RadioRaheem84
15th July 2011, 22:18
http://media.lclark.edu/content/hart-landsberg/2011/07/12/the-deficit-battle/
Those who are eager to generate fears of such a crisis normally cite a different debt statistic, gross federal debt as a percentage of GDP. Gross federal debt is equal to the total federal debt held by the public plus the total federal debt the government owes to itself. Examples of the latter include Treasury debt held by the Federal Reserve and by the Social Security System. This gross federal debt figure has little to do with fiscal sustainability. In the words (http://www.cbo.gov/ftpdocs/121xx/doc12103/FederalDebt.pdf) of the Congressional Budget Office:
Gross federal debt is not a good indicator of the governments future obligations . . . those securities represent internal transactions of the government and thus have no direct effect on credit markets.
Unfortunately, our national debt ceiling is defined in terms of gross federal debt rather than the more appropriate total debt held by the public. At the same time, this understanding of the debt problem leads to a relatively simple solution to our current deficit battle.
It is true that our yearly federal deficits have grown large. For example, as Figure 1 (http://www.cbpp.org/cms/index.cfm?fa=view&id=3516) below shows, the deficit for fiscal year 2009 (October 2008 through September 2009) was $1.4 trillion, equal to 10% of GDP. However, Figure 1 also makes clear that our future deficits are best explained by three drivers: the economic crisis, the Bush-era tax cuts, and the wars in Afghanistan and Iraq. According (http://www.cbpp.org/cms/index.cfm?fa=view&id=3516) to the Center on Budget and Policy Priorities, these three drivers explain virtually the entire federal budget deficit over the next ten years. Said differently, our debt problems have little to do with runaway social programs. Rather they are caused by specific (tax and foreign) policies that can be reversed and an economic crisis that can only be overcome through public spending.
It seems as though, no matter what the outcome of the meetings are the situation for the US is to squash public social programs.
Those who are eager to generate fears of such a crisis normally cite a different debt statistic, gross federal debt as a percentage of GDP. Gross federal debt is equal to the total federal debt held by the public plus the total federal debt the government owes to itself. Examples of the latter include Treasury debt held by the Federal Reserve and by the Social Security System. This gross federal debt figure has little to do with fiscal sustainability. In the words (http://www.cbo.gov/ftpdocs/121xx/doc12103/FederalDebt.pdf) of the Congressional Budget Office:
Gross federal debt is not a good indicator of the governments future obligations . . . those securities represent internal transactions of the government and thus have no direct effect on credit markets.
Unfortunately, our national debt ceiling is defined in terms of gross federal debt rather than the more appropriate total debt held by the public. At the same time, this understanding of the debt problem leads to a relatively simple solution to our current deficit battle.
It is true that our yearly federal deficits have grown large. For example, as Figure 1 (http://www.cbpp.org/cms/index.cfm?fa=view&id=3516) below shows, the deficit for fiscal year 2009 (October 2008 through September 2009) was $1.4 trillion, equal to 10% of GDP. However, Figure 1 also makes clear that our future deficits are best explained by three drivers: the economic crisis, the Bush-era tax cuts, and the wars in Afghanistan and Iraq. According (http://www.cbpp.org/cms/index.cfm?fa=view&id=3516) to the Center on Budget and Policy Priorities, these three drivers explain virtually the entire federal budget deficit over the next ten years. Said differently, our debt problems have little to do with runaway social programs. Rather they are caused by specific (tax and foreign) policies that can be reversed and an economic crisis that can only be overcome through public spending.
It seems as though, no matter what the outcome of the meetings are the situation for the US is to squash public social programs.