According to the Congressional Budget Office, the federal deficit in 2016 was $590 billion. But the federal debt in 2016 grew by $1.4 trillion. That means the debt grew by about $800 billion more than the deficit. How can that be?
The answer is that Congress uses all kinds of accounting tricks to pretend that money it borrows isn’t part of the deficit. You can read a complete list of those accounting tricks in an article by Dr. Lacy Hunt (you’ll have to get a free subscription to John Mauldin’s newsletter to read the article, which is well worth doing if you are at all interested in macroeconomic issues).
From the Antiplanner’s point of view, the most important accounting trick is that some spending from borrowed money is regarded as “an investment,” and so isn’t counted in the deficit. This includes student loans and highway and transit spending. In 2016, Congress borrowed $70 billion to pay for highways and transit, yet that isn’t included in the $590 billion deficit.
Someone needs to explain to Congress the difference between consumption spending and investments. Investments are supposed to produce a return. Assuming they are repaid, student loans produce a return. But no one expects that highway or transit spending will ever return money to the Treasury.
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Claims that transportation spending will cause the economy to grow, and thus yield higher tax revenues in the long run, are totally unsubstantiated. It might be true for some transportation spending, but certainly is not true for most of that spending. Transportation dollars going into maintenance and rehabilitation of existing infrastructure will not yield increased tax revenues. Nor will transportation dollars going for projects aimed at getting people to substitute one form of transportation for another.
The Interstate Highway System did lead to economic growth. But one of the prime reasons for its success is that it was built on a pay-as-you-go basis out of gas taxes and other highway user fees. Neither the federal nor the state governments were allowed to cover construction costs by borrowing money against projected future federal gas taxes. In contrast, money borrowed by Congress today has no projected tax revenues to ever pay it back.
To grow the economy as the interstate highways did, transportation spending must produce new travel and shipping by making transportation faster, cheaper, and more convenient than before. But the people running our transportation bureaucracies today regard anything increased travel as bad because it might use more energy and produce more greenhouse gases. So they spent most if not all of that $70 billion on projects specifically designed not to increase travel, and thus it will not increase future tax revenues.
Our entire federal government has become a giant Ponzi scheme, and the two parties fighting for control over who will get the last returns from that scheme before it collapses. While most of us can’t do anything about other parts of the federal debt and deficit, we can and should oppose further borrowing to supplement the highway and transit trust funds.
How? There is no scandal scandalous enough to embarrass elected officials of either party.
Showing up to meetings with one’s local house member may help. I showed up at my local house member who was surprised that there was no cost benefit analysis for transit projects. Just showing up, writing letters to legislators, and critiquing local plans with winnable arguments may help.
I should emphasize that “winnable arguments” do not include “Agenda 21” or “global warming is a myth”. I have been to public meetings where most of the public wants to believe that more transit and higher density is the answer to traffic, housing and climate change problems. I have pointed out that the planners own data, if they even have any, shows that their plans are not cost effective. Most of the public do not want to hear or believe that, and therefore my comments are not popular, but I can see from the crowd that they have some doubt. However they appear to want to find a reason not to listen to my points of view. Then someone else will speak stating that this is all some sort of “Agenda 21” or “global warming” conspiracy, and the crowd will smile and discount most of the critique.
Keep to winnable arguments on cost benefit analysis.
Like Mark Twain said. “It’s easier to fool people than to convince them that they have been fooled.”
Someone needs to explain to Congress the difference between consumption spending and investments.
Yep. Investment is deferred consumption. The word is so misused as to have lost any real meaning, just like the word literally.
Like Mark Twain said. “It’s easier to fool people than to convince them that they have been fooled.”
And you’ve been fooled into thinking that Mark Twain actually said that. Just another misattributed quote online that is uncritically parroted.
And you’ve been fooled into thinking that Mark Twain actually said that. Just another misattributed quote online that is uncritically parroted.
You sure about that?
Yes.
Like Henry Porter says. “It’s easier to fool people than to convince them that they have been fooled.”
No proof yet but it appears unlikely to be a Mark Twain quote.
When I searched the quote, virtually all of the results that came up attributed it to Twain. I understand the difficulty in confirming something like this, but at the same time there is no evidence confirming any other author either.
“When I searched the quote, virtually all of the results that came up attributed it to Twain.”
First result is about it being a misattribution. So is the third result, fourth result, fifth result. First result shows that it cannot be sourced in any of his writings or speeches.
The total and complete lack of evidence strongly suggests that it’s misattributed. Your note of lack of evidence for any other author indicates it’s a fake. It first popped up on the web in 1999 and then slowly proliferated from there; it really took off after 2013 after internet memes became a thing.
These kinds of fake quotes are the scourge of the internet, including Washington’s fake quote about fire being a dangerous servant and a fearful master.
I don’t quote anyone unless I can find the text in primary source material.
I do appreciate Henry Porter’s reattribution to himself. After all, the sentiment in the quote is a good one.
Clearly you need to understand math as well as our Fearless leader does. 1.4 Trillion debt minus a 590 million deficit means that he has reduced the deficit by more than 800 million. If you don’t believe that then you can ask professor Gruber at MIT .
It’s all part of the new math they teach at Harvard. Much too advanced for any of the “common people ” to understand !
I’m very interested in knowing why the Antiplanner closed comments (censored discussion) on today’s post about the Bundy verdict.