What's the real Federal Deficit? | Hacker News Reader

What's the real Federal Deficit?

usatoday.com

26 pointssmanek17 comments

I'm curious why no one is asking if this is hacker related news? An article like this seems very similar to the article posted about Obama winning the Democratic nomination and that posting received a significant amount of criticism.

Is it that the effort expended ranting in the comments of the Obama article has exhausted you? Is it that you haven't seen this news covered by as many news sources? Or, do you genuinely find this information different than that of Obama's nomination?

To be perfectly honest, the primary reason I posted this was that I found it interesting. It's just fun to know how things really are - even if there is no direct applicability to my current circumstances. I didn't see this covered much in the mainstream news, so I posted it here in the hopes others would also find it interesting.

For a more tangible reason, I'd say it's important for would be entrepreneurs to understand the state of the US (and world) economy. The fact is that America is borrowing vast sums of money, which is going to have a direct impact on us.

In the short term, it's likely to increase inflation, telling us that maybe we shouldn't be hording cash right now (and maybe it's a good time to borrow money ;-)). In the long run, it may deepen the credit crunch and cut many consumer's effective discretionary spending power.

But mostly I just posted it cause I found it interesting ;-)

I gave up caring.

It seems there's some sort of irresistable force that compels people to post articles about the government or the man. I suppose it appeals to this sort of audience, there's always the comment afterwards that "well I found it interesting" and enough people agree.

In the end anyone who doesn't care for this sort of thing becomes the minority and moves elsewhere. It's like an inevitable cycle.

This information is "different than that of Obama's nomination". It is about how numbers can be misleading. In this case, the government is holding corporations to a higher standard than they hold themselves. They are obscuring the truth about the deficit by using a different method of accounting.

I don't really think it is hacker related news, though.

I think it's interesting because most hackers also like math. This article is about people who obviously suck at math and/or are complete liars.

Further, most of the folks here are probably above-average in productivity. They should care that their extra efforts are being blown away by politicians. Sure, you can read the linked article anywhere, but you will probably have a more intelligent discussion here about what to do about it, or if it even matters to those you may consider your peers.

I'm more tolerant of this than usual descents into politics and general news because:

(1) it's not expressly political/partisan

(2) it's not transient 'news of the day'/horse-race frivolity -- it's about an underlying trend of many decades

(3) it's not been widely covered -- you can't turn on any cable news station and get this repeated every 1/2 hour (like politicking updates)

(4) it's something not many people realize, and yet is relevant to the long-term financial stability of the startup environment and the US/world as a whole

(5) as others note, it involves playing with numbers and organizational/systemic standards, which are somewhat hacker/startup related

Hackers have always tended to be interested in the affairs of our government, at least in my observation. At the very least, it's nice to have a heads up that America may be a bit late paying the rent next month. ;-)

> "Congress has written its own accounting rules — which would be illegal for a corporation to use"

It stupid to treat a Federal Government (of any nation with it's own sovereign currency) like a business when it comes to accounting. The nature of being the entity that creates a lot of the money (in the form of Treasury bills, banks create the rest via loans) means that doing this type of single entry accounting just doesn't make sense. Unfortunately this kind of article plays great for USA Today, where anything that terrifies the readership is great for business, like any other mass media outlet.

To see what I am talking about, check out this peice.[1] I'll even quote the relevant part:

> "When government spends and runs deficits, it credits private bank accounts more than it debits them, thereby increasing the savings of [dollar denominated] US financial assets of the non-government sector. In fact, non-government savings [...] can only increase if the government runs deficits, and they increase by that exact amount. The reverse is true of surpluses. Government surpluses necessarily reduce non-government savings by that exact amount as well.

Therefore, the projection of a $5.6 trillion government surplus a few years back was also in fact necessarily projecting a $5.6 trillion drop in non government savings! For all practical purposes, this was a ludicrous projection, as there is no way private savings can be reduced by that amount without virtually eliminating everyone's retirement accounts and in the process eliminating private spending, employment, and income."

[1] http://www.cfeps.org/pubs/sr/sr0402/sr0402.html

The rest of the policy proposals and case studies: http://www.cfeps.org/pubs

By definition, running government surpluses means sucking more money out of the economy in tax revenue than it puts back in. At first this would be done by buying back all those treasury bills that make up the debt, taking trillions of savings away from private holders of said bills. Then, with nothing else to do with the excess tax revenue, the government would have to start buying assets, which would remove said assets from the private market, effectively sapping wealth from the private sector. In the end, all assets would be owned by the government. Of course, there isn't any real danger of this actually happening, but I'm trying to point out that the government will never get it's act together or be profitable like a business like so many people seem to desire. It just doesn't work that way.

What matters is that the government has enough tax revenue to pay interest on the money it creates (treasury bills), which it does. In fact, interest payments as a percentage of tax revenue are at the lowest point in the last 15 years.

On the other hand, I totally agree with the guy from Harvard:

> "Accounting matters, the deficit number affects how politicians act."

If it takes a big scary (and meaningless) number like the National Debt to keep them from going hog wild on the pork, then so be it I guess.

As for Social Security and Medicare: http://www.cfeps.org/pubs/sr/sr0501/sr0501.html

USA fiscal policy is to adjust taxes to match spending, not adjust spending to reflect taxes.

The only problem is that when they raise taxes they do not have the Laffer Curve in mind. I won't explain it because there are better explanations out there.

It's also amazing how few people understand the difference between deficit and debt.

I'm still unclear about the difference between defecit and deficit.

heh, good catch. I freely admit spelling isn't one of my strengths.

The deficit is the annual shortfall...it is the amount added to the national debt in a given year, and that debt is the total amount owed.

I used to teach at a college, and a lot of my students didn't realize that. Just yesterday I was talking with a vendor, and somehow the talk (mostly his) turned to politics, and he didn't realize it. I think if articles like the one here explained it, more people would have the chance to understand that we're behind that much more every year, and the accumulation now is startling.

No wonder they can't control spending - no one is being honest about how excessive the spending actually is!

I hope Obama can help clean up this mess..

Does the new spending that he has proposed exceed the cuts that he's proposed plus the expected revenue from any tax increases? (He's on record supporting a rate increase that he admits leads to lower revenues.)

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