President Barack Obama told a news conference at the end of the G20 conference in Toronto that all nations have agreed to cut their deficits in half by 2013. So I asked myself:
What is the difference between the public debt and the deficit?
According to treasurydirect.gov The deficit is the difference between the money Government takes in, called receipts, and what the Government spends, called outlays, each year. Receipts include the money the Government takes in from income, excise and social insurance taxes as well as fees and other income. Outlays include all Federal spending including social security and Medicare benefits along with all other spending ranging from medical research to interest payments on the debt. When there is a deficit, Treasury must borrow the money needed for the government to pay its bills.
We borrow the money by selling Treasury securities like T-bills, notes, Treasury Inflation-Protected securities and savings bonds to the public. Additionally, the Government Trust Funds are required by law to invest accumulated surpluses in Treasury securities. The Treasury securities issued to the public and to the Government Trust Funds (intragovernmental holdings) then become part of the total debt.
The current federal debt is $13 Trillion. The deficit for fiscal year 2009, which ended Sept. 30, 2009 came in at a record $1.42 trillion, more than triple the record set in 2008. The administration projects a shortfall of $1.6 trillion in the fiscal year that ends in September 2010. The president’s immediate solution is to reduce domestic discretionary spending. CNN reports that such spending amounts to 2% of the budget. The government is about to ask for another $33 Billion for the Afghan War. Republican lawmakers — joined by Democrat Ben Nelson of Nebraska — maintained a unified front to sustain a filibuster of the $110-billion bill for the extension of unemployment benefits. The vote was 57 to 41; the majority was three short of the 60 needed to cut off debate and bring the bill to a final vote. Enough Republicans will probably switch their votes next week to pass this bill.
Where will the spending cuts come from? Perhaps it will be a fairy godmother that solves this dilemma. Perhaps they won’t happen at all except in our dreams.
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