War spending and deficits

June 7, 2007

 

Myth busting is fun (so much so I made it a category).

I’ve read numerous times on blogs (the most recently remembered here) and comments on blogs that our spending on the wars in Iraq and Afghanistan are paid for by supplemental bills and are “off-budget” and are thus not included in the deficit that the government reports at the end of every fiscal year. This is wrong. All spending, no matter the source (on-budget or off-budget) is included.

I think the confusion stems from terminology (it’s government after all; they don’t make anything easy). Most people call the money in/money out of the federal government a “budget” surplus/deficit. They then assume that if something is “off-budget” or “supplemental” (to the budget) that the money spent is somehow not recorded as spent.

You can make the point that future estimates (budgets) don’t include a reasonable amount for costs because the spending is supplemental (off-budget), but every single cent that has been spent to date is included in the deficit.

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2 Responses to “War spending and deficits”

  1. jess Says:

    I haven’t read any blogs that say the GWOT funding is not included in the deficit, but I can forgive the confusion. We already have two deficits, on budget (unified) and off-budget, and its no surprise the ‘official’ deficit used by the administration is the lower one, the on-budget deficit, which really does not include fiscal obligations. Namely, the hundreds of billions stolen from the social security surplus to subsidize the rest of the government, including, I would imagine, GWOT. If we were acting responsibility the off-budget deficit would be the standard, but sadly it is not.

  2. John in IL Says:

    Hi Jess, first of all, thanks for stopping by and commenting. I started this blog thinking that no one would read it, more for my personal entertainment (I get bored). It’s nice to have some company.

    Regarding your comment.

    The on-budget deficit is the deficit without the current SS surplus (off-budget) included. It is the higher amount. The unified budget deficit, not the on-budget deficit, nets the two.

    I think that the unified budget number is an important number because it determines the actual amount of money that is borrowed from outside the government. This is the part of the debt on which we have to pay actual interest with cold hard cash. When social security starts going negative, the unified budget will be the higher deficit.

    Also, you could only consider spending the surplus of SS revenue “stealing” (I’ve read that many times too, along with “borrowing from the trust fund”) if you also consider the SS trust fund to be a complete fiction. That’s fine, many people do. But you then can’t say that Social Security will be totally funded by the trust fund until sometime in the middle of this century.


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