Originally posted by Lizking
Pongo, source the 3 trillion dollar number, please.
worddig "There is no reliability to budget and debt reporting, in part because political leaders can announce official numbers that are almost meaningless, while careful analysis of implications by experts go all but unreported.
For instance, in 2003 the G. W. Bush administration announced a projected $1.4 trillion deficit over the next 10 years (to 2013) amidst disclaimers from the White House about how the numbers are unreliable and how these deficits aren't very big relative to the size of the U.S. economy. These are examples of the types of disclaimers that are often used to 'fuzz' bad news.
By law, the budget office that prepares these numbers must assume that existing laws expire as planned, and that no new programs are added or subtracted. This permits politicians to extend laws, add programs, etc., in the period after budget announcement, for instance, to make temporary tax cuts permanent, or pass a Medicare prescription-drug package. Then they may hope that something changes in the interim that will improve the news before they (or their successors) must announce the budget numbers the next year, or simply hope for some reaction to taxes that they can exploit. For instance, if federal alternative minimum tax as projected hits 30 million taxpayers due to bracket creep, the pressure to remove it rises, and debt, being paid in the future, seems like less of an issue.
According to Economist Alan Sloan, writing in Newsweek in September 2003, if one assumes that the tax will be eliminated, the prior cuts made permanent, and the drug package passed, these changes alone add $3.6 trillion to the deficit over the same ten-year period.
Another issue is that the numbers do not count other shortfalls and leakage. For instance, in the 2003 projection, the U.S. Department of the Treasury used a $2.4 trillion Social Security surplus to offset its cash shortfall. This means that in 2013, "the government will owe Social Security about $4 trillion, just as baby boomers begin retiring en masse. I don't see how that debt can be honored without huge borrowings from outside investors that would send rates to the moon, or huge cuts in other programs," claimed Sloan.
He thus calculates the total projected deficit using only the published numbers and limited assumptions above at more than five times the $1.4 trillion, or about $7.4 trillion. These numbers further assume spending nothing in Iraq starting Oct. 1, 2005, which seems optimistic, as there are no budgetary nor troop commitments from nations that did not invade as of his publication date.
Business confidence is a major reason to mislead about debt and deficit numbers. Wall Street in general responds poorly to growing debt. The U.S. Office of Management and Budget announcements (such as that in July 2003 that they expected a $455 billion deficit (after subtracting Social Security's surplus) for fiscal 2004) cause interest rates to move up.
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