There are two things that stand out about this administration: The speed with which it is taking us toward financial ruin and its uncanny ability to conceal the fact.
Here is an example. As a result of Obama's unfettered spending the debt of the federal government will soon exceed 100 percent of GDP. And yet the American people are almost completely unaware of this unfolding fiscal debacle.
Most Americans would, in fact, be incredulous at hearing this figure, suspecting it to be a conservative smear. But we need to go no further than the administration's own documents to get the truth.
Buried deep in the president's budget proposal for fiscal 2010 is a little spreadsheet called Federal Debt at the End of the Year: 1940–2014. Catalogued as Table 7.1, it is part of a subsection called “Historical Tables.” (The table cannot be viewed online, but it be can downloaded as an xls file by clicking on the hyperlink.)
The spreadsheet features a column called “Gross Debt,” which gives the size of the federal debt as a percentage of GDP. Below are the administration's projections for the next three fiscal years:
2009 = 90% of GDP
2010 = 98.1% of GDP
2011 = 101.1% of GDP
Yes, you are reading correctly. According to Team Obama, the federal debt will reach nearly 100 percent of GDP next year. And it will exceed that critical mark in the year after that.
Unbelievably, the American public knows virtually nothing about this. Hard though one may search, it is nearly impossible to find any mention of these shocking figures anywhere in the media.
The question, then, is this: How have this administration and their accomplices in the government and media managed to pull off this spectacular concealment act?
The trick lies in the terminology. To see through it, we need to know that the federal debt is made up of two parts: the intragovernmental holdings and the debt held by the public. In an earlier piece we explained how the two work – the debt held by the public is incurred when the government issues bonds. Intragovernmental debt occurs when the federal government borrows from government agencies that have surplus cash in their accounts. This is why Table 7.1 refers to these obligations as “government accounts.”
When speaking about public debt, administration officials refer only to the “debt held by the public.” They take advantage of the ambiguous nomenclature to create the false impression that the “debt held by the public” equals “public debt.” This is not true; it only represents a portion of it. On those few occasions when they were pressed on this point, they turned defensive. When asked to explain the intragovernmental holdings in a PBS interview, White House Budget Direct Peter Orszag said he prefers to speak only about the debt held by the public, because he thinks “that's the more analytically correct measure.”
Such a dismissive attitude toward the $4.3 trillion in intragovernmental obligations is alarming on the part of the man responsible for the integrity of President Obama's budgets numbers. But whether or not Orszag wants to talk about it, intragovernmental holdings do represent real debt. The government took real money from those accounts, and the time will come when real money will have to be paid back.
The lies and distortions notwithstanding, we can be certain there will be a steep price to pay for this fiscal profligacy. The first tangible consequence may well be the loss of America's triple A credit rating, which normally happens when a country's public debt exceeds its annual economic output. We saw a preview of what could be in store when Standard and Poor's warned Great Britain about its AAA status, because its debt load could reach 100 percent of GDP by 2013. But even as S&P's was issuing the warning to Britain, the Obama administration quietly put out estimates about own own situation that made Britain look like a paragon of fiscal sobriety in comparison.
Although Britain's public debt has grown sharply, many experts do not believe that it will actually exceed 100 percent of GDP. Analysts at High Frequency Economics, for example, issued a statement which read, “No one outside S&P sees the British public sector debt burden rising nearly to that level [100 percent of GDP], not even Moody’s.”
Obama's White House, on the other hand, predicted already in May that America will break through the critical 100 percent mark as early as 2011.
Dire as the administration's earlier estimates were, they were based on a set of unrealistically optimistic assumptions. Orszag and his team had assumed a higher rate of growth, lower unemployment and greater tax revenues than what was warranted by the economic realities. Using less bullish assumptions, the Congressional Budget Office obtained much bleaker results. Needless to say, the administration promptly rejected the CBO analysis. It turns out, however, that even the CBO's figures were far too optimistic.
In mid-July every administration issues updated economic and fiscal forecasts for the given fiscal year. The Obama White House has decided to delay this year's release until later in August, which is not surprising given the dire news it will contain. The strategy behind it is clear: delay the bad news for as long as possible and in the meantime try to implement as much of your program as you can. By way of excuse, the White House claimed that the delay was due to this being a transition year between presidencies. But even AP had to point out the lie:
The update mainly involves plugging in changes in economic indicators, not revising program-by-program details. And indicators such as unemployment and gross domestic product changes have been public knowledge for some time.
When the administration finally releases its updated figures, we should be ready for some really grave news. For one thing, they will show the federal debt moving past 100 percent of GDP at the end of the next fiscal year (the previous estimate for 2010 was 98.1%). This year's deficit amount will be revised close to $2 trillion (more than four times the previous record). Should these numbers become widespread public knowledge, Obama's prospects of implementing his costly agenda would effectually go down to zero. His only hope is to hide the truth. The president's concealment effort will be seconded by the mainstream media who will not do a single story on the fiscal ruin for which we are headed. We, on the other hand, will do our best to hold them accountable.