The red-ink legacy

April 13, 2006

It’s impossible to say for sure without the benefit of hindsight, but as David [tag]Broder[/tag] explained today, one of the most important lasting legacies of the Bush years will no doubt be the astonishing debt he’ll leave behind.

The cover letter in the report from Treasury Secretary John Snow contains the bad news. Whereas the budget [tag]deficit[/tag] for fiscal 2005 was officially given as $319 billion, “the government’s accrual-based net operating cost . . . was $760 billion in 2005.”

That $760 billion is the real difference between the money the government received and the obligations it added in the past year — in other words, the unfunded costs being passed on to our children and grandchildren.

For years, the federal budget has been stated in cash terms, not the accrual accounting method, which [Rep. Jim Cooper (D-Tenn.)] said has been in use for five centuries and is now mandated for all private corporations. The difference, as he explained it, is this:

If you go to Target and buy an item for cash, it’s felt in your wallet immediately. If you buy the same item on a credit card, unless you are using accrual accounting, it is disguised until the bill arrives.

Broder asked David Walker, the head of the Government Accountability Office, official bookkeeper for Congress, about the prospects. Walker said [tag]Bush[/tag]’s [tag]tax cuts[/tag], if they’re made permanent as the White House would like, leads to circumstances in which “the system blows up.”

Walker added that digging out of this mess “will take 20 years.” How do we start? We can forget about making Bush’s tax cuts permanent and we can reestablish the “[tag]pay-go[/tag]” rule, which used to require tax cuts and spending increases be by budget savings or revenue increases, but which was eliminated in 2002. Of course, Bush and the GOP insist that the tax cuts have to be made permanent and refuse to reinstate “pay-go” rules.

In related news, the federal government spent $250 billion in March, the “all-time high for a single month.” The deficit for the month was $85.5 billion, “a record imbalance for March.”

I’m curious, does the phrase “fiscal conservative” even exist anymore? If so, doesn’t it better describe Democrats?

One of the things that has recently given me (slight) hope that the fiscal recklessness can become clear to average voters is the way that the reaction to the Dubai Ports deal was one-step removed from laying bare the consequences of that recklessness.

I always get confused about the idea of trade deficits, but that ports deal shows what can happen when American debt is owned by foreign nations whose interests may diverge from our own. Namely, foreigners buy up little chunks of ‘America’, piece by piece.

People just yawn when you talk about trade deficits, but get them to make the connection in their head that this current path will eventually lead to the Dubai Ports multiplied by a 100, and fiscal responsibility may become a politically winner. Once interest rates on US paper adjust upward and foreign debt holders start looking for hard assets to own, we’ll be reminded that there is no such thing as free money.

  • Bush came into office with a $5.6-Trillion surplus. In his first four years he flipped it from surplus to over $5.6-Trillion dollars of debt.

    If his tax cuts are made permanent, then by 2011 Bushco’s tax policies (the worst effects of which won’t become clear until well after Bush leaves office) that 2004 $5.6-trillion dollar deficit will MORE THAN DOUBLE to around $12-trillion dollars.

    Bushco has ruled over the single greatest transfer of wealth – from the poor to the rich – in the history of the world.

    Forget about fixing Social Security. By the time it is predicted to be in trouble Bushco will have succeeded in bankrupting the country.

  • inthehighlands is right–the Dubai situation showed exactly how our national debt gives our creditors a sense of entitlement as far as dictating to us. Sometimes the manifestations gets exposed, but one now has to wonder whether anything our government does is in fact done to promote America’s interests or its creditors. Or, are America’s interests now replaced with that of our creditors owing to our debt?

    As for the tax cuts, the corporations aren’t going to care if our country becomes insolvent and so pleas to be a little less greedy or a little more patriotic are going to fall on deaf ears. Notions of patriotism and the commonweal only get heard if one is trapped where one is and thus has an interest in defending the homeland. But the corporations are international now. They have offices and resources all over the globe–the locusts can go elsewhere. And leave us with the tab.

  • What got me the most was the fact that in one year, my wife, daughter and myself are being pegged with 3 x $156,000 of government debt and obligations, or $468,000 in one year. Needless to say, I don’t make that much in a year.

  • Posted nearly the same thing twenty minutes earlier. Great minds and such, I guess. At any rate, the Norquist brigade is on the march, starving the beast at a record pace. I am so damn tired of being in hock to the rest of the world.

  • I’m glad someone brought up the Dubai Ports deal (thanks inthehighlands).

    Has there been any update on which “American-based” company DubaiPorts World sold off the U.S. operations to??? Or did that follow-up by the press slip through the cracks too?

  • Maybe my back to the land instincts I nurtured back in the late 60s and early 70s were right after all. Homeland security?

    Bush … speeding us on down the road to apocalypse on the axils of evil.

  • inthehighlands had a good point – take it a step further by making a map that shows the US and has a part colored differently than the rest. The colored part would be based on how much money we borrowed from other countries mapped out by state to show how much money states are getting from the fed gov’t is really from China, Japan, whoever.

  • Good article today in Slate’s Moneybox column about how the American Jobs Creation Act has not created jobs but has resulted in a huge tax windfall for huge corporations. More like the American Deficit Creation Act.

  • It seems impossible to do as much damage to the country in such a short time as Bush and his buddies have done unless it is intentional. No one can be that consistently incompetent. “Grab as much as you can boys, we’re taking her down.” (Vote anti-republican).

  • What got me the most was the fact that in one year, my wife, daughter and myself are being pegged with 3 x $156,000 of government debt and obligations, or $468,000 in one year. Needless to say, I don’t make that much in a year.

    The math doesn’t add up. A 760 billion debt spread of 300 million people winds up being about $3500 per person. What I think the congressman was referring to was the entire debt. That is around 8 trillion, presumably by the cash accounting method. I have no idea how big it would be by accrual accounting.

    Reversing the math, to get $156,000 per capita debt would imply a total accrual accounting debt of around 45 trillion dollars. Since I have heard 44 trillion as the total debt (and wondered where that number came from), it seems reasonable, but only when considering the entire debt, not just 2005.

  • I think there’s also the distinction that needs to be made between trade and budget deficits, what Pete Peterson refers to as the twin deficits…The Carpetbagger was discussing the latter (I think), whereas it seems the trade deficit is something else entirely, economists correct me if I’m wrong. I’m only an over-educated construction worker.

    About this point:

    “As for the tax cuts, the corporations aren’t going to care if our country becomes insolvent…”

    I agree with this in a sense, and think that with the structure of the tax cuts, much of the seriously wealthy entreprenurial class has made arrangements for its capital to be out of US dollars should the shit hit the fan (capital flight anyone? bank runs?), at which point it would be well poised to return to the country as a blunt capital instrument that can take advantage of the economic malaise, excess of labor supply, and uncertainty in order to achieve profits regardless of the plight of the average American.

    This is the problem with the unbalanced tax cuts, they weaken the fiscal position of the US making it more likely that native capital will seek less risk elsewhere, and do not require any obligation of the wealthy to keep that money in country. It can leave to Switzerland or the Caymans, then return as the blunt instrument, and I don’t reckon it/they will be too concerned about the struggles of average people as our standards of living fall…it’s all built into the structure of the problem.

  • Thanks Shargash,

    WaPo really needs to be clearer about their numbers.

    Okay, so the total debts and obligations from the Federal Government for my wife, my daughter and myself is $468,000, or more then my 401k, my IRAs, my equity in my house, and a couple of years of my salary. In short, because of Bush and his friends on the hill, I now own NOTHING.

    Thanks a whole lot, you twit Republicanites.

  • “Fiscal conservatism” now means tax giveaways to the already obscenely wealthy and screw everybody else.

    The only thing which really matters to those on the Right these days is “social conservatism”, i.e., bigotry — most notably against gays, blacks, hispanics, and pregnant women, but also against women generally, intellectuals, “foreigners” and a host of other talented, compassionate and Christ-like people.

  • Might as well add that the borrowing from other nations, as concordcoalition.org and others have pointed out, cannot continue indefinitely, because of demographic trends in some of out large lenders. Japan and European nations are going to need to divert some of this lending homeward once the aging populations start to drag on their budgets, reducing the pool of cash that will be available to invest in greenbacks.

    Also, surely this cannot be correct:

    “Bush came into office with a $5.6-Trillion surplus. In his first four years he flipped it from surplus to over $5.6-Trillion dollars of debt.”

    Off the top of my head, this seems way wrong, I thought the national debt clock was somewhere between 3 and 5 trillion when Clinton left office, and budget surpluses were around 100 billion a year or so, no?

    Anyway sorry for jumping into the forums all of the sudden, and hello the everyone by the way, but I just love the issue of the deficits for the Dems the cycle and thought I’d mention what I’ve been thinking of lately.

  • Two words: Liquidation Sale

    How much can we get if we sell off one of them Nimitz-class aircraft carriers?
    Or the federal lands out west?
    Hawaii?

  • inthehighlands- The surplus number was a 10 year projection of the US fiscal situation, based on the tax structure during Clinton’s last year in office (trillions in surplus that could pay down the national debt in advance of the Boomers retiring).
    My thoughts are that the current projected 3.5 trillion deficit amount is too small.

  • Hi inthehighlands–
    “Buy low and sell high”–I forgot to think about the long-term impact of US insolvency. Just speculating, but if the US economy is overvalued, then forcing US insolvency (and the whole shebang to crash) and getting one’s capital out ahead of the shitstorm would be a good wa to make a killing later.

    Good stuff! Even if it sucks for those of us w/o capital…

  • Oh,
    My point was to speculate that maybe this is a conscious plan on the part of corporations, rather than just dogmatic recklessness on the Bush Administration’s part. Under the “buy low and sell high” principle, wrecking the US economy would be a huge benefit for the GOP’s corporate masters.

    Your own tinfoil conspiracy quotient may vary…

  • Two more words: Eminent Domain.

    We might legally take back all the properties, mangy hides, and other conceivable assets of the BushCo profiteers, and transform them for the economic redevelopment of the United States. Think of it as financial responsibility—with attitude….

  • “Also, surely this cannot be correct: ‘Bush came into office with a $5.6-Trillion surplus. In his first four years he flipped it from surplus to over $5.6-Trillion dollars of debt.’ ” – inthehighlands

    When Bush came into office in 2001, the expectation was surpluses until the baby boomers retired.

    In one year, Bush reversed that, and has since run up deficits as far as the eye can see. His deficits are systemic. No matter how much his friends invest in America, he is not getting back the revenue he lost. Not to mention that the economic growth of the last five years could all be do to deficit spending, which does juice the economy.

    So I think that is what they mean over at WaPo.

  • Bushit under a banner that read “Mission Accomplished” said the tide is turning in Iraq since then, more than 2,360 Americans killed…insurgency in its “last throes”. …”Mission (Un)Accomplished” … A 3 year, $6.8 billion a month bait and switch invasion policy of Iraq, poorly planned, clumsy strategy, unwinnable failure and now an unending quagmire/civil war with disastrous consequences…75% of Americans feel Dumbya went into the Iraq war without a clear plan…Dumbya wanted war, but just didn’t want the war he got.… chief architects of the war in Iraq – President dumbya, VP Deadeye Dick and Defense Secretary Donald H. Dumbsfeld are three blind mice…political tin ears… growing chorus of conservatives and neo-con men now arguing the Iraq war is a failure and it’s time for the US to get out quick …$400 billion cost of the war in Iraq…close to $1 trillion in estimated total costs… dumba a wastrel who squanders a vast sum of the nation’s wealth…incompetence at its best!

  • my ‘conservative’ father in law now believes that deficits don’t matter. he said the Clinton surplus was an accounting trick and didn’t really exist. Of course the man is a ditto monkey and for some reason believes every word that comes out of that junkies mouth.

    • Comments are closed.