The Return of the Deficit

TYLER, TOO

By Gus Tyler

Published August 01, 2003, issue of August 01, 2003.
  • Print
  • Share Share

The federal budget deficit for fiscal 2003 will be the largest in American history, according to the White House. The estimate is that the deficit will run to $455 billion for the year. It breaks all records by billions. The highest deficit up until this year was $290 billion in 1992 when George Bush Sr. was president.

In between the two Bushes, during the Clinton years, the deficit fell from $290 billion to $22 billion in 1997 and then turned into a surplus of $236 billion in the year 2000.

Under Bush Jr. deficits made their return. Just a half a year ago, the White House announced that the budget would be running a sizable deficit of $300 billion. In this brief period, the forecast is a deficit that will have risen by 50%.

This runaway budget deficit should be a source of considerable concern to the administration. But it isn’t. Serenely, the new director of the budget, Joshua Bolten, assures us that a deficit of such unprecedented magnitude is “manageable if we continue pro-growth economic policies and exercise serious spending disciplines.” To the informed who know that Iraq is costing Uncle Sam nearly $4 billion a month and who see the unemployment rate and business bankruptcies soaring, Bolton’s words sound like a nonchalant non sequitur.

What is not revealed in all this talk about budget deficits is that for years budget deficits have been distorted to fool the public into believing that the federal budget was in better condition than it really was. It started with President Lyndon Johnson. In his last years in office, Johnson was burdened with costly wars in Asia. To pay for them, he should have raised taxes. But since there was an election coming up, Johnson was hesitant to do so. Instead, he indulged in creative accounting.

He knew that the Social Security Trust Fund had been running surpluses for many years. So, he decided to merge the pluses of the Social Security Trust Fund with the minuses of the U.S. Treasury — although the Trust Fund was, and is, an independent entity whose surpluses, by law, must be invested in government securities. (Uncle Sam has been paying interest on those funds to the Social Security Trust Fund that now has assets of close to a trillion dollars.)

Johnson’s little ploy has, ever since, been formalized in the annual report of the President’s Council of Economic Advisers. In that report there are three different budgets: the “On-Budget” budget, the “Off-Budget” budget and the unified budget.

No president has offered to put an end to this false reporting that counts borrowed money as “income” because this deception makes the budget look better than it is. During the last few years, the Social Security Trust Fund and a few other quasi-governmental funds such as the United States Postal Service and the Highway Trust Fund have jointly been running surpluses of about $150 billion a year. As a result, true government deficits have been and still are understated.

But shortly, these “off-budget” operations, especially the dominant Social Security Trust Fund, will become a burden rather than a blessing. The post-World War II baby boom generation is coming of age, getting ready to retire. The drain on the Social Security Trust Fund will in time exhaust the reserves, and a big plus may turn into a burdensome minus — as the painful truth about the budget is finally revealed.






Find us on Facebook!
  • British Jews are having their 'Open Hillel' moment. Do you think Israel advocacy on campus runs the risk of excluding some Jewish students?
  • "What I didn’t realize before my trip was that I would leave Uganda with a powerful mandate on my shoulders — almost as if I had personally left Egypt."
  • Is it better to have a young, fresh rabbi, or a rabbi who stays with the same congregation for a long time? What do you think?
  • Why does the leader of Israel's social protest movement now work in a beauty parlor instead of the Knesset?
  • What's it like to be Chagall's granddaughter?
  • Is pot kosher for Passover. The rabbis say no, especially for Ashkenazi Jews. And it doesn't matter if its the unofficial Pot Day of April 20.
  • A Ukrainian rabbi says he thinks the leaflets ordering Jews in restive Donetsk to 'register' were a hoax. But the disturbing story still won't die.
  • Some snacks to help you get through the second half of Passover.
  • You wouldn't think that a Soviet-Jewish immigrant would find much in common with Gabriel Garcia Marquez. But the famed novelist once helped one man find his first love. http://jd.fo/f3JiS
  • Can you relate?
  • The Forverts' "Bintel Brief" advice column ran for more than 65 years. Now it's getting a second life — as a cartoon.
  • Half of this Hillel's members believe Jesus was the Messiah.
  • Vinyl isn't just for hipsters and hippies. Israeli photographer Eilan Paz documents the most astonishing record collections from around the world:http://jd.fo/g3IyM
  • Could Spider-Man be Jewish? Andrew Garfield thinks so.
  • Most tasteless video ever? A new video shows Jesus Christ dying at Auschwitz.
  • from-cache

Would you like to receive updates about new stories?




















We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.