The Federal Budget Myth, and the National Debt

The US Treasury Department announced that there was a $20.99 billion surplus for the month of January. Some Republicans have indicated that this shows that the economy is strong and we should stick with the direction of Bush's administration. One fellow poster also thinks this means the economy is good.

Despite the good news, the announced surplus was expected. For those that work in the financial industry, the federal government typically runs a surplus in January when corporations and individuals make their quarterly tax payments. The Congressional Budget Office (CBO) actually expected $24 billion in the black. Receipts rose 13.7% year-over-year to $230 billion (a record in January), but overlays also rose 7.9% year-over-year to $209 billion (also a record in January).

A good number of conservatives are faulting the media and some doomsayers that the huge national debt will be the downfall of America's economy. They have tried to allay fears by saying that President Bush promises to cut the deficit in half by 2009, the year he will leave office. It would have been happier if he stated that he can cut the national debt by 2009, it would have actually freed up about $175 billion in interest payments for discretionary use! For a powerful and robust economy like the United States, we should not be having an issue with this. The tax cuts that President Bush pushed through Congress have helped the economy. Tax revenue has increased, but the problem is that government spending has also increased even more. Yes, people are saying that national security, the wars of Iraq and Afghanistan, and Gulf Coast reconstruction are to blame for the increased spending, but we cannot continually deficit spend hundreds of billions of dollars.

Ladies and gentleman, debt-to-GDP ratio is 64.8% (as of October 2005). Yes it's high, but you know it is obvious that Bush's Press Secretary would say, "well, that's lower than Japan's 164% and the Eurozone's 79%", but why are we comparing our problem to theirs? Some would say that we are doing fine. Past opinion polls have shown that the national debt is not a high priority about the populace. However, that has changed recently when it is known that when Bush took office in his first term, the national debt stood at $5.7 trillion. Today, we are hitting $8.2 trillion.

Know that when politicians start talking about the deficit figures, they do not include the emergency bills that were passed to finance the current military operations in Iraq and Afghanistan. They also love to include the figures from the Social Security Trust because it is currently running a surplus, but those years are numbered. It is better to listen to the Fed or the CBO than the President.