Tuesday, July 31, 2007

Did ya' hear the one about the budget deficit?

When I was a little boy (when I was just a boy)
And the Devil would call my name (when I was just a boy)
I'd say "Now who do, (who-oo)
Who do you think you're fooling?" (when I was just a boy)
Paul Simon - Loves me like a rock

As a card carrying member of the "reality based" community I don't believe that one can transform a turd into a rose by calling it such. The only thing, in my view, which would flow from a successful (i.e. getting everyone to refer to turds as roses) propaganda effort is the loss of meaning of the word "rose."

Or as Shakespeare put it in Romeo and Juliet;

What's in a name? that which we call a rose
By any other name would smell as sweet;

Equally, a turd called a rose, would smell as nasty.

Yet, it seems government officials don't read much Shakespeare, (or notice the different smells which roses and turds emit) for they think, by having the word "inflation" refer to other things than it used, different effects will flow from rising prices, or by having the phrase "budget deficit" refer to different things, different effects will flow from its rise.

I'll bet that any time you find yourself listening to a Republican vs. Democratic pundits' debate (boy do I miss SNL's Point-CounterPoint....Jane you...) on the deficit you'll hear two whoppers; 1) that Bush inherited a large surplus from Clinton 2) that Bush is halving the deficit this year.

Let's see if the left mouth knows what the right hand has been counting, to stretch a cliche, and go to the US Treasury's Debt to the Penny site.

Year Debt Deficit
1996 5224
1997 5413 189
1998 5526 113
1999 5656 130
2000 5674 18
2001 5807 133
2002 6228 421
2003 6783 555
2004 7379 596
2005 7933 554
2006 8507 574
2007 *8919 *412
*Debt and deficit as of Jul 27, 2007

As you can see, there was no surplus during the Clinton years, every fiscal year ended in deficit (albeit a quite small one in 2000) and there is no way that the deficit in 2007 will be half what it was in 2004, even if he says it is so.

It strikes me as quite comical to read this in the FT but a few weeks ago: Issuing a mid-year update of the budget outlook, the White House estimated that the deficit would drop to $205bn (€149bn, £101bn) by the end of September, lower than the previous projection of $244bn made in February and then to see Henry Paulson going to Congress hat in hand this week to ask that the Debt limit be raised again, especially when one considers that it was last raised in Mar 2006 by US$781B.

Obviously deficits ain't what they used to be. The FT can report a "deficit" of $205B expected by the end of the fiscal year in September, meanwhile the Treasury site tells us that the change in the debt over the year (what used to be a deficit) is already $412B.

By the way, don't step in the dog rose over there.