THINKING ABOUT THE NATIONAL DEBT; AND YOU THINK YOU HAVE PROBLEMS
The Trump Administration is currently working on a proposed budget for Fiscal 2018 ( For the government, the 2018 fiscal year, the money year, runs from Oct 1, 2017 till September 30, 2018. The fiscal year is three months ahead of the calendar year. It is a bit confusing, but that is the way they do it.). It is going to be a tumultuous, confusing effort. President Trump, with no prior experience in government, wants to increase spending for the military, drastically cut spending almost everywhere else, lower taxes so that less money will be coming in, and at the same time, work toward balancing the budget. It is fairly clear that what the President wants to do is not going to happen. This paper will be an attempt to provide some background and to make clear why those conflicting goals are not going to be attainable. The paper will suggest that one problem we have with budgeting is that the numbers are so large that people simply have difficulty conceptualizing them. Think about that as you read the many numbers on these two pages. But, we are good with numbers, so let us begin!
At the moment (It will change during the time that you spend reading this paper.), the government owes 19 trillion, 942 billion, 563 million, 678 thousand dollars ( Remember that a billion is a thousand million, and a trillion is a thousand billion.). That means that the government owes about twenty thousand billion dollars. Actually that huge number is really lower than the actual amount we owe because administrations have borrowed from our own Social Security and Highway Trust Funds. They can borrow money from those trust funds very cheaply and not really talk much about it. It still has to be paid back, and that money has to come from somewhere. If we were to divide just the official debt number among all citizens, each of us would owe about $61,500 (Adults would really owe more because many citizens are children.).
Every fiscal year the government has income from taxes and fee revenues and the government spends money as outlays. If the government reports outlays larger than its income it means that the government has already borrowed and has already spent the money. If at the end of the fiscal year not enough money has come in to balance spending, the result is a deficit. And, the deficit is added to the debt. So, any time you see an end of the year deficit, the debt has become bigger. An example: During fiscal 2016, which ended at the end of August of 2016, the government had taken in roughly $2.99 trillion (3000 billion dollars), and it spent 3.54 trillion dollars (3500 billion dollars plus). It ended up borrowing 552 billion dollars and that money was added to the debt. That was a jump from fiscal 2015, but, to point out an encouraging trend, until 2016, during the Obama administration, the deficits have grown larger but the increases have been growing smaller. The Obama administration spokesmen could argue that once out of the recession they had begun to get the deficits under control.
The Trump budget for 2018 has not been finalized but we know that the new president wants to make large increases in the military budget financed by unprecedented cuts in the nonmilitary military parts of the budget; cutting the State Department by 37%, for instance. Anyone who has watched the budgeting process knows that those cuts are unlikely to happen. Current spending for every department is mandated by law. And, each department, and, the people, groups, and the businesses they serve, will rise up to defend spending at the current levels. So, if President Trump is serious about the Pentagon budget increase that he is talking about (54,000 million dollars), probably all that money will have to be borrowed. For 2016, the Defense Department’s budget was already $573 billion (573,000 million dollars), which does not count the 163,000 million dollars for the Department of Veterans Affairs. Those are huge numbers when we have no active enemies out there. When we factor in, the drop in government income resulting from Donald Trump’s huge projected tax cuts the math becomes even more difficult. In fact, it will not be difficult because the administration will simply borrow the money and those huge debt numbers mentioned above will tick upward. The amount of money lost from the new tax cuts, from which the very wealthy will most benefit, will be have to be paid back by all tax payers in the future, including those who most supported Donald Trump. The Republicans in Congress will feel conflicted but up till now, given a choice between voting for tax cuts or for running up the debt, they have always chosen to run up the debt. Always!
We are also running into a simple problem of human capacity, something almost never talked about or written about. These numbers are so large, that the typical human mind simply has trouble grasping them. The words “million” and “billion” become simply symbols. Think about the people elected to Congress: Most of them are professional politicians who began running for office back in high school. They develop what seems like expertise but mostly they learn a kind of patter. Over time they develop the ability to talk easily about almost any subject but their real level of knowledge is usually rather shallow. The kinds of people who really understand those numbers don’t run for office. They could not get elected. What is true for members of Congress is also true for the people heading those huge government departments. The Department of Defense, for example, spent almost 6000 million dollars in 2016. But the way people gain advancement in the military means that most people at the top aren’t really equipped to deal with the huge outlays they must manage. The military brass can talk about millions of dollars and they can ask for more, but, they can’t really conceptualize the numbers. Much of the real money handling ends up being done by hired contractors outside the military.
The debt has been allowed to grow as much as it has partly because the people elected to determine the levels of spending are rewarded by the voters for cutting taxes. Those tax cuts reduce the income to government and drive up the debt. People elected know they can gain some reward for just talking about the debt so long as the programs people are accustomed to continue to be funded. And, neither those elected nor the public are really equipped to understand the huge numbers that are being borrowed and spent. It is time for all of us to grow up!
H.J. Rishel
3/5/2017
