by Lee Ann Obringer
October 2004The Issue
The federal deficit is the difference between what the government takes in from taxes and other revenues in a single year and the amount of money the government spends. The national debt is the total amount of money that the government owes, which comes from adding the up the deficits and budget surpluses (if any) for the past 200 or more years.
To explain it with a personal example, if each month you spend $500 more than you earn, then each month you have a deficit of $500 and have to borrow money to pay it off. If this keeps up for a year, at the end of the year your debt is $6,000, and the amount you've borrowed to pay off that debt has grown along with it. Unless you earn enough to pay off the loan, eventually it takes all of your money just to pay the loan's interest, and you have to file bankruptcy.
Every year since 1969, the U.S. Congress has spent more than it has taken in, meaning the Treasury has had to borrow money. Currently, the federal debt totals approximately $7.3 trillion. This number isn't really comprehensible to most people, so let's try to put it in perspective. One way to do that is to just type it out rather than spell it -- $7,300,000,000,000. Given a population of 294 million in the U.S., it would take a payment of $24,830 by every individual to retire this debt. If we instead asked only the residents of Virginia (population a little over 7.3 million) to pay it off, each person would have to fork over one million dollars.
At the moment, however, the U.S. is moving in the opposite direction. Current projections for the government fiscal year (FY) 2004 (October 1, 2003 through September 30, 2004) are that the national debt will increase by approximately $430 billion. That figure would be the highest on record, topping the deficit of $375 billion in FY '03. A significant contributor to the deficits in both years is the interest the government pays on this debt: approximately $318 billion in FY '03, and likely more than $360 billion in FY '04. The entire FY '04 budgets for NASA and the Departments of Interior, Energy, Justice, Homeland Security, Housing & Urban Affairs, Transportation, Labor, Education, and Agriculture together total $378 billion, about the same as the interest payment on the national debt.
In theory, this should put a significant damper on spending by the federal government, but in practice it has not. There are varying opinions as to why that is, and as to whether that is a good thing or a bad thing. But, one thing on which everyone agrees is that it obviously cannot go on forever. At some point, the debt has to be paid down, or the credit rating of the federal government will deteriorate so much that no one will buy savings bonds, Treasury bills, etc., which is one way the government gets the money to pay off debt.
At the moment, there is also growing concern in some quarters about how much of this debt is being purchased by foreign governments, and whether having other nations as our creditors is a dangerous thing.
According the Alan Greenspan, chairman of the Federal Reserve, "... the federal budget deficit will pose serious long-term fiscal difficulties unless it is addressed soon."Badnarik: Position and Record
by Ed Grabianowski
Badnarik strongly opposes deficit spending. He supports a constitutional amendment that would force Congress to balance the budget each year; but failing that, he thinks the president needs to veto any budget that involves deficit spending. If he were elected president, he would do just that.
Badnarik's other solution is to return the American dollar to a gold or silver standard. Although doing so is probably not possible, and most economists would say the results would be disastrous, Badnarik thinks it would prevent Congress from creating "money out of thin air."
Since Badnarik has never held a public office, he has no voting record on this issue.Bush: Position and Record
- Bush's proposed budget drops the ratio of total federal spending to the Gross Domestic Product (GDP) to 16 percent, meaning that the federal budget would be 16 percent of the nation's GDP.
- Bush's budget plan also seeks to pay off $2 trillion of the national debt over the next 10 years.
During George Bush's presidency, the federal budget deficit hit a record high. According to the Office of Management and Budget, his $2.4 trillion budget for the next fiscal year (starting in October 2004) will leave the government $521 billion in the red.
According to FactCheck.org, discretionary spending has risen over the past three years by 36 percent. While 20 percent of the increase was due to military spending and homeland security, that still leaves a 16 percent increase in funding for other discretionary programs. This spending has increased twice as fast as it did under Clinton.Kerry: Position and Record
John Kerry says he will cut the deficit by 50 percent during his first four years in office, while also lowering taxes for 98 percent of Americans. He says he will not propose new spending plans without also having determined how we'll be paying for them -- the "pay as you go" budget process. To fund health care and education plans that are estimated to cost $853 billion over a 10-year period, Kerry plans to:
- Restore the top two federal income tax rates that were in effect under President Clinton
- Restore tax rates on capital gains and dividends on annual incomes of over $200,000
- Restore the federal estate tax, but add higher exemptions of $2 million for an individual and $10 million for a family-owned business or farm
In 1985, Kerry was an early supporter of what is now the Gramm-Rudman-Hollings amendment, which was designed to cut chronic federal deficits by setting spending levels and enforcing mandatory across-the-board cuts when necessary.
Other senate voting records include:
- Kerry voted against $1 trillion in tax cuts, including the repeal of the estate tax during the 107th Congress in 2001-2002, and voted for authorizing President Bush to send U.S. troops to Iraq.
- In 2000, Kerry voted no on an amendment to increase the amount of the budget that would be used to reduce the national debt by $75 billion over five years. The debt reduction would be offset by reducing the tax cut in the budget framework from $150 billion.
- In 1997, Kerry voted no on the GOP budget, which would cut spending and taxes.
- Also in 1997, Kerry voted no on the balanced-budget constitutional amendment, which required a balanced budget.
Nader states that the priorities of the federal budget need to be shifted to areas like infrastructure, transit and public works, schools, clinics, libraries, forests, parks, sustainable energy and pollution controls. He has set forth no specific plan regarding spending or reducing the federal deficit.
Because Ralph Nader has never held a public office, he has no political record regarding the federal deficit.
- U.S. Treasury Dept: FAQs: Financial Markets
- U.S. Treasury Dept: Financial Management Service
- Frequently Asked Questions (FAQ) about the Debt
- National Debt Awareness Center
- Budget of the United States Government: Historical Tables Fiscal Year 2004
- Reagan Policies Gave Green Light to Red Ink, The Washington Post, by Jonathan Weisman, Washington Post Staff Writer, Wednesday, June 9, 2004
- MSNBC: Kerry plan echoes 'Clintonomics' era