The debt and the deficit: Where are we really?
Unbelievably, President Biden stated last month in his State of the Union address that the deficit has decreased. Here's what Biden said:
In the last two years, my administration has cut the deficit by more than $1.7 trillion — the largest deficit reduction in American history.
Wow! This is excellent news that the federal government is in better shape. But is it? I thought the debt clock just continues to increase, now over $31 trillion. How can that be?
Is it possible that Biden is motivated to make things sound better than they really are, and the "fact-checkers" are motivated to confirm what he said? Something has got to give, since the debt keeps climbing.
Maybe the difference is that the U.S. debt is different from the deficit. However, the debt is just cumulative deficits, plus interest. How could the deficit go down but the debt go up? The answer is verbiage.
What Biden is actually saying is that the annual deficit decreased, but there is still a deficit adding to the cumulative debt. The debt still went up by $1.4 trillion in 2022 due to the deficit, a record number other than during the pandemic and 2008:
So we shouldn't rejoice that the government spent less than when it handed out checks during the pandemic, yet continued to outspend revenue in 2022 and added to federal debt more than in 19 out of the past 22 years. It's one thing to put numbers into perspective so that they're better understood, but it's another when making them sound positive when they're actually negative.
Here's a more accurate restatement of what President Biden said: "In the last two years, my administration has cut the increase in the debt by more than $1.7 trillion — the largest reduction in the debt increase in American history."
Here's the detail: the federal deficit "reduced" from $3.1 trillion in 2020 to $1.4 trillion in 2022. This is like saying a company's losses went from $3.1 million to $1.4 million, and thus it improved by $1.7 million. But it still lost $1.4 million!
What's the right context? The national debt has reached $31.4 trillion, most of which has been incurred due to deficits under recent presidents:
These numbers have been used to imply various successes and failures of the presidents in charge during their terms. Of course, there are many people involved beyond just the president, not to mention the impacts of the COVID shutdown, the 2008 recession, the War on Terror, and even the fact that a given year's deficit may be "baked in" due to prior decisions of other presidents.
So we've heard how Washington's debt has reached new levels, where the debt has increased more in 10 years than it had in the previous 200. Context is everything, and putting numbers in proper context is vital to understanding the billions and trillions. Without context, one could conclude such ridiculous things as "Well, I didn't spend as much as the last president" or "Well, I decreased the deficit."
But how the current administration can spin poor numbers to somehow sound positive is simply amazing and should be discounted.
Rich Yurkowitz, Healthcare Actuary and Author of Medicare For All — Really?!
Image: US Gov.