine the train wreck this nation is headed for with continued debt growth like we have seen in the last several years. Hard-and-fast term limits are needed for the Legislative branch to redirect the priorities of Congressmen and Senators away from the "more Government Spending to get me re-elected" mentality causing all this. I don't really trust that anyone "serving" in these august bodies longer than 10-12 years is serving the best interests of America and thier districts as much as they are serving themselves (in strategies to be re-elected if nothing else).
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Re: The Real Deficit

Postby srothstein » Sun May 27, 2012 5:25 pm

MeMelYup wrote:Please explain how our deficet can be lower in 2011 that 2010 when the congress had to raise the debe ceiling?



It is easy if you do not confuse the deficit with the debt. The deficit is how much deeper in debt you go this year while the debt is the total of all of the deficits minus any payments made on it.

To give an example, imagine that the debt ceiling at the beginning of 2010 is 10 billion. There is a 1 billion dollar deficit for the year 2010. At the end of the year, the total deficit is now 9.9 billion. Along comes 2011 and the deficit is only 500 million. At the middle of the year, we approach the debt ceiling and raise it to 11 billion. At the end of 2011, we have a total debt of 10.4 billion.

Note that the total debt went up by 500 million but the deficit went down by the same amount.

Obviously, in my example is very simplified but it shows the principle of how the two are related and both claims can be true. If we were talking real government, the numbers would be in trillions and billions, not the millions I used.
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Re: The Real Deficit

Postby tbrown » Sun May 27, 2012 9:09 pm

MeMelYup wrote:Please explain how our deficet can be lower in 2011 that 2010 when the congress had to raise the debe ceiling?

Like the OP wrote, its "the annual deficit, not the total debt" but a lot of people seem to be missing the difference, so let me try an example. If a household spends $300 less than their income each month, that's a $300 budget surplus. If a household spends $300 more than their income each month, that's a $300 budget deficit. They can have a $300 deficit one month and a $250 deficit the next, and their debt will increase both months.

I think the important part of the article is the real deficit is higher than reported, which means the debt probably is too. (And this is coming from USA Today, not some Crazy Uncle.) Companies have to follow certain accounting rules so investors and creditors know a fair measure of the companies' finances. The federal government doesn't follow those rules. If they did, the real 2011 deficit would be $5.6 Trillion for that one year, instead of the $1.3 Trillion deeper hole they reported. That means the sovereign debt problem in the United States is probably much worse than the politicians will admit. Many reputable sources say unemployment is also higher than reported by the government.

Draw your own conclusions why they're not being honest with the citizens. And what you need to do to about it.
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