Re: Projections in the State of the Union address

Ron Kean (
Fri, 22 Jan 1999 17:35:26 -0500

On Fri, 22 Jan 1999 16:14:17 -0500 "Alexander 'Sasha' Chislenko" <> writes:

>Why does the govt have to borrow then?

In the simplest terms, the government needs to borrow when it spends more than it takes in, its cash balance being normally very small.

>Is debt interest not counted in the budget?,
>or is there something else?

Interest on the debt is counted as an outlay in the Federal budget. Look at the page next to the back of the 1998 IRS Form 1040 instruction booklet and you will see pie charts for Fiscal Year 1997. Net interest is 15% of outlays. Those pie charts for FY97 are for the 'unified budget' which includes Social Security.

Before 1965, Social Security was 'off-budget', and if it were still off-budget the 'rest of the budget' budget today would show a deficit, not a surplus. That is because SS today is taking in more money than it is spending, so SS is showing a surplus which contributes on net to the unified budget as net current income for the government. It's actually hard to see that from the pie charts because they have mixed in some other things with SS.

It does not make a whole lot of difference whether SS is reported on-budget or off-budget as long as we understand the difference and take it into account. It is important to realize that the government is building up an 'internal' debt to SS, even as it begins to pay down the 'external' public debt with the unified budget surpluses. I hope this is not too confusing.

Ron Kean




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