DEFICIT vs. DEBT

Recently there was an article in the paper explaining that President Obama tried to get credit for reducing the “budget deficit.”  The table (see below) extends out to 2017, gradually reducing that. How it is figured, I don’t know (yet).  Though he cannot run for office again, he wants to explain how the deficit has been declining under his watch, but nobody is paying much attention to that.

us_deficit_pct

Debt, on the other hand has been spiraling out of control.  According to a (Democrat) post, G.W. Bush is responsible for that, by not acting toward the end of his term, which might very well be true. I don’t know how that is figured, but cannot believe that in the past six years President Obama could do nothing about that.  In all fairness, it is very tough to get Americans to agree that we all are overspending, and need to do something about that.

debt-as-percent-of-gdp

October 1, 2014 Trent Lott (Republican Senate Majority Whip in 1995) and Tom Daschle (Democrat Senate Minority Leader in 1995) were interviewed and asked why the current congress cannot get along, between the two parties. They came up with various reasons. It was a very interesting interview. At one point Trent brought up the issue of a balanced budget under President Bill Clinton.  It was the only (recent) president under whom that happened, which was through cooperation between both Houses of Congress. Yet the debt kept, and still keeps, climbing.

Wikipedia has a very nice definition:

Suppose you spend more money this month than your income. This situation is called a “budget deficit”. So you borrow (ie; use your credit card). The amount you borrowed (and now owe) is called your debt. You have to pay interest on your debt. If next month you spend more than your income, another deficit, you must borrow some more, and you’ll still have to pay the interest on your debt (now larger). If you have a deficit every month, you keep borrowing and your debt grows. Soon the interest payment on your loan is bigger than any other item in your budget. Eventually, all you can do is pay the interest payment, and you don’t have any money left over for anything else. This situation is known as bankruptcy. If the DEFICIT is any amount more than ZERO, we have to borrow more and the DEBT grows. “Reducing the deficit” is a meaningless sound bite.  Each year since 1969, Congress has spent more money than its income. The Treasury Department has to borrow money to meet Congress’s appropriations. We have to pay interest on that huge, growing debt; and it cuts into our budget big time.

Some suggest: “tax the rich to make up the deficit”. As of the end of 2010, the total worth of all American billionaires is $1.3 Trillion. We could take ALL their worth, not just high taxes, but ALL their WORTH; and it wouldn’t dent our national debt. It wouldn’t even pay this year’s deficit! And if we did take their money to pay some of this year’s deficit, what would we do next year?

The debt, and Interest payments on the rising debt, will be paid by our children and grandchildren through much higher taxes. Is that Child Abuse?

Screen Shot 2014-10-15 at 9.43.06 AM

Notice how the budget, as approved by congress, has a built in deficit amount of $1.27 trillion in order to balance the total expenses. Also note at the right bottom,  the interest on that debt is $251 billion.

“For society as a whole, nothing comes as a ‘right’ to which we are ‘entitled’. Even bare subsistence has to be produced…. The only way anyone can have a right to something that has to be produced is to force someone else to produce it… The more things are provided as rights, the less the recipients have to work and the more the providers have to carry the load.” Thomas Sowell, quoted in Forbes and Reader’s Digest.

In short:

Deficit is a shortcoming of the annual mount spent beyond income.          

Debt is the accumulative amount of deficits year to year, plus interest.

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