Federal Deficits Are Worse Than You Think

Voters tend to be rationally ignorant. Since a single vote does not matter, for most potential voters the cost of being politically well informed is greater than the benefit of being knowledgeable about political affairs. Therefore it’s rational for most voters to be ignorant regarding political issues.

A main reason for the high cost of being well informed is that government officials may not want the public to be well informed. They purposefully conceal their schemes to reduce the opposition to their policies. A well informed body politic would be a threat to the welfare and warfare state.

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This obscurantism is on full display regarding the government budget.

Let’s start with the annual deficit. You may have noticed that the stated annual deficit is less than the increase in government debt. In order to explain this, consider a small scale example. Assume that you were $20,000 in debt at the beginning of 2017 and you earned $3000 and spent $4000 during the year. You borrowed $1000 to cover this spending so your total debt increased to $21,000. A sensible reading of this situation would be that you had a $1000 deficit in 2017 (multiply these numbers by a billion dollars to roughly approximate what is generally asserted to be the federal budget).

However, if you followed the federal government’s method, you would claim a deficit of, say, $600. According to the feds, the official deficit is less than the increase in total debt. How do they do this? Well, some of the borrowed money is simply not included in the deficit. For example, in fiscal year 2016, they claimed a deficit of $587 billion even though the total debt increased $1422 billion and the debt held by the public (the total debt less the intragovernmental debt) increased $1049 billion. They hide some of the deficit by simply declaring that some of the increased debt is not part of the deficit.

But this deception is of little consequence compared to the government’s claims about their spending habits.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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