They are at it again. Lying to us about the deficit, that is.
The polls all say that the American people have grown far more skeptical about their government. It’s a good thing. They are lying to us as though we are school children that have yet to master simple addition and subtraction.
The government’s Fiscal Year 2014 ended about a week ago, on September 30. On October 1 Fiscal Year 2015 began.
We’ll get the final numbers on the 2014 deficit in a few days. But already the cheering has begun. For example the Daily Beast announced on Monday that, “It’s time to retire the phrase ‘trillion-dollar deficit’ from our political vocabulary.”[amazon asin=B0040RMF2K&template=*lrc ad (right)]
Instead they tell us, the deficit is down two-thirds from its peak of $1.412 trillion in 2009. In lieu of the final number the Daily Beast rounds its estimate to $500 billion and declares victory.
It says that the giant iceberg that deficit hawks said the U.S. was steaming toward is actually melting.
We got more of the same from the President himself last week in a speech at Northwestern University. Obama wagged his finger at deficit hawks with their “mindless austerity” and “manufactured crises.”
Instead, said Obama, “over the past five years we’ve cut our deficits by more than half. When I took office, the deficit was nearly 10 percent of our economy. Today, it’s approaching 3 percent.”
Now, the deficit is what the deficit is. They can cook the press release, massage the numbers, or hide the spending, but at some point we have to revert to the real numbers.
What did the government take in during the fiscal year? And what did it spend? If it spent more than it took in, that’s the deficit.
The real numbers involved actually do matter, because even the government somehow has to come up with the money it spends.
In order to cover the deficit, the government has to borrow money. The government has to pay interest on the money it borrows to [amazon asin=B00B9ZH4UY&template=*lrc ad (right)]cover the deficit as well. The money it borrows is added to the national debt. Financing the national debt means paying interest on all the borrowed money.
It also means being susceptible to rising interest rates. Interest rates are low now, but they won’t be low forever and higher rates mean higher costs of financing the debt.
I am making the obvious but often ignored point that while government numbers may be playthings for politicians, there are real costs and consequences to deal with no matter how artfully the numbers are framed for the evening news.
Now, finding out how much the deficit actually grew – and how much more the government had to borrow during FY2014 – between October 1, 2013 and September 30, 2014, is as simple as going to the U.S. Treasury’s website.
You can do this at home. If you Google the phrase “debt to the penny” you will be directed to a Treasury department page that allows you to enter specific dates and find out – to the penny – the size of the federal debt on that date.
So let’s do that, entering September 30, 2013 as our start date; and entering September 30, 2014 as our ending date. And here’s what we find:
The total public debt outstanding at the end of the FY2013 was $16,738,183,526,697.32.[amazon asin=0990463109&template=*lrc ad (right)]
One year later, as the end of FY2014 it was $17,824,071,380,733.82. The difference is $1,o85,887,854,o36.50.
That is how much the deficit grew.
It grew by more than one trillion dollars. In other words, the iceberg is still there. The state’s lapdog journalists and the politicians may not see it or may not wish to see it.
But just because nine-tenths of the iceberg is hidden below water doesn’t make it any less dangerous.
I know there will be special reasons that the deficit will be said to have grown by only five or six or seven hundred billion dollars instead of the full trillion dollars it actually grew.
But we have been down this road many times.
Remember the Clinton-era budget surpluses? The national debt actually grew each one of those years. But money was “borrowed” from the Social Security “Trust Fund” instead of from the public which created the illusion that the budget was in surplus. There was no real surplus then, just as we did not bid goodbye to the trillion dollar deficit in the budget year that just ended.[amazon asin=0517548232&template=*lrc ad (right)]
No wonder nobody really believes anything the government says, whether it’s the assurance that we won’t be putting “any boots on the ground” to stop ISIS, or the promise from the head of the Center for Disease Control that Ebola will be stopped dead in its tracks.
Nothing the state says is credible. Writing in the Wall Street Journal this weekend about the astonishing brazenness of congressional testimony by IRS and Secret Service bureaucrats in their respective scandals, Peggy Noonan concludes that the only people in Washington who tell the truth these days are whistleblowers.
She’s right.
Director of National Intelligence James Clapper lied to Congress about NSA snooping on Americans. It fell to whistleblower Edward Snowden to tell us what the NSA was really up to.
A year and a half later Clapper is still the head of National Intelligence. Snowden is seeking asylum in the European Union.
“In the empire of lies,” says Ron Paul, “truth is treason.”
We’ve learned that our default assumption must be that except for whistleblowers, everybody else in Washington is liable to be engaged in the art of political flim-flammery.[amazon asin=1603864814&template=*lrc ad (right)]
When Senator Diane Feinstein accused the CIA of breaking into the computers of Senate staffers, CIA Director John Brennan denied it. “Nothing could be further from the truth,” he said.
Four months later the CIA Inspector General confirmed Feinstein’s charge. Brennan is still the head of the CIA.
Think about that. The executive branch, the CIA, spies on the legislative branch, Senate staffers, as they go about their legitimate oversight duties. And nothing happens.
So much for checks and balances and the separation of powers.
All of this generates public cynicism, says Noonan. “A nation can’t continue to be vibrant and healthy when the government controls more and more, and yet no one trusts a thing the government says.”
It’s a point that needs to be underscored for the world of finance. A sophisticated economy depends on information and thrives in a culture of mutual trust. When the state of economic affairs is concealed or contorted by the government, whether it’s the size of the deficit, the real state of unemployment, or artificially contrived interest rates, malinvestments results. Businesses waste precious resources in unsustainable projects. Individuals are misled about the resiliency of the economy, the vitality of specific sectors, and the prospects for their investments.
We are all made poorer as a result.
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Reprinted from Money and Markets with permission of the author.
