Inartful Use of Data Clouds Real Budget Problems
“The U.S. government is set to borrow nearly $1 trillion this year, an 84 percent jump from last year,” blared a recent headline in the Washington Post. The source of the “exact figures” cited in the piece is a report from the U.S. Department of the Treasury. Many casual readers would understandably think the piece was talking about budget deficits, but it is not. Instead these points relate to “net marketable borrowing” estimates. Budget deficits are indeed rising, and the long-term fiscal trajectory has serious problems, but the alarmist framing of the article and its failure to make clearer the distinction between budget deficits and the metric is discusses only clouds the issue.
The topline point in the article centers on the fact that a new Treasury report shows that the government will borrow $955 this fiscal year, up 84 percent from last year and the highest amount in six years. Looking at the document in question helps shed some clarifying light on what is in the report.
Source: U.S. Department of the Treasury, “Treasury Presentation to TBAC,” p. 12.
As mentioned above, the $955 billion figure is an estimate related to “net marketable borrowing,” which is different from the budget deficit, which has its own estimates in that same table.
While most of the article is more a failure to make clear the distinction between the two measures, some sections appear to conflate the two: “The Committee for a Responsible Federal Budget predicts the U.S. deficit will hit $1 trillion by 2019 and stay there for a while. The latest borrowing figure — $955 billion — released this week was determined from a survey of bond market participants, who tend to be even faster to react to the changing policy landscape and change their forecasts.” The reference to the CRFB alludes to their estimate of budget deficits, while the $955 billion figure is a separate and distinct metric.
The $955 billion figure is based on a survey of 23 primary bond dealers, and is far from an official government estimate, as noted by Alan Reynolds of the Cato Institute. Furthermore, as the Treasury report explicitly mentions in the same table, the net marketable borrowing amount for FY 2018 is artificially higher due to the restoration of the extraordinary measures used by the department related to the debt ceiling showdown in 2017.
The Congressional Budget Office reported that the federal government ran a budget deficit of $668 billion in fiscal year 2017, itself a 14 percent over fiscal year 2016. The Committee for a Responsible Federal Budget projects that the budget deficit for 2018 will be $730 billion, or as much as $820 billion when other factors such as sequestration and disaster relief are accounted for.
Despite the framing of the piece that makes reference to it being President Trump’s “first full year in charge of the budget,” at least through the first quarter of the fiscal year it was not the case that a suddenly newfound profligacy is at play. B
This is not to say that concerns about the return of trillion dollar deficits are misplaced. Setting aside the merits of the tax reform bill, it will result in revenues being between $10 and $15 billion less per month than expected, starting in February. The broad budget deal reached by Senate leaders would further exacerbate the problem. According to reports, the deal would significantly increase the discretionary spending caps by about $300 billion over the next two years, and also include a disaster aid package that could add more spending. The related package of offsetting budget savings would only cover about a third of the proposed spending increases, and some critics contend that only a portion of these offsets are really savings instead of budget gimmicks.
Meanwhile, neither party has shown an appetite for reforming the major entitlement programs that are the main drivers of the long-term debt.
News outlets, Axios being just one example, picking up the Washington Post piece attributed the increase in net marketable borrowing to the tax reform, and also neglected to make clear that it was not talking about the more commonly referenced budget deficits. Other pieces, in referencing the Washington Post article, reference the $955 billion figure as being a budget deficit when that is not the case. If news outlets and writers much more well-versed in budget issues and related terms can misconstrue the claims in the article, casual readers could very plausibly do the same.
Problems with the country’s fiscal trajectory can and should be debated, especially with the news of a spending deal which could load on hundreds of billions in additional spending. However, it is not the case the Treasury Department estimated that budget deficits would be almost $1 trillion this year, and using vague language or confusing data points is counterproductive and introduces more opportunities for misperceptions surrounding the issue.
Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on Twitter @CharlesHHughes.
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