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I want clarification on surplus vs deficit

 
 
Reply Wed 17 Sep, 2008 11:12 am
So I was listening to NPR on my way to get lunch and I once again heard what I consider a fallacy about the deficit and Clinton's surplus...

My understanding of this (and I freely admit that could be wrong) is that as a country, we have a huge deficit. 5 trillion dollars now I believe. The guy ( a liberal discussing the latest financial happenings, I know I was surprised by that too.. a liberal on NPR, go figure) and he said how we went from a surplus to now having a 5 trillion dollar deficit.

Now, my understanding was that Clinton had indeed had a budget surplus, but that it did not really make a dent in the deficit. Am I all wet on this? Do I have this all wrong? Does that mean the deficit was not only zero but was actually positive?! I have a real hard time believing that.

discuss.
 
FreeDuck
 
  4  
Reply Wed 17 Sep, 2008 11:16 am
@McGentrix,
I think both surplus and deficit have to do with the budget. Maybe you're thinking deficit vs. national debt?
ebrown p
 
  2  
Reply Wed 17 Sep, 2008 12:03 pm
@FreeDuck,
A surplus simply means that for that year, we took in more money than we spent.

The Clinton surplus lowered the national debt. The Bush deficits made the debt higher.
cicerone imposter
 
  1  
Reply Wed 17 Sep, 2008 12:04 pm
@McGentrix,
McG, What we usually hear is the annual surplus or deficit; they're all cumulative. A surplus does't necessarily mean that the federal deficit is in the green, and it also doesn't mean that a deficit is necessarily bad. It's the level of the cumulative deficit that is bad when it's in relation to the GDP.
0 Replies
 
FreeDuck
 
  1  
Reply Wed 17 Sep, 2008 12:06 pm
@ebrown p,
Is that second part actually true? While I agree that deficit increases our debt, if the surplus is spent on things other than debt payments, it doesn't lower our debt.
0 Replies
 
McGentrix
 
  4  
Reply Wed 17 Sep, 2008 12:07 pm
I appreciate the replies, but doesn't it seem disingenuous to compare a yearly budget surplus to the national deficit? It seems to apples to oranges to me.
FreeDuck
 
  2  
Reply Wed 17 Sep, 2008 12:08 pm
@McGentrix,
That's what I meant when I said you might be confusing deficit with debt.
0 Replies
 
Cycloptichorn
 
  2  
Reply Wed 17 Sep, 2008 12:15 pm
@McGentrix,
McGentrix wrote:

I appreciate the replies, but doesn't it seem disingenuous to compare a yearly budget surplus to the national deficit? It seems to apples to oranges to me.


You are confusing Deficit with Debt.

Clinton ran surpluses his last few years (with a lot of help from the Republican congress) and was in fact paying down some of the debt.

We have about 9 trillion in debt, and that doesn't count the bail-outs this year, which have added another 900 billion onto that. When Bush took office, we were 5.5-6 trillion dollars in debt. The national debt has gone up by over half while he was in office. This is unprecedented.

This year, we are running a 400 billion dollar deficit, and once again that's not counting the Iraq war and several other outlays. It's likely that we will have more then 10 trillion dollars in official debt by the time the next prez takes office, and that's a sad testament to the Bush era.

here -

http://zfacts.com/metaPage/lib/brillig-deflate-national-debt.gif

This graph only goes up to 2005, but you can imagine that it's spiked much, much higher since then.

Cycloptichorn
Ramafuchs
 
  1  
Reply Wed 17 Sep, 2008 05:37 pm
@FreeDuck,
A budget deficit occurs when an entity (often a government) spends more money than it takes in. The opposite of a budget deficit is a budget surplus. Debt is essentially an accumulated flow of deficits. In other words, a deficit is a flow and debt is a stock.

An accumulated deficit over several years (or centuries) is referred to as the government debt. Government debt is usually financed by borrowing, although if a government's debt is denominated in its own currency it can print new currency to pay debts. Monetizing debts, however, can cause rapid inflation if done on a large scale. Governments can also sell assets to pay off debt. Most governments finance their debts by issuing long-term government bonds or shorter term notes and bills. Many governments use auctions to sell government bonds.

Governments usually must pay interest on what they have borrowed. Governments reduce debt when their revenues exceed their current expenditures and interest costs. Otherwise, government debt increases, requiring the issue of new government bonds or other means of financing debt, such as asset sales.

According to Keynesian economic theories, running a fiscal deficit and increasing government debt can stimulate economic activity when a country's output (GDP) is below its potential output. When an economy is running near or at its potential level of output, fiscal deficits can cause inflation.
http://en.wikipedia.org/wiki/Deficit
cicerone imposter
 
  2  
Reply Thu 18 Sep, 2008 10:43 am
@Ramafuchs,
As can be seen by Cyclo's chart, Bush has increased the debt never seen before in US history - and still increasing as we speak, and he's a "conservative" who believes in "small government." ROFL

And as they "rescue" all those banks and finance companies, that debt is going to fly over the charts.
Cycloptichorn
 
  2  
Reply Thu 18 Sep, 2008 10:45 am
@cicerone imposter,
It's almost 10 trillion now, 3 years later. So imagine another three bars on top of that graph; that's how high it's risen.

Cycloptichorn
parados
 
  1  
Reply Thu 18 Sep, 2008 12:01 pm
Surplus and deficit are for the year.
Debt is cumulative money we owe.

People often confuse debt and deficit. They aren't the same thing.

The US can run a surplus and still add to the debt which it did during the Clinton years. The surplus then reduced the publicly held debt but the debt itself went up because the debt included money owed to government trust funds like SS.

Example
The government takes in $3 from SS and $5 from other sources. It pays out $2.5 in SS and $5.25 for other items. The government took in $8 and only paid out $7.75 so it had a surplus but the debt still went up by .25 because they borrowed that .25 from SS.
0 Replies
 
parados
 
  2  
Reply Thu 18 Sep, 2008 12:06 pm
@Cycloptichorn,
I wondered how your chart could show a debt that went down but then realized that it is inflation adjusted.

In real dollars the total debt didn't go down under Clinton. The amount held by the public did go down.
parados
 
  2  
Reply Thu 18 Sep, 2008 12:08 pm
@McGentrix,
deficit ONLY refers to the year.

Debt is the correct term to use when talking about all the money the government has borrowed over the years.
Cycloptichorn
 
  1  
Reply Thu 18 Sep, 2008 12:25 pm
@parados,
parados wrote:

I wondered how your chart could show a debt that went down but then realized that it is inflation adjusted.

In real dollars the total debt didn't go down under Clinton. The amount held by the public did go down.


Yup. Damn that inflation adjustment!!

Cycloptichorn
0 Replies
 
Ramafuchs
 
  0  
Reply Sat 20 Sep, 2008 12:53 pm
@Cycloptichorn,
I am of the opinion that A2K is a forum to educate others and thereby enthuse the new members get entangled in discussion.
I am not in favour of the regular customers/ members who wish to score a point or two to make this forum a wretched boaring forum..
This subject should normally arrest the other#s view( 373 people are on line now)
0 Replies
 
Robo
 
  1  
Reply Mon 22 Sep, 2008 11:03 pm
@McGentrix,
Not exactly sure about a REAL number as to surplus or negative value. Under Clinton the budget was passed for a specific amount of money to spend. The budget was INFLATED and accepted. That administration during that term did not spend it all. Therefore a surplus was reported. Not that the funds were even there but the number remaining is reported as a surplus. (Funny money. We are a debtor nation). Then the new administration comes aboard and a new budget. The surplus is eaten up (numbers) and into the new budget. That is why congress always seems to go home without doing anything. It is all a numbers game and we are still into debt. Go to Google and type in "Who is the Federal Reserve" and read until your eyes close. It is all for public reporting. In my house I either have the cash in pocket or I have to go to the bank and borrowed thus incurring debt and interest payments. If I don't have, I don't buy. Simple. Dollar in dollar out. Just a game for public eyes I think. Just my opinion !! Go to Google.
0 Replies
 
cicerone imposter
 
  1  
Reply Mon 22 Sep, 2008 11:19 pm
@parados,
parados, The whole game of borrowing, bonds, and money have now been changed. The $700 billion will not have anything to back it up except us taxpayers. Nobody in their right mind will buy those bonds, because what they already own will depreciate in value as soon as that $700 billion beings to flow into our economy. Our government is playing magician now; no interest payments on that money.

What's the value of monopoly money when you produce more of it and there's nothing to back it up, and no interest payments accrue on it? Is that a catch-22 or just an interesting dilemma?
0 Replies
 
 

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