2006-09-15 03:12:11 UTC
D.C.'s Deficit Math Doesn't Add Up
By Allan Sloan
Next month the White House and its congressional allies will be taking
victory laps when the deficit for fiscal 2006 is announced.
The stated deficit for the year, which ends Sept. 30, will be $260
billion or so.
That will be down $58 billion from 2005 and a whopping $77 billion
below what the nonpartisan Congressional Budget Office predicted in
The White House says this is happening largely because tax revenues
have surged--which they have.
It sure sounds great.
But let me share a dirty little secret with you:
the real federal deficit isn't $260 billion.
It's more than double that.
And when you calculate what I consider the real deficit--hold on to
your hats, it's $558 billion--you come out with slightly more than
last year's real deficit, which I put at $551 billion.
Revenue surge, shmevenue surge.
Things are getting worse, not better.
To be sure, that $558 billion is better than the $635 billion implied
by January's CBO numbers.
But it's nothing to crow about, considering that not long from now,
baby boomers will begin to retire en masse and put huge pressure on
We know that numbers in Washington tend to be big and sometimes murky.
But how can the official deficit be only $260 billion while mine is
Am I taking strange pills?
Drinking funny water?
It's the difference between Washington Math--the unique way that the
federal government accounts for itself--and real-world math.
Here's the deal.
The stated deficit is the difference between the cash that the
government takes in and the cash it spends.
That's $260 billion--the number most analysts use to measure the
But Uncle Sam will also borrow almost $300 billion from federal trust
$177 billion from Social Security, and an additional $121 billion from
"other government accounts" such as federal-employee pension funds.
Some $78 billion of this total comes from the Treasury's taking Social
Security's cash surplus this year and spending it.
Most of the rest comes from the government's paying what it owes the
trust funds--primarily for interest on their $3.6 trillion of Treasury
securities--with I.O.U.s, not cash.
(All my numbers, by the way, are based on public budget documents.)
If a company tried to keep books this way, its accountants would
scream faster than you can say Sarbanes-Oxley.
But we're playing by the rules of Washington Math.