[Buckaroo]

The U.S. Government: Another $1.9 Trillion in Debt

http://seekingalpha.com/article/1836...illion-in-debt

Does Congress have a clue what they are doing? Images of what 2 trillion dollars (1 trillion in each photo) looks like.

Those are double stacked pallets of $100 bills and the little blip on the left hand side is a guy standing next to the money.

What does one TRILLION dollars look like?

[turtle777]

Could somebody please stop those greedy retards from ruining our country ?

-t

[SpaceMonkey]

We can't even be sure that the $1.9 trillion figure will be accurate. Unfortunately, the area of the U.S. government that is the biggest year-over-year budgetary disaster in terms of linking actual programs and outcomes to costs and accurately understanding its budgetary footprint, the Defense Department, is not one that either Republicans or Democrats are eager to vilify, so we get continual punting on relatively simple matters like Medicare.

[Big Mac]

So you're claiming the budget charts are wrong and that Defense spending actually exceeds Entitlements? Source?

[SpaceMonkey]

No. I'm claiming that defense spending is more poorly understood than entitlements, and, in contrast to entitlements, is nearly impossible to predict on a year-to-year basis, and impossible to account for on a year-to-year basis (unless you have about 10 years of hindsight). It one of the biggest drivers of unforeseen variability in year-to-year deficits. Reforming the defense budgeting process would be incredibly productive for the fiscal responsibility of this country. But rather than wade into an area none of them understand, Congress finds it politically convenient to haggle over comparably easy problems like entitlements, which, theoretically, rational people should find some compromise on (we need to raise taxes by X and cut benefits by Y).

[Chuckit]

I think he's claiming that the Department of Defense is unpredictable and has horrible accounting practices, with tons of money mysteriously vanishing into black holes, so it's hard to say exactly how much they're going to end up bleeding us for.

[ghporter]

With the way Congress micromanages DoD's funding, I think it's amazing anyone gets fed on a military base. Or has toilet paper. Seriously, Congress won't let a base commander move funding from an "executive furniture" line item to something useless like "operations and maintenance" line items. Honestly. DoD can be expensive-you try paying somewhere over 8 million salaries, plus providing things for them to work with and places for them to do that work-but the accounting practices that are the worst actually belong to Congress.

[SpaceMonkey]

Originally Posted by ghporter 

With the way Congress micromanages DoD's funding, I think it's amazing anyone gets fed on a military base. Or has toilet paper. Seriously, Congress won't let a base commander move funding from an "executive furniture" line item to something useless like "operations and maintenance" line items. Honestly. DoD can be expensive-you try paying somewhere over 8 million salaries, plus providing things for them to work with and places for them to do that work-but the accounting practices that are the worst actually belong to Congress.

What you're saying is true, and I think it actually speaks to my point. Congress insists on reviewing costs on a defense-wide basis for only one year into the future, reinforcing what has been the practice within the Executive Branch of reviewing spending largely by input category (military personnel, operations and maintenance, procurement, R&D, construction, etc.) with no real linkages to strategy, plans and programs. DoD's accounting, strictly speaking, is fine, but its budget planning and evaluation process is somewhat archaic, maintaining separation between comptroller functions, programming, and systems analysis. DoD manages tens of thousands of line item categories without any ability to break them down by command or mission. Consequently it is difficult if not impossible to tie most defense spending data to the ability to execute a given strategy or force plan, meaning that Executive Branch planning and Congressional oversight of the defense budget at the level of public policy is largely useless. The bulk of the defense budgeting process basically consists of trying to compensate for past over- or under-spending in different categories.

[ghporter]

Originally Posted by SpaceMonkey 

What you're saying is true, and I think it actually speaks to my point. Congress insists on reviewing costs on a defense-wide basis for only one year into the future, reinforcing what has been the practice within the Executive Branch of reviewing spending largely by input category (military personnel, operations and maintenance, procurement, R&D, construction, etc.) with no real linkages to strategy, plans and programs. DoD's accounting, strictly speaking, is fine, but its budget planning and evaluation process is somewhat archaic, maintaining separation between comptroller functions, programming, and systems analysis. DoD manages tens of thousands of line item categories without any ability to break them down by command or mission. Consequently it is difficult if not impossible to tie most defense spending data to the ability to execute a given strategy or force plan, meaning that Executive Branch planning and Congressional oversight of the defense budget at the level of public policy is largely useless. The bulk of the defense budgeting process basically consists of trying to compensate for past over- or under-spending in different categories.

Unlike most parts of the federal government, DoD only fairly recently was required to produce a budget. Up until the late 1960s, DoD and/or the individual services would request funds for specific operations, weapon systems and other needs, which Congress would either fund or not fund. In the mid 1980s, Congress got pissy and asserted control over every dollar all the way from allowing it to go to the department to how it was ultimately spent, which is when the "I have to spend $20k on stupid furniture when I don't have funds to buy toilet paper for the barracks" (this is not something I made up) dilemma occurs. So we have a federal department made up of several other federal departments that are very history and tradition-driven, with no history or tradition of budgeting. When you factor in the "anti-bean-counter" practice of having to spend ALL of one's funds in the fiscal year to avoid having next year's budget cut by the amount you didn't spend, and you wind up with a psychotic episode. Or just really poor planning skills.

And it is frankly impossible to predict military operations and maintenance costs on an annual basis. Nobody knows what sort of threat or other special mission will come up tomorrow, so how can you budget for it? You certainly can't put "just in case" projections into a budget request and expect them to be funded-or even to have your overall request not rejected out of hand.

The biggest flaw in the DoD budgeting system is treating DoD like a business. Use of military force is an inherently wasteful thing. One does not employ troops and equipment with the expectation that they will come back with everything they left with; it is often far more militarily effective to sacrifice equipment (and unfortunately sometimes lives) to protect the majority of one's personnel. Those multimillion dollar tanks and airplanes are supposed to be disposable. We managed to win in WWII because we were ready and willing to abandon equipment on a moment's notice in order to take military advantage of situations that popped up. Forcing commanders to think about how they're going to provide the hardware for tomorrow's actions using the current budget hamstrings them on the field. It's psychotic.

[SpaceMonkey]

Originally Posted by ghporter 

Unlike most parts of the federal government, DoD only fairly recently was required to produce a budget. Up until the late 1960s, DoD and/or the individual services would request funds for specific operations, weapon systems and other needs, which Congress would either fund or not fund. In the mid 1980s, Congress got pissy and asserted control over every dollar all the way from allowing it to go to the department to how it was ultimately spent, which is when the "I have to spend $20k on stupid furniture when I don't have funds to buy toilet paper for the barracks" (this is not something I made up) dilemma occurs. So we have a federal department made up of several other federal departments that are very history and tradition-driven, with no history or tradition of budgeting. When you factor in the "anti-bean-counter" practice of having to spend ALL of one's funds in the fiscal year to avoid having next year's budget cut by the amount you didn't spend, and you wind up with a psychotic episode. Or just really poor planning skills.

And it is frankly impossible to predict military operations and maintenance costs on an annual basis. Nobody knows what sort of threat or other special mission will come up tomorrow, so how can you budget for it? You certainly can't put "just in case" projections into a budget request and expect them to be funded-or even to have your overall request not rejected out of hand.

The biggest flaw in the DoD budgeting system is treating DoD like a business. Use of military force is an inherently wasteful thing. One does not employ troops and equipment with the expectation that they will come back with everything they left with; it is often far more militarily effective to sacrifice equipment (and unfortunately sometimes lives) to protect the majority of one's personnel. Those multimillion dollar tanks and airplanes are supposed to be disposable. We managed to win in WWII because we were ready and willing to abandon equipment on a moment's notice in order to take military advantage of situations that popped up. Forcing commanders to think about how they're going to provide the hardware for tomorrow's actions using the current budget hamstrings them on the field. It's psychotic.

Exactly. What I was trying to say is that a lot of this is mismanagement on Congress' part in terms of the information it demands from DoD, which has no incentive to give Congress anything more than what they ask for. To your point about it being "frankly impossible to predict military operations and maintenance costs on an annual basis" -- I'm not just talking about new, unexpected threats throwing the budget off. That's a rational need for supplemental spending bills. But at present, even aspects that should be able to be predicted in advance, like new procurement plans, are routinely underfunded, causing DoD to defer spending in other areas (like maintenance), or to play with the annual flow of spending so the costs don't appear on the current year's outlays, or even slip them further back beyond the period of the "Five Year Defense Plan" so that when the next FYDP comes along (often under the tenure of a new president), the spending becomes a sunk cost that is politically difficult to remove. Hence my comment about the defense budgeting process really being one of compensating for past over- or under-spending in different categories, and not based enough on an informed evaluation of program or force strength needs.

[CreepDogg]

Originally Posted by Big Mac 

So you're claiming the budget charts are wrong and that Defense spending actually exceeds Entitlements? Source?

Do we have to do this again? Once again, unless you choose to be more specific about which 'Entitlements' you refer to, I'll assume it's Social Security and Medicare.

Yes, they are driving spending. But, let's not forget that they're also driving revenue in the form of FICA taxes. If you take away the spending, you also have to take away the corresponding revenue.

In the most recent fiscal year, SS ran a $179B surplus, and Medicare a $5B deficit.

Social Security 2009 Annual Report Summary

So, take away 'Entitlements', and the deficit gets worse by $174B. Something else must be driving the $1.9T.

[Big Mac]

What about the federal employee benefits Entitlements, which are even worse than the public Entitlements?

Whatever you may say about the short-term budgetary impact of Entitlements, it's undeniably that their unfunded liabilities are the primary driver of the National Debt. Do you dispute that?

[CreepDogg]

Originally Posted by Big Mac 

What about the federal employee benefits Entitlements, which are even worse than the public Entitlements?

Whatever you may say about the short-term budgetary impact of Entitlements, it's undeniably that their unfunded liabilities are the primary driver of the National Debt. Do you dispute that?

Yes. Unfunded liabilities are not included in year-over-year budget. It measures income and outgo, and the deficit (and cumulative debt) is measured off that. The $1.9T number does not include said unfunded liabilities.

Unfunded liabilities are a measure of what might happen, and are not included in the budget. That said, I agree that unfunded liabilities are a problem and have to be addressed in the management of those programs (which, yes, means the difficult choices of either cutting benefits or raising revenue to meet them). But that is a different issue than what is driving the current $1.9T debt.

[Big Mac]

It's not a different issue at all. The expansion of the national debt is driven largely by unfunded Entitlement obligations, and the $1.9 Trillion expansion of the debt ceiling they're asking is being added to the $12+ Trillion currently recognized.

[CreepDogg]

Originally Posted by Big Mac 

It's not a different issue at all. The expansion of the national debt is driven largely by unfunded Entitlement obligations.

Um, evidence?

The unfunded liability of SS and Medicare is NOT included in the $1.9T number. The liability is for benefits that are NOT currently due and payable, and could be changed at any time.

I am not arguing that it's good practice to promise benefits that can't be delivered, but I am arguing that said promises are not included in the budget, or the current debt figures.

If you have an issue with the way SS and Medicare are administered, fine. But, if you're looking for what's driving the $1.9T deficit, you're going to need to look elsewhere.

[Big Mac]

File:Estimated ownership of treasury securities by year.gif - Wikipedia, the free encyclopedia

US Government ownership of debt is by far the largest chunk of the national debt. Government held debt has accounted for greater than 50% of the national debt every year since 1999 through 2008. And all the reports I can find state that the vast majority of that debt is from one program in particular: Social Security. Social Security may be in surplus for now in comparison to what it currently has to pay out immediately, but the rest of the funds get spent by the Treasury and shortfall in Social Security gets added to the national debt. It is the single biggest contributor to the national debt, so I'm sorry but you're wrong. Very wrong. Farking FDR's Socialist brainchild is killing this country. Add in the escalating debt service costs from the enormous Socialist fueled debt we have and we're hurtling toward national bankruptcy.

I accept your apology in advance for arrogantly assuming you had a better grasp on the subject.

[CreepDogg]

Originally Posted by Big Mac 

File:Estimated ownership of treasury securities by year.gif - Wikipedia, the free encyclopedia

US Government ownership of debt is by far the largest chunk of the national debt. Government held debt has accounted for greater than 50% of the national debt every year since 1999 through 2008. And all the reports I can find state that the vast majority of that debt is from one program in particular: Social Security. Social Security may be in surplus for now in comparison to what it currently has to pay out immediately, but the rest of the funds get spent by the Treasury and shortfall in Social Security gets added to the national debt. It is the single biggest contributor to the national debt, so I'm sorry but you're wrong. Very wrong. Farking FDR's Socialist brainchild is killing this country. Add in the escalating debt service costs from the enormous Socialist fueled debt we have and we're hurtling toward national bankruptcy.

I accept your apology in advance for arrogantly assuming you had a better grasp on the subject.

That's pretty funny, and I'm not sure which is larger - your arrogance or your cluelessness.

First, let's look at the graph you posted. That says NOTHING, ZERO, NADA about the contribution of SS to treasury holdings, or the national debt. It shows the various levels of ownership in treasury securities. I'm VERY curious to hear your explanation of how this is relevant to this discussion.

OK - now to the argument. How could Social Security be the 'single largest contributor to the national debt' if it's currently running a surplus? The only way that even comes close to making sense is if you look at the spending, but ignore the revenue. Are you proposing we abolish Social Security, but keep the taxes that are currently being paid? Good luck with that.

So, you linked to Wikipedia for your irrelevant data. That page actually links back to a page which talks about the national debt, so let's see what it says about unfunded liabilities...

Originally Posted by Wikipedia

Unfunded obligations

The U.S. government is committed under current law to mandatory payments for programs such as Medicare, Medicaid and Social Security. The GAO projects that payouts for these programs will significantly exceed tax revenues over the next 75 years. The Medicare Part A (hospital insurance) payouts already exceed program tax revenues and Social Security payroll taxes fully cover payouts only until 2017. These deficits require funding from other tax sources or borrowing. The present value of these deficits or unfunded obligations is an estimated $41 trillion. This is the amount that would have to be set aside during 2008 such that the principal and interest would pay for the unfunded commitments through 2082. Approximately $7 trillion relates to Social Security, while $34 trillion relates to Medicare and Medicaid. In other words, health care programs are nearly five times as serious a funding challenge as Social Security. Adding this to the national debt during September 2008 of nearly $10 trillion and other federal commitments brings the total obligations to nearly $53 trillion.
The Congressional Budget Office (CBO) has indicated that: "Future growth in spending per beneficiary for Medicare and Medicaid—the federal government’s major health care programs—will be the most important determinant of long-term trends in federal spending. Changing those programs in ways that reduce the growth of costs—which will be difficult, in part because of the complexity of health policy choices—is ultimately the nation’s central long-term challenge in setting federal fiscal policy."

So, once again, unfunded liabilities are NOT included in the current deficit/debt figures. The debt would be MUCH HIGHER if they were included.

And, once again, I am NOT disputing that the unfunded liabilities are a problem that need to be managed. I AM disputing the conclusion that it is contributing to the current reported deficit/debt.

You don't like entitlement programs. I get it. Fine. You're entitled (ha!) to your opinion. But you're being fiscally irresponsible if you blindly assume they are the primary contributor to our current fiscal issues. Fortunately, this is something we can actually observe, and it's not true just because you believe it to be so.

Oh, and I accept your apology in advance for underestimating my grasp on the subject.

[Big Mac]

You simply don't get it, and I don't care to waste much more of my time trying to explain it to you. I'm not talking just about unfunded liabilities. I'm talking about the so-called Social Security "trust fund" that takes bonds for the money it loses to the Treasury spending its surplus. Social Security encourages profligate spending by making federal deficits appear smaller than they truly are, balloons the national debt by taking bonds in exchange for the surplus dollars that get spent after current beneficiaries get paid, and as a result it increases debt service costs. If you don't think Social Security's unfunded liabilities are included in the national debt, then you're not in touch with reality. You're wrong, just plain wrong. Medicare and Medicaid are bigger long term problems, but since they're not accounted for like Social Security, it's Social Security that is the driver of the debt. But believe whatever you wish to believe - this is my last response to you on the subject.

[CreepDogg]

Originally Posted by Big Mac 

You simply don't get it, and I don't care to waste my time trying to explain it to you. Believe whatever you wish to believe.

Whatever. I'm happy to let other readers decide who 'gets it'. I'm the one posting facts and logic, and you're the one insisting only on what you believe. All I can say is I'm glad you're not in charge of the budget.

EDIT: Response to edited response.

I'm talking about the so-called Social Security "trust fund" that takes bonds for the money it loses to the Treasury spending its surplus.

Which makes my case. Right now, if you take away Social Security (once again, including the revenue!), you take away the ability to raid its current surplus. Overall deficit gets bigger.

If you don't think Social Security's unfunded liabilities are included in the national debt, you're not in touch with reality.

I've been working in retirement plans, including how they integrate with Social Security and how actuaries value them, for 20 years. I think I know a little bit about accounting for unfunded liabilities. I'm happy to let others decide who they think is in touch with reality.

[Chongo]

Finally, some sort of sanity out of the White House, but..... will Obama's 3 year "spending freeze" that he will propose in his State of the Union Address, be call a 3 year "spending cut" by the MSM if it were proposed by Dubya? Remember, according to the MSM, a smaller increase over last year's budget than proposed by a (D) is a cut. A spending freeze should be "slashing" the budget.

[Big Mac]

250 Billion saved over 10 years is a drop in the bucket when we're running $1-2 Trillion deficits per year. It's all a joke.

[CreepDogg]

I should point out for others' benefit that unfunded liability, while it needs to be managed, is not as scary as it sounds. It does not account for expected future tax collections (or future benefit promises, for that matter).

It basically says, 'If we were to completely shut down the program today (i.e. stop collecting taxes, and stop promising new benefits), how much money would we have to set aside to cover all the benefits we've already promised?'

This is a useful construct for private pensions because they, by and large, have to cover their unfunded liability. Social Security, however, is a 'pay-as-you-go' system that, by definition, had an unfunded liability on day one. Social Security, by design, can withstand an unfunded liability. What it cannot withstand is a perpetually growing unfunded liability, so it needs to be managed properly based on incomes, outflows, and appropriate demographic assumptions.

Debt figures do not include this unfunded liability precisely because SS is 'pay as you go' and the liability doesn't account for expected future revenues. In private pensions, expected future plan revenues are zero (the only income is contributions from the plan sponsor, which are assumed to be zero unless the sponsor has a liability to cover).

[finboy]

Originally Posted by Chongo 

Finally, some sort of sanity out of the White House, but..... will Obama's 3 year "spending freeze" that he will propose in his State of the Union Address, be call a 3 year "spending cut" by the MSM if it were proposed by Dubya? Remember, according to the MSM, a smaller increase over last year's budget than proposed by a (D) is a cut. A spending freeze should be "slashing" the budget.

Correct-amundo.

When will we start seeing the CNN profiles of the families left homeless by the spending freeze? Will they get a free house built for them on TV? What about profiles in the Color Supplements in NYT/WashPo over the weekend?

The best part of all this is the backlash against corporate media. Those guys deserve whatever they get -- they're the propaganda arm of the progressives.

[ctt1wbw]

Originally Posted by Chuckit 

I think he's claiming that the Department of Defense is unpredictable and has horrible accounting practices, with tons of money mysteriously vanishing into black holes, so it's hard to say exactly how much they're going to end up bleeding us for.

Where do you think the funding for Area 51 comes from? I bet that money is so lost behind different accounting practices that it is untraceable.

[olePigeon]

The problem with most (if not all) Federal funding is outdated contract policies.

[Doofy]

Asset Protection BLOG - Mark Nestmann: DOJ/IRS: "We're Just Getting Started in Offshore Crackdown"

I just returned from a conference in San Antonio sponsored by the American Bar Association's Section on Taxation. I attended this conference to learn more about plans the Department of Justice (DOJ) and the IRS have going forward in their anti-offshore vendetta, and how the financial institutions and nations affected by it are likely to react.

...

Hundreds of billions of dollars in foreign investments are fleeing the United States. Several attendees in San Antonio told me they represent offshore banks that are pulling their clients' money out of the United States. While offshore banks make a good income by managing non-U.S. clients' money in U.S. stocks, the compliance cost of doing so has become overwhelming. Again, FATCAT (H.R. 4213) will exacerbate this exodus. The implications for U.S. stocks—and the U.S. dollar—are ominous.

Originally Posted by Barry

We're going to close tax havens down.

As you sow, so shall you reap.

[CRASH HARDDRIVE]

Meh.

Not that there's not some truth in any of that, but on first glance I thought to myself it sounds a lot like the bleating of Swiss bankers who long ago bent over and grabbed their ankles and took themselves completely out of the offshore game, trying to cast all other tax havens in the same negative light. "Hey! Those other guys are as bad as we are too!"

Then I saw: "I also heard a presentation from Thierry Boitelle, a tax partner with the Altenburger law firm in Geneva, Switzerland."

Yup.

Again, not that there's not some truth in it, but basically don't trust a Swiss banker to give you an accurate account of the actual state of the entire offshore banking industry. No one with any real financial sense has used a Swiss bank to shelter money since the 1970's, yet there still are real offshores that do still do their best to protect their clients' money from the broke, greedbag governments back home. Not that Obama et al don't want to try and put a stop to it- it still doesn't mean they can.

[Doofy]

You'd better go have another look at the offshore world, Crash. A lot of them won't take US clients any more and a lot of them are taking their non-US clients' money out of the US. Of course, nobody with any sense banks in CH (unless they're shielding themselves via some kind of trust/shell), but it ain't just CH which is pulling US investments.

[hyteckit]

What does $2.3 trillion dollars look like?

The War On Waste - CBS Evening News - CBS News

More money for the Pentagon, CBS News Correspondent Vince Gonzales reports, while its own auditors admit the military cannot account for 25 percent of what it spends.

"According to some estimates we cannot track $2.3 trillion in transactions," Rumsfeld admitted.

[Snow-i]

Originally Posted by hyteckit 

What does $2.3 trillion dollars look like?

The War On Waste - CBS Evening News - CBS News

January 2002? Nice article!

[hyteckit]

Originally Posted by Snow-i 

January 2002? Nice article!

Yeah, Jan 2002. By now, there's maybe $4 trillion not accounted for.

[SpaceMonkey]

Oh, almost forgot, obligatory: