Budget Is ‘Balanced’ for Whom?
Balanced budget? Surely you jest. “Balanced” only by a federal accounting system that borders on fraud.
Every year, we dramatically understate the “official” federal deficit by borrowing from trust funds. The announced federal deficit for the last 10 years totaled $1.967 trillion, but we actually increased the federal debt by $4.364 trillion.
The numbers Washington uses are not only inaccurate; they are misleading. The politicians brag about balancing the budget in 2002, but under President Clinton’s budget, we still will have to borrow $168 billion from the future just to cover 2002’s expenses. That’s a balanced budget?
The government’s accounting system does not honestly account for the full yearly deficit or the total debt. In 1981, our debt was $1 trillion and gross domestic product was $3 trillion. In 1997, debt is $5.4 trillion and GDP is $7 trillion. In a few short years, the debt has increased from one-third the GDP to five-sevenths.
Moreover, the total debt is actually much more than the published figures. The real cost for government services has to include the “unfunded liabilities” from services we consumed and promises we have made. The official debt figures do not reflect the unfunded costs of military pensions, federal Civil Service pensions, unfunded liabilities of Social Security and Medicare, and similar costs incurred but not paid for. When you put these together, the real debt we are leaving our children is closer to $17 trillion.
We offset the misleading figures of both the deficit and debt by ersatz “assets.” We have told America’s children that there is a “Social Security trust fund” but failed to point out that this is something they will have to fund themselves by raising taxes, cutting spending or borrowing from their kids. If an individual inherits government bonds, this is clearly an asset; but if a generation inherits government bonds, it is a wash because it both owns and has to pay off those bonds. It’s like funding your retirement plan with IOUs signed by yourself.
Our generation has been guilty of “credit card generosity.” There is no program we can’t justify adding to our children’s debt. Since the early 1980s, on a per capita basis, we have been receiving $500 more each year in government services than we paid for, passing the bill to future generations.
Some complain and point out that this is unsustainable. But when there are short-term gains, it is easy to brand these critics as “naysayers.” There are myriad ways to justify deficits if it is the only way to win a political race.
Successful democracy, in the long run, requires some allegiance to and respect for the future. In the short run, modern public financing gives public policymakers amazing opportunities to encumber the future for present political gain. Running deficits is the most obvious one, but there are many others.
A 200-year ethos that budget deficits are appropriate only during times of war or recession has been completely eroded to be replaced by a new and, so far, successful strategy of using deficits to avoid making unpopular decisions. Need, not affordability, will drive American politics as long as we have a way to transfer the costs to the future.
What worked when we were the world’s largest creditor nation with a small federal debt to fight the Depression and World War II cannot sustain consumption for the world’s largest debtor nation. American political culture makes it almost politically impossible to be a good ancestor.
