What Does It Mean?

"When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.' – Humpty Dumpty, Through the Looking Glass by Lewis Carroll

All this time I thought we were living, well, on earth. Apparently, I was wrong. I thought that when the President and Congress said that they were going to reduce the debt, they meant they would make it smaller. That is how my several dictionaries define ‘reduce,’ to make something smaller. At least, that is what it says on this side of the mirror. But, apparently Washington DC is not on this side of the mirror. Instead, we have something else again.

Let me explain.

As of a week ago, the US had an official debt of $14.3 trillion dollars. Some very ‘clever’ economists in Washington had forecasted that by 2021 that debt would grow to some $26.4 trillion. Let’s be clear, this is over the next ten years – it hasn’t happened yet – it’s in the future. Then, a great many people stood around and argued for several weeks and by the time all was said and done, they said they had reduced the debt by more than $2 trillion.

What had they done? Well, in fact, what they had done is to reduce that number – the $26.4 trillion – to $24.3 trillion.

That’s what just happened. Our government (they work for us, not the other way around) – took in about $2.3 trillion in revenue last year and spent $3.7 trillion, a $1.4 trillion difference. That difference, and the debt from previous administrations stretching back into the mists of time, now total $14.3 trillion. The rational mind would suggest that this has to stop, and soon. But our government doesn’t quite see it that way. In fact, the current Congressional Budget Office (CBO) forecast yearly revenues to rise to $5 trillion by 2021, but yearly expenses to rise to $5.7 trillion that same year, this before the big ‘deal’ of the past weekend. Now, the White House proudly tells us that they have reduced the debt by $2.1 trillion, reducing NOT the $14.3 trillion, but reducing the total deficit expected to accumulate by 2021 to $24.3 trillion from the previous estimate of $26.4 trillion – a “reduction” of $2.1 trillion. We are going to continue to add debt at a rate of roughly $1 trillion per year, down from $1.2 trillion per year and we are supposed to thank the folks in Washington and celebrate their hard work. This is as sound fiscally as rewarding a child who promises not to overspend as much next year as this year.

Will Rogers once observed that: “When a dog gets a bone, he doesn’t go out and make a down-payment on a bigger bone, he buries the one he’s got.” Our elected representatives in Washington, led by the President, clearly have considerably less sense then the average dog. Anyone who can define a $10 trillion debt increase over the next ten years, as opposed to a $12 trillion increase, as a ‘reduction,’ is either a snake-oil salesman of the highest order - or stupid. Either way, they shouldn’t be in office and neither should their aides and henchmen.

For those of you who want to read on, here is the problem in relative terms: Let’s pretend you have $143,000 in debt. The bank is a bit concerned because last year you only managed to bring home $23,000 and yet you spent $36,000. (If these numbers look vaguely familiar, they should; multiply each 100 million and they are the relevant numbers for the US Government – our government.) The Bank sends around an accountant and financial planner and they ask to see your financial plans for the next ten years. You pull out your books and show them that by 2021 you intend to be bringing in about $50,000 a year and spending $57,000 a year, by which time your debt will have risen to ‘only’ $264,000. The accountant and the financial planner beat their breasts and say that doom is upon you. You struggle for weeks.

In the end, you develop a plan that trims your spending from $57,000 per year to roughly $53,000 per year by 2021, and your total debt to $243,000. In other words, your spending, currently at $36,000 per year, will only increase $1700 per year rather than $2100 dollars per year, while your income will increase $2700 per year. You all celebrate.

Huh?

“If Stupidity got us into this mess, then why can't it get us out?” Will Rogers