Explainer: The Deficit vs. the Debt
Vince Bucci
In light of the release of President Obama's 2012 budget proposal, Hotsheet figured it's as good a time as any to explain the difference between two words that often get confused in economic discussions: deficit and debt.
Put simply, the deficit is the amount that the government's spending exceeds its revenues -- the amount it takes in -- in a given year. Let's say the United States takes in $10 billion in a particular year, but it spends $15 billion. The deficit for that year is thus $5 billion. (The actual figures are, of course, far larger - the budget deficit in fiscal year 2010 was $1.29 trillion.)
The debt, meanwhile, is what you get when you add up all these yearly deficits - it's the total amount that America owes. Each year's budget deficit, then, adds to the total debt figure, which is currently more than $14 trillion.
In his proposal out Monday, President Obama proposed to cut deficits by $1.1 trillion over ten years. But even if that happens, America will still be running a yearly deficit - and thus will keep adding to its debt. The only way that America can reduce its debt is to run budget surpluses - that is, to take in more money than it spends each year.
Here's one way to think of it: Reducing the budget deficit is sort of like plugging a leak on a boat -- but only partially. Sure, there's less water coming in. But the boat is still sinking.
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In 2008, 52,000 to 55,000 Americans have Swiss bank accounts.
Exxon made 29 billion last year-paid $0.00 in taxes and got a 153 million refund.
Farmers get 15 billion a year to not grow crops--but fruits and vegetables will have a 60-300% increase this week.
The military budget in 2000 was 359 billion---now it is 969 billion a year.
We pay to keep 52,000 troops in Japan---65 years after the war ended.
These are all good places to start BEFORE we get to other cuts.
Fact #1: Taxes are at the lowest point since Harry Truman was president. Taxes have gone down every year under Obama - lower than when Bush was president. Tax-cuts, not off-set by spending cuts, and dramatic increases in military / war spending, have driven the debt sky-high since two years into the Bush presidency.
Fact #2: We spend more on our military / industrial complex than the next 14 countries combined. Nearly one trillion per year when you factor in military outlays, war costs, and various and sundry other "security" costs (i.e. homeland security, CIA,etc.). We simply cannot sustain this spending, much of which goes to fraudulent / bloated defense contracts. This serves merely as corporate welfare to politically connected companies. Crony capitalism to be honest.
Fact#3: The largest programs - Social Security and Medicare - go to the elderly. Nobody really wants to talk about this. The Republicans blow smoke about nickels and dimes (wasteful govt. spending) but never address the elephant in the room. Neither of these programs are means-tested, so wealthy seniors rake in bennies. Much of the Medicare money serves as a corporate give-away, just like defense. Look at the killing that Big Pharm makes off of government subsidized drug sales.
Want to talk about debt and deficits? Talk honest about taxes, defense, war, and senior entitlements or go home. All else is simply smoke-n-mirrors.
REPEAL OF THE HEALTH CARE LAW: May 2010 CBO figures state that the stupid health care law will cost the federal government $1 trillion in NEW spending over the first 10 years. If left in place it will bankrupt the federal government and the states - and push health care costs higher for the majority of Americans. Nothing is free.
FORGET THE $53 BILLION IN NEW SPENDING FOR A HIGH SPEED RAIL SYSTEM. AMTRAK lost $1.3 billion last year because Americans don't really want to ride trains. 80 years ago this country had a massive passenger rail system, which was abandoned for the car. This is not Europe.
NO MORE AUTOMATIC INCREASES BUILT INTO FEDERAL PROGRAMS AND AGENCIES: We don't have the money to continue to expand federal programs (especially without forcing each to justify why it is needed - and there must be exceptional cause for expansion).
Then we must do away with federal programs which are not really needed. The federal Department of Education educates no one, as states run the school systems. Leave this duty to the states and get rid of the federal Department of Education. We have 100s of TV and radio stations, so there is absolutely no justification to continue federal funding of NPR and PBS. Look for ways to trim federal agencies by attrition. As federal employees retire, evaluate whether a rehire should be made. Fannie Mae and Freddy Mac have proved to be incompetent and hogs of public funding. Send them to the private sector to stand or fall on their on merit.
CUT FEDERAL WASTE: Many authors have pinned books on government waste - leaders in Washington should begin reading those books and looking for ways to cut waste. These authors have done the exploratory work for them already. This includes evaluating whether or not we need all of the US military bases in other countries, and whether we need the troop levels there. If it is not needed for national security, then it should be on the table.
2) They do not need to cut Social Security and Medicare, they need to cut the 40-45% of it that is fraud. That would make it less expensive without all the fraud.
3) There is so much money going to over countries to keep them propped up so they don't collapse, Egypt is one example. We need to stop this. If those countries can't make it on their own, then what are we going to do if we go bankrupt?
4) The Federal government, the officials, federal employees need jobs cut or paychecks cut down by at least 15-20% or so. Federal government has gotten so big and so over priced it's also killing us budget wise. If they are unwilling to cut jobs, then cut those paychecks.