Wednesday, May 30, 2007

Perspective on the Federal Budget Deficit

Friend and fellow blogger John Hutchenson, relying on an article that appeared yesterday in USA Today, gives President Bush a "thumbs down" based on the President's management of the federal budget. Using accounting methods that include incurred future liabilities, USA Today says that the federal deficit exceeded $1 trillion last year.

The President, and the previously Republican Congress, deserve criticism for their fiscal mismanagement; however, Mr. Hutchenson then errs, or at least goes too far, in contrasting the Bush record with that of President Bill Clinton.

Of course, as Mr. Hutchenson says, the federal government ran a surplus during the Clinton years, and while Mr. Hutchenson and I may disagree as to the extent to which the President or the congressional leadership of that era deserve the credit for that, it must be agreed that Mr. Clinton merits praise for those surpluses that were achieved during his years. However, it must be added that the Clinton surpluses, like those of the Bush administration, relied on excess Social Security funds, and that reliance accounts for much of the accounting "gimmickry" that Mr. Hutchenson deplores. The accounting methods used during the Clinton years were like those used in the current administation in that they did not take into account incurred future liabilities. In fact, no administration will do that, because the liabilities created under current Social Security and Medicare programs could not be sustained under any accounting that would require that current receipts be set aside in order to fund promises currently made.

While the Bush administration deserves criticism for its lack of fiscal discipline, discretionary spending does not account for the type of deficit that USA Today discusses. Those problems are structural and systemic. They desperately require attention, but one doubts that any administration will really attempt to tackle them.


Anonymous john h said...

Hey MCO - your point about SSN 'gimmickry' is well taken. My major point was that the so-called party of business (I really don't agree with that, but perceptions being reality and all that) should do a better job telling the truth about the economy and the deficit.

Of course..any chance to rub Clinton into the argument is fun for me!

Hey..haven't seen you in a while..I'd love to rectify that.

9:07 AM  

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