But where did the money go? Fume and gnash your teeth.
The US gross national debt – after having been successfully disappeared
from public discussion – has jumped by $1.38 trillion in fiscal 2016,
which ended Friday. Ironically, this is not one of my infamous typos.
So OK, there were some timing issues with the debt ceiling and so forth a
year ago, after which the debt jumped $340 billion in one day.
To smoothen out those factors, we look at fiscal 2016 and 2015 combined:
the gross national debt ballooned by $1.71 trillion over those two years,
$850 billion on average each year. There were only four years in the
history of the US, when deficits exceeded this average: 2009-2012.
Not too shabby, for a booming economy. But follow me. This is just to lay
down some basic numbers, as we’re drilling into the mystery of how the
government borrowed $4 trillion more than it said it spent since
2003. Those $4 trillion in borrowed money – the bonds are still out there –
went up in smoke, according to government numbers. But money doesn’t go up in
smoke. It flows somewhere. So follow me.
This is how the US gross national debt has ballooned since 1980, from less
than $1 trillion to nearly $20 trillion.
This scary chart says two things:
- Deficit spending has become a huge stimulus package that
does not stimulate the bogged-down economy.
- Inflation, oh boy, it does exist! It chewed up the value
of the dollar over those years. The government had to borrow many more
increasingly worthless dollars to accomplish the same thing, plus some
to grow real spending. Adjusted for inflation, this chart would look
less scary but would still give you the willies – particularly about
inflation.
Debt rises because government spending exceeds revenues. Over time, the
amount by which debt rises and the amount of the cumulative deficits
should be roughly the same. If you run $5 trillion in deficits over 10 years,
you have to borrow those $5 trillion, which are added to existing debts,
which should therefore rise by $5 trillion.
But not with the US government.
Remember when the US government had “surpluses” in the years 1998-2001?
Well, yes, according to the Office of Management and Budget, those four years
produced a combined $559 billion in “surpluses”:
So did the debt fall by that amount? Nope. The debt continued to rise
each year, as the government continued to borrow more and more money though
it had a “surplus”: over the four years of “surpluses,” the government added
$394 billion to its debt, as the scary chart above shows.
But that was then and this is now. Now, the hole through which money
disappears has gotten a lot bigger.
In Fiscal 2016, the government ran a deficit of $590 billion, per the
latest estimate of the Office of Management and Budget. Last year, the
deficit was $438 billion. So combined over $1.0 trillion. But it borrowed an
additional $1.7 trillion to pay for 1.0 trillion in deficit spending. What
happened to the $700 billion that it borrowed and that were not officially
spent?
It disappeared.
Is it just a timing difference that averages out over the years? Nope.
Since 2003, the government deficits published by the Office of Management
and Budget amounted to $9.26 trillion. So the Treasury should have had to
borrow that much to make up the difference. But over the same period, the
national debt rose by $13.3 trillion. Meaning, $4.04 trillion had gone up in
smoke.
This chart shows the official deficits (red columns) and the increase in
outstanding debt (blue columns) each year:
The $4 trillion was borrowed and the bonds were issued and the amounts are
still outstanding, but the proceeds from the bond sales went out the
door, off the books!
We’ve all heard the stories
of how the Pentagon’s books are sordid fiction, how the Army’s financial
statements for 2015 were “materially misstated,” how it made $6.5 trillion in
wrongful adjustments to its books and manipulated the numbers, etc. etc. But
that’s a different – and additional – matter.
The money the Pentagon received was part of its budget; they just messed
with the numbers after they received the money, and now the money they
received cannot be accounted for.
But the money the Pentagon received was part of the federal outlays, and
thus in the federal budget, and thus reflected in the federal
deficit and US national debt, even if subsequently the money disappeared in
the endless hallway maze at the Pentagon.
With the missing $4 trillion, I’m talking about money that the government
borrowed but never spent officially, that it never acknowledged even
existed. This $4 trillion is on top of all the internal shenanigans at
various departments, including the Department of Defense.
In my articles, I’m like a lawyer: I rarely ask a question to which I
don’t already know the answer. But this is one of those times.
What happened to the $700 billion in real money that the government
borrowed over the past two fiscal years but never officially spent? What
happened to the $4 trillion that the government borrowed but never officially
spent since 2013? Where did this money go?
It doesn’t matter who sits in the White House: it happened under Clinton
(the “surpluses” of 1998-2001), under Bush, and under Obama. It’s standard
operating procedure, but hidden from view. And it’s getting bigger.
I do know, however, that the money went somewhere – and that US taxpayers
owe it and have to struggle with the debt and the interest on it for all
eternity. And there’s another thing I know: our government’s accounting of
what it spends and therefore the deficit numbers are BIG lies: since 2003, it
admitted to an accumulated deficit of $9.26 trillion, but the national debt
during that time rose by $13.3 trillion. That’s not a rounding error, but a
liar margin of 43%!!
And the fate of this deficit-stimulated,
consumer-based US economy? Read… “Negative
Growth” of Real Wages is Normal for Much of the Workforce, and Getting Worse:
New York Fed
