"Off-Budget" Numbers Expected To Start Hurting Official Deficit Number by 2020



The calculation of deficit numbers in the United States can be done in more ways than one.When it comes to reporting the surplus or deficit that is posted by the United States every year, the White House and the media like to use a combination of the "on-budget" and "off-budget" numbers.

"On-budget" numbers include things like income tax revenues, military spending, education spending, corporate tax revenues, etc.

"Off-budget" numbers include three very specific things: the Federal Old-Age and Survivors Insurance Trust Funds (Social Security), and the operations of the Postal Service. So, any contributions made to Social Security, for instance, are treated as an off-budget receipt.

In recent years, the inclusion of "off-budget" numbers in the surplus/deficit calculation has made things seem much rosier than they actually are.

For instance, in 2000, the US government reported a surplus of $236.24 billion, though after subtracting the "off-budget" numbers, you were left with a surplus of just $86.4 billion.

Essentially, the US government collects money for Social Security, and after paying out Social Security checks, the excess is automatically invested into government-issued debt in order to meet the future obligations of the Social Security fund.

In essence, the government is writing itself an IOU. This is what constitutes "intragovernmental holdings" - the money that the governments owes to programs like Social Security.

Since 1990, Social Security has remained "off-budget" and shouldn't really be used in the official surplus/deficit numbers.

It is still used, however. The reason? It makes the deficit numbers look better than they actually are.

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According to the White House, something is going to happen in 2020 that hasn't happened since 1984. The US government is going to spend more on their "off-budget" activity than they take in.

The number will be small to start, as the White House projects that the US government will spend $18.4 billion more than what it takes in during the 2020 fiscal year from "off-budget" activities.

By 2024, this number is expected to jump to $65.4 billion.

This is quite a difference from the 2006 fiscal year, when the US government took in over $186 billion than what it spent for "off-budget" activities (Social Security, USPS).

In short - the "off-budget" numbers made the deficit/surplus numbers look dramatically better than just the "on-budget" numbers would have over the past number of decades, though this is expected to change starting in 2020.

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Why are "off-budget" expenses going to be larger than receipts starting in 2020?

That's simple - "Baby Boomers" will continue to retire in droves, and they will start collecting their Social Security checks. The pace of "off-budget" receipt growth will slow, while the pace of "off-budget" expense growth will spike as more and more "Boomers" retire.

Forcing people to increase their contributions to Social Security or decreasing payouts are both very unpopular options and proposing one or both of these changes would amount to political suicide. The result? More debt.

One thing that is a near-certainty - whoever is occupying the White House following the 2020 Presidential election will almost certainly push for the "off-budget" numbers to be excluded from the official surplus/deficit calculation.

Sources:

SSA.gov - Budget Treatment

WhiteHouse.gov - Historical Tables

Filed under: General Knowledge

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