Lies, Lies and More (Government) Lies
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 who have yet to master simple addition and subtraction.
The government’s Fiscal Year 2014 ended a week ago, on Sept. 30. On Oct. 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.”
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 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 Sept. 30, 2013, and Sept. 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.
– More at MoneyandMarkets.com