US Treasury Posts Gigantic $1.16 Trillion Shortfall in Fiscal 2017, Hilariously Points out “Where We Are Headed”

Just add tax cuts and ballooning expenditures. The media chose to silence the report to death.  

“If a tree fell in a forest and nobody heard it, did it really make a sound?” asks our favorite fiscal gadfly and Director of Research at Truth in Accounting, Bill Bergman, referring to the media coverage that the Treasury Department’s “Fiscal Year 2017 Financial Report of the U.S. Government” has received, which was, at the time he wrote it 24 hours after the February 15 release of the report: “Nothing. Zip. Scratch.”

Friday’s issue of the Wall Street Journal did not say a word about our public purse, or what happened to it last year. In the “What’s News” section on the front page, we learn about compelling things like “Billionaire investor Thiel is relocating to Los Angeles,” “Nestle’s sales growth last year was the slowest in decades,” and “U.S. motor vehicle deaths remained near decade-high levels in 2017.”

But we don’t learn anything about the financial condition of the federal government, from neither the Wall Street Journal nor the New York Times.

The largest financial institution in world history issued its annual report yesterday, and nobody cares.

That’s probably a good thing, given the kind of fiasco it is:

Here’s a summary of the salient data points of the FY 2017 Financial Report of the U.S. Government (full PDF).

  • “Net cost” before taxes and other revenues rose by $129 billion year-over-year, or 2.9%, to $4.5 trillion.
  • Tax and other revenues grew by $29.3 billion year-over-year, or 0.9%, to $3.4 trillion.
  • The difference, the Net Operating Cost or the “bottom line,” as the report calls it, soared 10% year-over-year to $1.157 trillion.
  • The Budget Deficit, a different measure, grew by $78.3 billion, or 13.3%, to $665.7 billion.

The Net Operating Cost ($1.157 trillion) is defined as revenues minus costs. The Budget Deficit ($665.7 billion) is defined as receipts minus outlays (cash spent). The difference of $491 billion between the two is, according to the report, “primarily due to accrued costs (incurred but not necessarily paid) related to increases in estimated federal employee and veteran benefits liabilities and certain other liabilities that are included in net operating cost, but not the budget deficit.”

So the Net Operating Cost is a more realistic measure of the actual gap between the government’s revenues and expenditures.

This chart from the report compares the Net Operating Cost and the Budget Deficit over the past five years. Note that the Net Operating Cost and the Budget Deficit increased for the second year in a row:

This is who paid the $3.4 trillion in revenues:

  • 80% from Individual income tax and tax withholdings, including Social Security
  • 9% from Corporation income taxes
  • 11% from other revenue.

And this is how the $4.5 trillion in costs were divvied up:

  • 24% Department of Health and Human services
  • 22% Social Security
  • 15% Department of Defense
  • 11% Department of Veterans Affairs
  • 22% All other
  • 6% Interest on Treasury Securities held by the public

“Where We Are Headed”

That $1.156 trillion in Net Operating Cost occurred in fiscal 2017. But these are the good times, the boom years, if you will, when shortfalls should shrink into oblivion. So what will happen to the shortfall when the economy slows down or goes into a recession? That was a rhetorical question.

For fiscal 2018 and going forward, the tax cuts will lower revenues by about $150 billion per year on average over the next ten years. And for fiscal 2018 and 2019, Congress passed the two-year budget resolution that will add about $150 billion on average per year to the outlays. Both combined will drive up the deficit by about $300 billion a year on average.

“Where We Are Headed” a chapter heading (pages 9 and 14) says. I can supply my own chart, based US Treasury data, to show exactly “where we are headed” in terms of the US gross national debt:

Bill Bergman, at Truth in Accounting, chimes in again with “some takeaways” from the report, namely the government’s persistent inability to provide accurate and auditable financial statements, particularly the Defense Department and the Energy Department (which handles much of the expenditures related to nuclear weapons programs):

The GAO {Government Accountability Office] delivered another disclaimer of opinion on the government-wide financial statements. This was the 20th consecutive year for what is effectively a flunk on your audit. GAO cited material weaknesses in “accounting for intergovernmental activity,” an “ineffective consolidation process,” and “serious financial management problems at the Department of Defense” that prevent the statements from being auditable.

The GAO audit opinion took note of a new department-wide audit initiative at the Department of Defense, mainly reporting on what DoD has said it intends to do, without providing much evaluation or expectations.

The term “material weakness” (in accounting and/or internal controls) appeared 65 times in this year’s report, down from 67 times last year. The total number of cited “material weaknesses” fell from 45 to 40.

This year’s overall report was delivered despite the lack of financial statements from the Department of Energy, a huge department with significant defense-related programs, assets and liabilities, including massive obligations relating to reclamation of nuclear testing waste.

Is the Fed trying to send a message to Congress about all this? The chorus for four rate hikes is getting louder. But no one will be ready for those mortgage rates. Read…  Four Rate Hikes in 2018 as US National Debt Will Spike 
 

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  130 comments for “US Treasury Posts Gigantic $1.16 Trillion Shortfall in Fiscal 2017, Hilariously Points out “Where We Are Headed”

  1. jest
    Feb 19, 2018 at 3:15 pm

    So where does the 1.157 trillion short fall come from? Do they just print the money? cause i don’t have it.
    And what if the Government just says “let’s just erase the debt” and start from 0? Is this Debt owed to someone?
    thanks

    • RagnarD
      Feb 19, 2018 at 3:24 pm

      I don’t have it either, in case anyone is wondering.

    • Kent
      Feb 19, 2018 at 4:58 pm

      “So where does the 1.157 trillion short fall come from? Do they just print the money?”

      Yes, they actually just print the money and it ends up in the bank accounts. But they will eventually take it back through taxes bond sales.

      “And what if the Government just says “let’s just erase the debt” and start from 0? Is this Debt owed to someone?”

      The entire world’s economy collapses, because it is a significant portion of the assets of most large financial organizations.

      I guess you could have the federal reserve buy up the debt with printed dollars (kind of like with QE). But that would obviously show the population that the federal government doesn’t have debt the way people do. And that could create all kinds of political problems.

      • Justme
        Feb 19, 2018 at 7:49 pm

        >>Yes, they actually just print the money and it ends up in the bank accounts.

        This statement is not true.

        • Feb 19, 2018 at 10:39 pm

          yes, sadly it is true

          Start here to understand: Chapter 8, view other chapters if need be, it’s a very view-altering course.

          https://www.peakprosperity.com/video/85834/playlist/92161/crash-course-chapter-8-money-creation-fed

        • Justme
          Feb 20, 2018 at 3:22 am

          I repeat: There is no automatic printing of money to cover a budget shortfall. Debt has to be issued and sold. There is a possibility of the FRB ‘buying” federal debt by issuing reserves against the debt, but there absolutely nothing automatic abut this. Stop confusing people.

        • JR
          Feb 20, 2018 at 3:42 am

          The Fed creates dollars to buy bonds. That is the basis for QE. And the Fed refunds the interest payments by the Treasury on the bonds back to the Treasury. When the bond matures, the Treasury can issue another bond to fund the bond maturity payment. This is basically what the Japan Central Bank has been doing for years now. It isn’t really “printing” in the old fashioned sense, but it is money creation. To fact check, search for the mises report “The Cozy Relationship between the Treasury and the Fed”.

        • Justme
          Feb 20, 2018 at 4:22 pm

          But QE has long since stopped, and in fact is in the process of being reversed (QE unwind). QE ended on 29 October 2014. QE unwind was formally announced in Sep 2017 and started in earnest in Oct 2017.

          I’ll say it again: There does not exist an automatic financing of budget deficit by QE or any other process. Debt has to be sold to
          SOMEONE, and since Oct 2014 that someone has been the bond market.

      • Torel.james@gmail.com
        Feb 20, 2018 at 8:08 pm

        Justme is correct and this conversation is a distracting waste of space to readers. The Treasury pays government expenses, not the Fed. The corporate and mortgage bonds bought by the Fed with QE remained at the Fed as an asset. So who does pay for the deficit every year? By purchasing Treasuries, US and foreign investors lend the Treasury money every year, in the amount of the deficit.

        The writer for the blog at your link adds great style and cleverness to premises that are entirely false. “Printing” bonds (they are issued, not printed) is in no way the same as printing money.

      • David Larsen
        Feb 21, 2018 at 5:31 am

        It isn’t even necessary to print anymore. It’s just an entry on a spreadsheet. Cheaper than printing. It’s like the money your local bank creates out of nothing to loan. They don’t have it, but the put an entry on the spreadsheet of the bank’s deposits, because the borrower will either spend it by using a debit card or a check that give to say a grocery store, and they deposit that check in their bank, etc. etc. etc.

    • Mickey
      Feb 19, 2018 at 8:20 pm

      Can anybody find the true GAAP Accrual accounting “loss” which should be around 5-7 trillion?

      • Max Power
        Feb 20, 2018 at 1:43 pm

        Government doesn’t operate under GAAP rules. It operates under GASB.

        • Max Power
          Feb 20, 2018 at 1:47 pm

          Actually since it’s the Feds it’s FASAB.

    • JZ
      Feb 19, 2018 at 8:55 pm

      You buy 1000$ TV from Chinese company.
      You do NOT have 1000$. You borrow from banks using credit card. (here comes in bank regulation regarding how much they can lend based on a bunch of ratios, but literally, this is the place the bank is creating credit, AKA the promise to pay money).
      The Chinese guy took your 1000$ and goes to people’s bank bank of china to convert 1000$ into RMB AKA yuan. PBOC prints 700yuan and get that 1000$.
      Now US government says I want to borrow 1000$ to spend because I spend more than I make and I promise you to pay you back 10 year later with 2.5% yield. This is the crucial part. Would the PBOC lend US gov that 1000$ at rate of 2.5%? Here comes in Federal Reserve at the same table saying if nobody lend US gov 1000$ with 2.5%, I will print 1000$ and lend to US gov.
      I know this is a mess with multiple parties, but this is the process. Essentially a bunch of people “promising” others they will pay back with 2 central banks sitting there to make sure this goes as what both government wants. Do PBOC and FED have to print? No. But if other parties do NOT comply to their terms, they will print everybody and themselves into oblivion.

      • TomYumGoong
        Feb 21, 2018 at 5:53 am

        Not how it works. US gov does not “just print” money. There is no real reason it couldn’t, and in fact, JFK ordered some money to be “printed” without going through the process of buying treasuries to issue it. It is on some peoples’ list as one of the many, many possible reasons why he was shot.

      • DV
        Feb 22, 2018 at 4:58 am

        Correct, whatever money have been “printed” or “issued” ended in Asian (mostly Chinese and OPEC reserves). Fed increased its balance sheet from just over 800 billion to over 4 trillion (4.3 at some points). Add about 2.5 trillion printed by ECB and some by Bank of England and compare that to the official reserves of countries like China, Korea, Taiwan and Japan, and you will see how they match and who has been funding US “shortfalls”.

    • GERALD STEHURA
      Feb 20, 2018 at 11:48 am

      Don’t worry… the Stable Genius will have all the answers!

    • Bad
      Feb 21, 2018 at 6:34 pm

      The print the money. Government can default on its debt. But that’s bad.

  2. Charles Ponzi
    Feb 19, 2018 at 3:51 pm

    I’d like to thank Wolf for his efforts on a holiday weekend. Obviously the traditional media does not feel that the looming deficits are newsworthy.

    Only when mortgage interest rates increase and inflation impacts the great unwashed will the deficits become newsworthy. Torches will then be lit and pitchforks sharpened as the man in the street looks for someone to blame.

    Until then I will be laddering T-Bills and ultimatley T-Notes. Might even add a bit of AU and AG to the hoard.

  3. van_down_by_river
    Feb 19, 2018 at 3:59 pm

    “Is the Fed trying to send a message to Congress about all this?”

    Quite the contrary, Congress is sending the Fed a message: if bond vigilantes force interest rates on government borrowing above 2.5% (aggregate) you will step in and buy the debt because there is no one else.

    Congress doesn’t care about debt. The Fed will monetize the debt because they have to. When it becomes clear the U.S. is merely printing money to keep the lights on the dollar will collapse. We are collapsing, same as the USSR before us, our empire is too expansive and riddled with corruption to continue.

    The loss of confidence in the currency is happening much faster then many of us had hoped. Who would have thought Americans would heap fiscal stimulus and reduced tax revenues on top of an already fragile debt pile? If only arrogance were wealth, we would have more than enough to meet our needs.

    What becomes of us after the currency crashes? How will a complex society run without a stable currency to grease the skids of commerce? Will the rest of the world be left wondering how to secure our nukes if our society destabilizes? Pride cometh before the fall – am I being too dramatic, if so how do we get out of this mess with the currency intact?

    I see only disaster ahead, if we had not doubled down on bad fiscal policy there may have been some hope.

    • Paulo
      Feb 19, 2018 at 7:11 pm

      They started on this solution when the word, “Entitlements” was coined. Create the word, nurture the meme, demonize those who disagree, and Bob’s your Uncle.

      It’s a long game run by some very smart, focused, and ruthless people.

      I feel that if the US population was actually asked if they wanted to maintain nearly 800 foreign military bases, and vast expeditionary forces overseas, as well as copious world-wide surveillance operations and military support for dubious autocrats; or a sound retirement and medical system coupled with a scaled down defense and Coast Guard, the deficit would be under control. You can’t have it all.

      From Google: “Despite recently closing hundreds of bases in Iraq and Afghanistan, the United States still maintains nearly 800 military bases in more than 70 countries and territories abroad—from giant “Little Americas” to small radar facilities. Britain, France and Russia, by contrast, have about 30 foreign bases combined.”

      Overthrowing foreign Govts for the benefit of corporations is expensive business, (then they offshored the jobs and profits). Go figure.

      Who knows how much is really spent on military and foreign influence operations? As I understand it, the military can’t even keep a set of books. Then there are the ‘off book’ operations.

      Something has to give and I suspect the ongoing decline will squish common folk long before those in power realize their mistakes.

      I remember back when I worked for some real bandits who ran a small airline. Actually, the operating money/credit was supplied by a big logging contractor. One day, when I approached the dynamic duo about a pay raise they said, “You guys seem to forget why we are in business. It’s for us”. I replied, “You guys seem to forget why we work here. It’s for us”. There were 30 employees and two supposed owners. About 1 year later we certified under Teamsters Local 213. They actually could not figure it out. Ever.

      From Wiki: “Republicans elected with Tea Party support in 2010, most notably Governor Scott Walker of Wisconsin, have launched major efforts against public sector unions due in part to state government pension obligations (even though Wisconsin’s state pension is 100% funded[7]) along with the allegation that the unions are too powerful.[8][9] States with higher levels of union membership tend to have higher median incomes[10] and standards of living.[11] It has been asserted by scholars and the International Monetary Fund that rising income inequality in the United States is directly attributable to the decline of the labor movement and union membership.[”

      But hey, as soon as those SNAP cards are replaced with food boxes…….

      • Alexandre Richard
        Feb 19, 2018 at 9:07 pm

        Nice rant, but did you notice the fast one they were trying to pull on us with this very article?! They say Defense spending is a measly 15% of tax expenditures! According to business Insider, the defense budget gobbles up closer to 80% of the tax revenue. I, for one, know that it’s over 50% of the us budget, or that’s the figure I’ve been told since ever…

        But ‘Entitlements’ seems like a bigger expense that defense when they break it down in percentages….Can I see your math, Mr. Truth in Accounting?

        Btw, replace the word Entitlement with “That money we docked off your paycheck” and suddenly…this whole psychotic raving at social security suddenly reveals itself for what it truly is… psychotic ravings.

        • LouisDeLaSmart
          Feb 20, 2018 at 12:31 am

          It’s funny, the current US budget looks something like the Soviet Union in the early and late 1980’s.

        • TomYumGoong
          Feb 21, 2018 at 6:01 am

          Defense is of the order of 80% of the “discretionary” part of the budget, not the total budget. The discretionary part is what is left after the parts mandated by law are subtracted. You might want to read it again.

        • rj
          Feb 21, 2018 at 7:53 am

          Yeah, it sucks, but how else can we force feed frn’s into the world economic system without a huge military?

      • Tom
        Feb 20, 2018 at 10:53 am

        AH :The old meme Guns or Butter. I jam my toast, I don’t need no stinking butter!!

  4. Feb 19, 2018 at 4:00 pm

    Hi Wolf,

    I have been wondering this for a while, and this question is neither a joke, nor one based on ignorance:

    What really keeps the FED from canceling all of the U S T-Bills it currently holds, thus effectively canceling about $4T of recent borrowings? Effectively making room for much much much more borrowing?

    Yes, I do know that to do so is to engage in direct money printing, but no-one would be hurt, because the FED can ¨afford¨ the loss. And the FED, through its machinations, prints our money too.

    Since the FED bought the T-Bills, WHICH IS ABSURD (buying your own debt!) why is canceling the debt any more absurd ?

    It would be different if the T-Bills were owned by the Primary dealers, or Banks or Pension/Insurance funds, or even Individual People, as each would be hurt, but not the FED, no hurt there.

    The tin-foil hat crowd insists that one of the WTC buildings that went down on 9-11, perhaps Building 7, perhaps another building, contained trillions in US bonds that were effectively canceled in the attack. I can understand why they think that . . . . .

    • Feb 19, 2018 at 4:21 pm

      Cancelling debt is similar to a selective default. That would be very radical – with very messy consequences for global financial markets. And it’s not needed.

      When push comes to shove, the Fed can just buy the Treasury securities (as it did during QE). Any interest income from those securities (the interest expense for the government) is remitted back to the US Treasury. The Fed already does this: it remitted $80 billion of its 2017 income to the Treasury. So if the debt threatens to blow up, the Fed can and will step in with another round of bond purchases. But we’re a long way away from that.

      Watch the Bank of Japan. It’s at the forefront of this.

      • Charles Ponzi
        Feb 19, 2018 at 4:35 pm

        Isn’t Japan running a current account surplus? If so doesn’t this allow Japan to fund its debt internally opposed to the US which relies on China, Japan and the UK among a myriad of others. If this is the case how does it impact a comparison between the US and Japan?

        • Feb 19, 2018 at 4:46 pm

          Yes, to your first point. But when central banks step in, account surpluses no longer matter. The BOJ holds over half of Japan Government Bonds (JGBs).

          That said, the currency is usually the entity that bears the brunt of this type of money-printing (eventually). And that’s where your remaining points come in: Japan has an account surplus, which supports the yen. And it holds $1 trillion in US Treasury securities plus other foreign exchange that it can sell to defend the yen.

          The US has neither one of these options. The only thing the US has is that the dollar is the dominant reserve currency — which is a huge support for the dollar.

        • Bob1
          Feb 19, 2018 at 10:30 pm

          Despite its flaws, Japan is a creditor nation, while the USA is a debtor nation. I think Japan is the largest creditor on the planet. Always look at a country’s net international investment position (NIIP). Even Canada is considered a creditor nation (despite copious private debt).

          https://en.wikipedia.org/wiki/Net_international_investment_position

      • JR
        Feb 20, 2018 at 3:56 am

        I personally find the China situation more educational and entertaining than Japan. As Balding (see twitter) points out – China is really a huge pile of regional gov confidence games and State Owned Enterprise confidence games all sort of herded along by the central gov. And it relies on the continued buy-in of the populace that the housing bubble will go on forever, and all the yuan sunk into empty shells of housing units retain their ludicrous values. That appears, amazingly enough, less sustainable than the Japanese situation…

      • KPL
        Feb 20, 2018 at 1:21 pm

        So basically is it a one way street, that of rising debt without any ending and there is no need to worry about anything bad happening (and you accumulate debt for ever)? Does the system become more and more fragile as time goes by?

        • Feb 20, 2018 at 2:28 pm

          This is a very unhealthy situation. Someone is going to pay the price. It’s just a question of who.

      • Pete
        Feb 20, 2018 at 10:29 pm

        They could, but when the world says we no longer want to hold USD, the printing goes from being a normal QE into a hyperinflation spiral and your life savings may be enough to buy a loaf of bread when its ends.

    • Kent
      Feb 19, 2018 at 5:11 pm

      One of the things I think Wolf overlooks here is the vital importance of maintaining the myths of our financial system. What happens if the general population realizes that the government could just print money if needed? People could have social security, healthcare, jobs and all other socialist claptrap of the rest of the industrialized world?

      The “debt” is the crucial piece of myth that keeps people from voting for leftist policies.

      • Ed
        Feb 19, 2018 at 5:32 pm

        That may be how it works in the U.S., depending on who is in the White House, I agree. But a mountain of debt is not needed to constrain government.

        Countries can behave prudently, spend on socialist claptrap, and avoid mountainous debt.

        See Germany or any of a number of northern European countries who have for a long time thought a good social safety net and good education were good for the nation. The rough outline of the system was promised to the German people a long, long time ago, roughly 150 years ago by Bismarck and his Kaiser.

        • Jeff
          Feb 19, 2018 at 5:36 pm

          Germany is extraordinary because its debt was wiped clean after WWII. If that had happened after WWI, the sequel would have never occurred.

        • Charles Ponzi
          Feb 19, 2018 at 5:44 pm

          Ironic that Germany with guaranteed government health care and a 35 hour work week has a current account and budget surplus.

        • alex in san jose AKA digital Detroit
          Feb 19, 2018 at 6:55 pm

          I sure wish I’d lit out for Germany when I was in my 20s.

        • Charles Ponzi
          Feb 19, 2018 at 7:45 pm

          @Alex

          I wish I’d lit out for San Jose when I was in my 20’s. Finally made it when I was in my 30’s. Did Ok.

        • Bobber
          Feb 19, 2018 at 8:58 pm

          Sure, the government can issue bonds and the Fed can retire them which is “money printing”. But this can only be done if the natural state of the system is deflationary like in Japan (as a result of demographics and savings mentality). If the U.S. tried the same money printing, there would likely be high inflation that would put an end to it. The U.S. has a 3% savings rate, better population growth, and a disposition to spend, which is the opposite of Japan.

        • Gandalf
          Feb 20, 2018 at 12:10 am

          Jeff,

          Germany’s debt was wiped clean largely because of the London Agreement of 1953, which gave a generous haircut of 50% debt relief and restructured the debt to allow the German economy to grow unencumbered by massive debt payments. This relief included the huge debts piled up by Hitler and the Nazis. Massive deficit spending on infrastructure and a secret military buildup were the keys to the pre-war Nazi “economic miracle” – they had anticipated being able to pay off this debt by looting the countries they conquered.

          Nevertheless, for both Germany and Japan, life after WWII for the next three decades was a harsh struggle to dig out from the utter ruin of war (mostly caused by U.S. bombing).

          So, while in the U.S. we had the postwar Baby Boom growing up in a world where US industrial might was unchallenged, jobs were easy to find, and prosperity the norm (e.g. “Happy Days”), Germans and Japanese of that generation grew up in poverty and learned to be frugal and to save their money and work hard.

          American Baby Boomers still haven’t come to terms with the reality of the changing world, and it is still spend, spend, spend.

      • C Jones
        Feb 20, 2018 at 10:24 am

        Well we are getting close… when >50% of any electorate are directly on the govt handouts and finally figure this out, perhaps with the help of a new captivating front man to whip them into a political frenzy, then yes things could get out of hand very soon.

        The trust issue of fiat currency is not so much that it is backed by anything (it is – it pays a tax obligation and settles a reserve obligation) but that the people managing it don’t start giving it away willy-nilly.

      • Nick Kelly
        Feb 20, 2018 at 3:53 pm

        Most of the population does realize that the gov could just print money, and that it does do it, but think it would be a bad idea to just print so much that everyone could have everything.

        The Fed’s miracles with paper and ink are not to be compared to Jesus’s miracle multiplying loaves and fishes.

        The patent office will longer consider applications for perpetual motion machines because the concept violates the Law of Conservation of Energy.

        I.e., you can’t get something from nothing.

    • Rcohn
      Feb 20, 2018 at 7:10 am

      Then why not eliminate all taxes. The Fed buys up all of the debt that the Treasury issues and the Fed then cancels all of the debt. Could work except for one thing,a currency collapse
      E

      • Kent
        Feb 20, 2018 at 9:45 am

        My point exactly. What you describe is possible. But most people don’t understand that it is. Therefore, we must have this notion of debt that must be paid back. And people must believe it.

        • C Jones
          Feb 20, 2018 at 10:29 am

          I agree with what you are saying and would like to also add that the international context w.r.t currency might not necessarily be negative … What I mean is, since every other major currency is playing the same game, would there even be a currency collapse?

          (only being half serious here but) If you did it over a long weekend when the markets were shut you might actually not suffer too much. Indeed somewhat ironically since the US would now have zero debt to GDP it would start to look attractive vs western counterparts … ha
          Most people still think we’re on the gold standard and money spent must first be ‘earned’ … we’re not.

    • JZ
      Feb 20, 2018 at 11:52 am

      Currently, US gov spend by “borrowing” from FED with a promise to pay later.
      If FED says “I do NOT want my money back any more” so that US gov no longer needs to repay, this is the “cancelling” you are referring to. Then this becomes FED directly printing money for US gov to spend. I heard this is NOT legal at this moment, you have to pass a law in order for this to happen.
      One branvch of GOV wants to do everything it wants but the constitution makes sure that will NOt happen unchecked.

      • ZeroBrain
        Feb 20, 2018 at 5:58 pm

        No problem. As the wise GWB says, the constitution is just a piece of paper. Congress hasn’t voted on a war in ~15 (?) years, we have unconstitutional domestic surveillance, need I go on?

    • Konstantin KS
      Feb 20, 2018 at 2:00 pm

      In Greecewe have been so well educated the hard way that cancelling debt means balaned a budget effective today…

    • Konstantin Ks
      Feb 20, 2018 at 2:02 pm

      In Greece we have been so well educated the hard way that cancelling your debt means a balanced budget effective today, as it seems noone will like your T bills any more for some years.

      • Kye Goodwin
        Feb 22, 2018 at 5:00 pm

        The Greek situation is very different from most nation’s. Greece owes it’s debt in a foreign currency, the EURO. If Greece had it’s own currency the debt problem would be solved in a few years in the usual way. The government would create money to pay the debt, inflation would result, exports would increase, imports decrease, tourists would flock in to get the great deals and the inflation would help to reduce private debts too. As it is, I’ve read that Greece will be struggling under this debt load into the 2050’s, if there isn’t political rebellion first. Ironically it was the Euro that made these intractable debts possible, because banks would never have made the loans to Greece without assuming that the European Central Bank would bail them out if anything went wrong. It did, though the banks had to take a 20% haircut. Greece is expected to pay back the ECB in full.

    • Torel james
      Feb 20, 2018 at 8:18 pm

      The Fed lends money. It doesn’t owe money. It bought bonds, it didn’t issue them.

  5. Arnold Ziffel
    Feb 19, 2018 at 4:08 pm

    Given the weak or non-existent financial controls it begs the question of how much fraud has cost the taxpayers.

  6. Old Engineer
    Feb 19, 2018 at 4:18 pm

    With all of this debt, and debt growth, the 10 year Treasury is still under 3%. I think the motto of the United States should be changed to “What, me worry?”

    • Charles Ponzi
      Feb 19, 2018 at 4:44 pm

      FYI German 3Yr Bunds yield -.337. Buyers pay the Bundesbank for the privilege of owning the debt. Wonder what the motto of Germany should be?

      • Ed
        Feb 19, 2018 at 5:38 pm

        “My neighbors make me look really, really good” ?

        Risky neighbors in the Euro area have brought out the buyers of the German bonds, not least of those being the ECB, which has shrunk availability even more than German prudence.

        • Charles Ponzi
          Feb 19, 2018 at 5:41 pm

          If the neighbors are risky where did they get the Billions of Euros to buy the Bunds and how does a zero interest rate on their investment benefit them?

      • mean chicken
        Feb 19, 2018 at 9:03 pm

        “Bunds yield -.337” My guess; this is smart money betting Germany will leave the EU.

        • Frank Klevenhaus
          Feb 20, 2018 at 1:20 pm

          The Bazooka has driven Interest rates below zero

  7. no_free_lunch
    Feb 19, 2018 at 4:27 pm

    GOP was at one time the party of fiscal conservatives, however, now no difference between the two parties. Really only one party, the Republ-crats.

    Current Congressional ploy is to (instead of raising the debt ceiling), why not just suspend it completely. There fixed it! No more issues.

    “Hello, my name is Congressperson _____ and I’m a spendaholic.”

    Congressional focus is on getting re-elected. Need free stuff to buy votes. Free stuff costs $ (insert my shocked face here). Solution: Print or borrow. Same thing really. Monetization of the debt via the Fed’s e-printing press.

    I’m sure Congress knows exactly what they’re doing and this will all work out in the end… /sarc.

    “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” – Alexis de Tocqueville

    “Politicians are like diapers: They should be changed frequently, and for the same reasons.” – Robin Williams as Tom Dobbs in “Man of the Year”

    “Trees don’t grow to the sky.” – Louis Rukeyser

    https://econimica.blogspot.com/2018/02/how-did-america-go-bankrupt-slowly-at.html
    Friday, February 16, 2018
    How Did America Go Bankrupt? Slowly, At First, Then All At Once!!!

    https://www.zerohedge.com/news/2018-02-09/moodys-threatens-us-downgrade-due-soaring-debt-fiscal-deterioration
    Moody’s Threatens US Downgrade Due To Soaring Debt, “Fiscal Deterioration”
    Fri, 02/09/2018 – 09:48

    http://investmentresearchdynamics.com/why-even-pretend-theres-a-debt-ceiling-limit/
    Why Even Pretend There’s A Debt Ceiling Limit?
    February 15, 2018
    “Beginning in 2013, Congress has taken to temporarily suspending the debt limit, rather than raising it directly. The debt limit has now been suspended on five occasions, most recently as part of the Bipartisan Budget Act of 2018, which suspends the debt limit through March 1, 2019. When that suspension expires, the debt limit will be reinstated at a new, higher level.” – Bipartisan Policy Center

    http://dailysignal.com/2018/02/15/congress-blew-budget-caps-heres-needs-change/
    February 15, 2018
    Congress Blew Through the Budget Caps, Again. Here’s What Needs to Change.
    “The Bipartisan Budget Act of 2018 signed into law last week really should be renamed the Bipartisan Budget Crash Act.

    This spending spree takes a Mack Truck and rams through the hard-fought budget caps under the 2011 Budget Control Act to the tune of at least $300 billion.

    • Jeff
      Feb 19, 2018 at 5:41 pm

      Money on a macro level has become a fiction, which has given birth to worse fictions yet (crypto). What money means anymore is a question worth asking.

    • Smingles
      Feb 20, 2018 at 1:00 pm

      “GOP was at one time the party of fiscal conservatives, however, now no difference between the two parties. Really only one party, the Republ-crats. ”

      The GOP has never been a party of fiscal conservatives, at least not in the last 40-50 years, not when they’ve had power to control the purse strings. By and large, they are bigger profligates than Democrats by a wide margin.

      One party wants to tax and spend, while the other wants to cut taxes and spend. It’s been that way for as long as I can remember.

  8. Pavel
    Feb 19, 2018 at 4:29 pm

    I read the report last year and it mentioned that one of the “surprises” was the increase in VA spending. This is directly attributable to the endless and pointless “War On Terror” started by GWB and Cheney and Rumsfeld and then continued by Obama for another 8 years.

    The VA care of the veterans is going to take a long time and be very expensive. In the old days they would just die on the field. Now they can be kept alive with artificial limbs etc up the wazoo (to quote Wolf) but it is extremely costly. I believe the nature of the injuries has changed — more brain damage.

    So much for the “war paying for itself with the oil revenues” or whatever that malarkey was.

    • Feb 19, 2018 at 4:55 pm

      In terms of outlays, the VA and DOD combined get 26% of the total budget. Then add the nuclear weapons related expenses which are part of the DOE. Then there are the outlays for the intelligence agencies in the US. There are 17 of them in the Intelligence Community. Some of them are part of the DOD, others are part of Homeland Security, the DEA, etc. So if you add it all up, it’s a pretty serious amount of money.

      • Sporkfed
        Feb 19, 2018 at 7:00 pm

        I miss the Peace dividend we were promised.
        Perhaps Free Trade while trying to be the wolrd’s
        policeman don’t go hand in hand.

      • timbers
        Feb 19, 2018 at 8:13 pm

        Don’t forget the secret because it’s classified spending on illegal & unconstitional wars & terrorism (we helped fund ISIS & Al-Qeada & whatever they changed their name to in Syria because regime change for example and many others) and illegal and unconstitutional spying on you, me, and all Americans to preemptively crush any effective opposition to wars and pro corporate policies…I guesstimate that’s hundred of billions per year and growing fast fast fast.

      • Philbq
        Feb 20, 2018 at 8:00 am

        Thank you, Wolf, for telling the real cost of the National Security Complex. When you add the Pentagon, CIA, NSA, Dept. of Energy (nuke management), and VA- you get well over a trillion $. The cost of the endless war machine is always underestimated.

  9. DK
    Feb 19, 2018 at 4:40 pm

    How does the US national debt to GDP ratio compare with other developed countries?

    • Feb 19, 2018 at 5:13 pm

      Of the major developed countries:

      1. Japan 250%
      2. Greece 180%
      3. Italy 132%
      4. Portugal 130%
      5. US 106.7%
      6. Belgium 105.7%

      Even France is lower, at 96%

      • Lou Mannheim
        Feb 19, 2018 at 6:28 pm

        Do you have data for public and private? I know the US is around 345% but it would be interesting to see where other countries are.

      • mean chicken
        Feb 19, 2018 at 9:14 pm

        How quickly does that change once the MIC spending is backed out? Nuclear and Pentagon, VA is a given overhead that could’ve been avoided but now can’t be backed out.

        News media talks endlessly about FANG but MIC has been an impressive rocket with no spotlight at all.

  10. economicminor
    Feb 19, 2018 at 4:47 pm

    This all just seems so incredulous.

    These are certainly interesting times.

    I have friends (most of my friends) who haven’t a clue about interest rates and their relationship to debt.. On 60 Minutes last night Opra was with a group of for and against Trump and the one guy who was rather push, loud and IMO obnoxious thought Trump was doing a wonderful job because his 401K was up and so was the value of his house… He has no clue that it is because of the FED and that Trump had nothing to do with it.

    Not stupid just ignorant..

    I can not imagine how this isn’t going to end badly for most of us.

  11. c smith
    Feb 19, 2018 at 4:57 pm

    Why should anyone care? The Fed will just print whatever amount is needed anyway. That, more than anything, is the lesson of the last decade.

  12. Jeff
    Feb 19, 2018 at 5:23 pm

    I think, on a more philosophical than a strictly economic perspective, that we have entered a period of meta-capitalism, where everything is game for commodity, rationalized by the debt. In my lifetime I have seen the levels of distrust between people grow exponentially, the disparity of wealth grow exponentially, the decency of society decline exponentially. These are visceral things that make the world in which we live worth living in. They are being destroyed, together with the ecosystem that supports life gestalt. Naomi Klein’s This Changes Everything really hit it on the head. Capitalism is a dead man’s game.

    Btw, I just discovered this site, and find its analysis just brilliant.

    • Mike B
      Feb 20, 2018 at 10:07 am

      Welcome!

      And yes, this site is a welcome antidote to the myopic cheerleading everywhere else in the Idiocracy but it’s also like falling into the red-pill rabbit hole of the Matrix. Good to finally see things for what they are but also terrifying. As you say, the ‘glue’ that holds our civilization together is being relentlessly eroded. Financially, Environmentally, Socially, Scientifically, Emotionally, Educationally. Where every you choose to look. This wont end well :(

  13. OutLookingIn
    Feb 19, 2018 at 5:27 pm

    On September 10, 2001, Secretary of Defense Donald Rumsfeld said:
    “According to some estimates, we cannot track $2.3 trillion in transactions”.
    The following day the twin towers came down and the missing funds revelation was all but forgotten.
    By 2015 the amount missing reported by the Office of the Inspector General had increased to $6.5 trillion for just the army alone!
    A group at Michigan State University said on December 12, 2017 that they had found $21 trillion in unauthorized spending at DOD and HUD spanning the years 1998 – 2015 using governmental data.
    So “finding” a $1.16 trillion shortfall by the Treasury is small potatoes when considering whats going on behind the scenes.

    • Feb 19, 2018 at 6:18 pm

      Rumsfeld knew about and reported the problem in accounting long before 9/11; certainly by Feb. 2000. That money wasn’t stolen or “missing” but with the hodgepodge accounting system money was difficult to track and it was to this that Rumsfeld wanted to find better controls. The other part of the conspiracy theory is the plane that hit the Pentagon was out to destroy those records, that is those conspiracists who believe there really was a plane.

      • Off The Street
        Feb 20, 2018 at 10:14 am

        Who are the likely suspects to have absconded with that Pentagon loot, and perhaps the gold that was to have been spirited away from underneath WTC7, or was it WTC6? How would they deploy those weapons? As leverage to force some policy changes, start a new country, subsidize one, trip to Mars, other?

  14. walter map
    Feb 19, 2018 at 5:35 pm

    The easiest thing to do is to simply dismiss all the numbers as fake news.

    Problem solved.

    Remember when the budget was balanced in the last year of the Clinton administration, with a slight surplus? True fact that. But this was before the temporary tax cuts for the rich of the Bush I administration, which never expired, and before the IRS budget was gutted, and never restored, and before tax evasion by the 1% replaced baseball as the national pasttime, plus more trillions in tax cuts for the rich.

    You yanks should forget about attacking N. Korea and Iran. If you want to do something constructive try invading the Caymans. They have trillions of missing US tax revenues, all neatly stacked in useless collections of ones and zeroes.

    You didn’t really believe that tax cuts for the rich pay for themselves, did you?

  15. michael Engel
    Feb 19, 2018 at 5:38 pm

    A different accounting.
    1) Tariffs and “invisible barriers”and trade “walls” raise gov revenue.
    2) A new gas tax for infrastructure does the same.
    3) A CPI > 2% and US short duration up to UST 1 year = 2.0%, or less, give the gov a nice discount on borrowing.
    Trump is not a populist, as most think !!
    He is no president Madison, Andrew Jackson, or James Polk.
    He belong to another list.
    Hamilton and Friedrich List 1789 – 1846.
    That’s not Adam Smith at all. That’s the national economy – the national system of innovations.
    His ideas are simple : in a permanent portfolio with several types of
    assets, if asset A (trade) increase a lot, out of whack, while asset B (mfg) shrunk & collapse ==>
    Adjust. It’s might be easier, because the US is not an infant industry.
    With few more details and adjustments to our period & times. Friedrich List era, in the US, was the Gilden age, from post civil war 1865 to 1896, during Grant and few nameless presidents, consolidation.
    In Germany it’s Bismrck era.

  16. mvojy
    Feb 19, 2018 at 5:41 pm

    HYPERINFLATION here we come! Can’t wait to see the reduced buying power of the American consumer. You thought online retailers were killing brick and mortar? Ha! The death of that will be caused by the US dollar turning into a peso. Wait for our debt to be denominated in foreign currencies where the exchange rate drive up our borrowing costs. Then we have SS benefit payments and Medicare/Medicaid costs rising to consume more of the federal budget exceeding the payroll tax inflows. We seem to be headed towards a downward spiral. Maybe it will be good to hold Bicoins since the US Treasury can’t deplete their value.

    • Charles Ponzi
      Feb 19, 2018 at 7:48 pm

      Congress is preparing to put a stake through the heart of the craptocurrenties as we speak. Buy physical AU and AG.

      • Jon
        Feb 19, 2018 at 9:00 pm

        Won’t regulation be long-term bullish on Bitcoin?

      • Frederick
        Feb 20, 2018 at 8:00 am

        I agree that TPTB won’t tolerate crypto-competition and will ultimately find a way to crush them They’ve been crushing Au and Ag for years and they are dirt cheap as a result

  17. Rob
    Feb 19, 2018 at 7:46 pm

    What is the cyclically adjusted deficit as late cycle they should be in surplus… Also if you normalise debt costs to levels similar to nominal GDP (5.5%)…

  18. Paul Morphy
    Feb 19, 2018 at 8:31 pm

    Most of the American national debt owing is owed to………………US citizen

    https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124

    • Rates
      Feb 19, 2018 at 8:54 pm

      And next you are going to say that most of stock market wealth belongs to Americans. Income inequality does not matter, poverty does not exists, etc, etc, because after all my first statement is correct.

      • Paul morphy
        Feb 20, 2018 at 5:01 am

        That wasn’t the point that I was attempting to make, Rates. My point was that if America were to default, it would be the American citizen upon whom the default would impact very significantly. Debt is the accumulation of deficits. American has been running current budget deficits for years.

        Arguably, America is reaching a situation where its paying its taxes but not receiving the services which that tax is paying for because tax receipts have to be ringfenced to pay the interest on the outstanding debt.

        So not only is the citizen forced to pay higher rates of taxes/new taxes, the citizen is getting less services from the state for the taxes paid. And if a default happens, then all services from the state could be cut

        • Feb 20, 2018 at 8:58 am

          Sorry, I too misinterpreted your prior comment.

        • scott
          Feb 20, 2018 at 11:19 pm

          Thanks for posting the link, Paul. Ive heard people speaking on SS, which now I know is incorrect in terms of SS being an expense. And your 2nd point of taxpayers less for their tax dollars, and in particular, more of it goes to pay intrest, is outrageous; this should make people furious. Thanks again.

    • Feb 19, 2018 at 9:15 pm

      All debt is owned by someone. One entity’s debt is someone else’s asset. In terms of the theoretical split of the US debt, it’s between:

      1. $15 trillion in “publicly traded” debt that form the US Treasury market. These securities, which are a common topic on these pages, are owned by whoever, including Americans with a bond fund and the Chinese government.

      2. $5.7 trillion in “internal debt” that is owned by government pensions funds, the Social Security Trust Fund, and the like.

      The government owes every dime of both categories, and if it doesn’t pay, it means a default, which would blow up the markets along with pensions funds, the social security system, and other things. This idea that since Americans own many of these Treasuries, that the debt doesn’t matter is nonsense.

      The only reason to make the division between category 1 and 2 is to point out which part of the debt is subject to market forces ($15 trillion) and which part is not ($5.7 trillion). This matters when markets don’t like to buy those bonds anymore and are demanding massive yields in order to do so. So in a situation like this, it is perceived a good thing that at least part of the debt is out of reach for the “bond vigilantes.”

      • Mel
        Feb 20, 2018 at 9:14 am

        “This idea that since Americans own many of these Treasuries, that the debt doesn’t matter is nonsense.”

        But if the government has to collect taxes to repay the debts, then it’s the Americans ponying up the money that the government will use to repay them, Yes?
        Question 2 then becomes “Who, specifically, pays the taxes, and who, specifically, collects the payback?”

        • Feb 20, 2018 at 10:22 am

          Every debt is an income-producing asset for someone else. So someone pays the interest (debtor); and someone gets the interest (creditor).

          Apple owns a lot of US Treasury securities (registered in accounts in Ireland and elsewhere = offshore). It RECEIVES income from this debt, paid for by US taxpayers. Apple also pays some taxes in the US and is a US taxpayer. It also has issued a lot of its own bonds, and PAYS interest on this debt (income for bondholders/creditors).

          So are these Apple creditors receiving the money that US taxpayers pay to the Treasury to pay the interest on Treasury securities that then is paid to Apple? And is Apple, when it pays US taxes, funding the interest that the government pays Apple on the Treasury securities Apple holds? In other words, is Apple paying itself?

          Do you see where I’m going? The answer is: money is fungible.

  19. Rates
    Feb 19, 2018 at 8:51 pm

    We live in the Modern Monetary Theory world. Deficits don’t matter ;)

    • Kent
      Feb 20, 2018 at 9:59 am

      Haven’t mattered yet. I remember everyone whining when Reagan jacked up the deficits. The democrats screamed that our kids would have to pay higher taxes to pay down the debt. Here we are 30 years later and we’re cutting taxes! But one day, its gonna be bad. Real bad. One day… just like those democrats said it would be…

  20. R2D2
    Feb 19, 2018 at 10:25 pm

    This raising of debt ceiling limit every few month is like a shopaholic who promises herself month after month, year after year that she will limit her credit card spending, and keeps raising the amount that she allows herself to borrow on her credit card. If it was an individual doing this, the Sheriff would have shown up at her door steps sooner or later.

  21. MCH
    Feb 19, 2018 at 11:32 pm

    I would object just a little to the headline, Wolf. I think in this case the Media silence isn’t complicity, it’s just ignorance. The media realistically has not a clue what any of this means. The media is kind of like mushroom, you keep it in the dark and feed it S***, and it grows like the weed.

    As for the debt, no one in our so called leadership cares very much. It would imply that they understand what it means to future generation or care about it, but like much of the ponzi scheme that is our social safety net, it’s the problem of the younger generation. And those usually don’t have a clue what’s happening until it’s too late.

    • Wolfbay
      Feb 20, 2018 at 7:29 am

      Or maybe they do have a clue. If politicians proposed a budget that had revenues from taxes anywhere near expenditures for the year even without paying down any of the huge debt their careers would be over at once.

    • Frederick
      Feb 20, 2018 at 8:03 am

      I disagree completely and believe the presstitutes are VERY complicit in impoverishing the American “middle class”

      • JD
        Feb 20, 2018 at 11:07 am

        I agree with you regarding the “press” … much of the tripe printed in Newsweek, Time and ‘The New Yorker” that my parents read when I was a teen struck me as totally fucked logic and ‘reporting’ of ‘news’.
        Read a number of articles in the ‘Economist’ while waiting for a haircut a few years ago …. had the exact same feeling about what was being written about that I did when I was a teen (40 plus years ago) …. it was total bullshit being written

        • John Doyle
          Feb 25, 2018 at 7:54 pm

          Absolutely true, particularly about economics, or eCONomics more accurately.

  22. james wordsworth
    Feb 20, 2018 at 6:12 am

    The US fixation with the military is the ultimate “root cause” of the debt debacle. Even with the stated spending of 15% on defense and 11% on Veterans affairs (in peace time mind you), the have at least 26% of spending going to the MIC. (Note there is a lot of defense spending hidden in other departments. For example take a look at the foreign aid budget and you find that a lot is arms sales to other nations).

    Other nations spend on infrastructure and health care, the US spends on guns and the military. Ultimately excessive (and yes the US is well into the excessive range) military spending will bankrupt a nation, as the US is gradually finding out … but is too in bed with the illusion of military strength (MAGA anyone) to be able to pull back. Sad!

  23. Feb 20, 2018 at 6:36 am

    Rising Inflation, Is it a sign of the money printed by Central Banks have started to appear in the real economy?

  24. fred green
    Feb 20, 2018 at 7:18 am

    It’s time to start taxing corporations the same way we tax individuals–on their INCOME (not profit)

  25. philbq
    Feb 20, 2018 at 8:06 am

    The 22% of the federal expenditures for Social Security is payments back to S.S. for MONEY BORROWED by the federal govt. from the S.S. trust fund. S.S. does not use a penny from the federal budget. The federal govt. has borrowed $2.7 trillion from S.S. to fund their deficit spending, and the govt. is paying it back. But S.S. has not taken money from the federal budget. That is a standard lie told about S.S. to undermine public confidence in S.S.

    • Kent
      Feb 20, 2018 at 10:12 am

      And today, the payroll tax still funds SS in its entirety. Therefore, by definition, SS cannot add to the deficit. Cut SS and the payroll tax correspondingly and the deficit doesn’t change.

      The deficit is purely a function of military spending and overpriced healthcare. And I’m going to guess the MIC and AMA are significant contributors to congressional campaigns.

      • viewat30k
        Feb 20, 2018 at 3:22 pm

        Right on! Sickcare is the 800 lb gorilla in the front room! The yearly exponential growth #’s are amazing in their negative context.

        MIC/VA is another wonder to behold. Ive been part of both and the inefficiencies are mind bending. You remove entitlements and Military/Va there is not enough left to carve up enough to make a difference.

        The incredible shrinking purchasing power of the fiat money is the the direct result of this process. Youve got to be old enough to remember what things use to cost in the recent past…and smart enough to care where it is all going.

    • Anon1970
      Feb 20, 2018 at 12:22 pm

      The FICA trust funds have always been limited to US government securities since day 1 of the first S.S. tax back in the late 1930’s. The problem is that the $2.7trillion trust fund is not sufficient to meet future S.S. benefit promises (unfunded liabilities). The Medicare trust fund is in worse shape and the Disability trust fund is in the worst worse shape of all.

  26. Paul Morphy
    Feb 20, 2018 at 9:33 am

    The root analysis approach needs to be adopted.

    By this I mean, first establish what are tax receipts getting spent on?

    By right every citizen in every tax paying jurisdiction should get an itemised receipt from his/her state/country, showing the taxes paid and where that tax was spent by the his/her state/country.

    In my own country – Ireland – we pay for example, what is known as motor tax. This is a tax on every motor vehicle to drive the highways and byways of our country.
    The receipts derived from this tax are supposed to be used to maintain the same highways and byways. This seems like a reasonable principle. Impose the tax and put the tax to use to maintain the road network.

    Except it isn’t used to maintain the road network. It is spent instead on anything other than the road network (look at the state of our roads).

    It seems to be that the huge disconnect between the imposition of tax and the expenditure of that tax. Taxes collected to fund A, are being used to fund B or C or D……………..
    Another abuse is that taxes are being spent more to fund current expenditure rather than to fund capital expenditure. Paying wages accounts for a huge amount of tax imposed and collected.

  27. Ambrose Bierce
    Feb 20, 2018 at 10:57 am

    The Fed does not print money, the Treasury issues bonds, and takes in revenue that way. The Fed is the middle man. New debt creates new money, which the government then does print, or issue digitally. Not sure if people here don’t know how monetization works or don’t believe it.
    In the next crisis they will do what any family does, take old debt off balance sheet, and balance the budget. (Then you consolidate and make a deal with the lenders, in macro you orphan the bonds) They took the Iraq war off balance sheet, why not the entire economy? The general public could care less as long as the stream of payments and services continues. Confidence wise going off balance sheet is like a company in bad trouble firing the CEO, the stock goes up! How are they going to balance the budget? Raise taxes! Trump already talks about a gas tax, and probably a VAT tax, this what the GOP wanted all along, end the income tax and replace it with use taxes.

  28. Feb 20, 2018 at 11:33 am

    Emancipate the robots and tax the hell out of them

  29. David S
    Feb 20, 2018 at 11:36 am

    As the Mogambo Guru would say – We’re frickin’ doomed.

  30. Jon
    Feb 20, 2018 at 12:13 pm
    • Feb 20, 2018 at 12:18 pm

      Yeah, that’s a prime Stockman piece :-)

  31. desmond
    Feb 20, 2018 at 12:28 pm

    the roman empire collapsed because of the cost of maintaining the continual expansion which was required to fund itself… a common end to empires.. the common coin in usage had less and less and finally no precious metal at all. All gold was requisitioned by central government because that was the only commodity that could buy off invaders or pay for mercenaries.. it took 200 years to run its course but today things happen much faster….

  32. George Ort
    Feb 20, 2018 at 12:49 pm

    We are a nation being governed by people who do not understand the value of the dollar and the concept of thrift.
    WE CANNOT AFFORD TO SPEND MORE THAN OUR INCOME! !!!!!
    What about that statement do the Washington Elite of both parties
    NOT UNDERSTAND ????
    We are being dragged down by “politicians” who do not understand the basics of ECONOMICS. Spending more than you “earn” is a path to BANKRUPTCY. And that’s where the WASHINGTON ELITE are leading our nation. WE ARE NOT TOO BIG TO FAIL!!!!!

    • lenert
      Feb 20, 2018 at 2:46 pm

      Uh oh – Just last week a bank lent me money to buy a new car.

  33. raxadian
    Feb 20, 2018 at 1:01 pm

    “Look guys these tax cuts are bad for the US economy.”

    “Nosence, tax cuts are good for you, are good for me, they are good for everyone!”

    “But…”

    “Distraction!”

    “Russians? Where?”

    And that basically sums it up, and I wish I was joking.

  34. Jon
    Feb 20, 2018 at 3:03 pm

    I don’t think deficit has any impact on anything as long as dollar remains a dominant currency. The govt can in principle print as much money as they want..
    this has been happening for decades with no real impact

  35. Kye Goodwin
    Feb 20, 2018 at 4:40 pm

    Deficits apparently don’t matter much in the short run, except that they are clearly stimulative. We’ve heard so many warnings for so long about the federal debt and the runaway inflation its supposed to cause, that its hard to see from the real world how deficits matter in the long run either. Does anyone in a position of political power really understand the consequences of debt clearly enough to make policy?

    When urgent need is perceived, as in wartime, deficits are run up with no thought to consequences, and in the case of WWII there were apparently no bad consequences for the biggest deficits in American history. I’m with the folks who say that the only important deficits are shortfalls in REAL CAPITAL like infrastructure and trained workers.

    Still, in a market system there’s no separating the facts that really matter from the facts that people (market participants) think should matter.

  36. Laughing Eagle
    Feb 20, 2018 at 6:22 pm

    With WWII we were lucky as our manufacturing base was still intact while Japan and Europe’s factories were destroyed in the bombing. Nixon removed the gold backing from the dollar in part because of our spending in Vietnam.
    And now with the over 10 years in the Middle East, over 700 military bases, the large military industrial intelligence complex, we are being told this is only 25% of our spending, but we have an OTHER category at 20%. Sure.
    I also do not believe the government’s inflation data because prices are not a good reflection of it. It is easy to hide quality in inferior parts or workmanship. Inflation is here but we are being hypmotized into believing it’s low.
    Our deficits do matter and so does our money creation.

    • ScottS71
      Feb 21, 2018 at 1:20 am

      Great point on hidden inflation in quality, service, and quantity.

    • Kye Goodwin
      Feb 21, 2018 at 1:43 pm

      Laughing Eagle, I agree that inflation is higher than the official numbers, which are pushed lower by scams like improvement factors, chained CPIs and highly selective choices about what to include in the calculation. Everyone agrees that over the last 15 years real estate, equities and energy have run up in price must faster than basic food and clothing. The sudden concern about inflation, that some say was the cause of the latest stock correction, came when rising wages were finally detected. I think that wage growth has to be in place before inflation is declared: the old wage-price spiral.

      If we look at the categories where the prices have clearly gone up faster than the official rate, its hard to see the connection to the national debt. Real estate prices are controlled by private banks (until they aren’t). Banks decide how much money they will lend against particular properties and then create that amount of money when they make the loan. A lot of the increase in stock prices also involves borrowing to speculate. I don’t know how much of this is newly created money, but again I don’t see how this is connected to the national debt or deficit. Oil prices have gone up spectacularly because of a genuine physical shortage of cheaply extractable oil in the world. Shale fracking is the proof of that.

      Federal deficits are popular on Main Street because they add money to the private economy in the short run. Surpluses lead to immediate pain because they subtract money from the private sector. Running deficits might be a problem in the longer run because this could cause inflation or a decline in the dollars’s value against other currencies. This effect is likely to be a lot less obvious and slower to develop than the short term improvements from deficit spending. It matters too what country we’re talking about. Bolivia runs a much greater risk to it’s currency from deficit spending than the US does. One reason, there’s such a large number of US dollars in circulation to start. Another, the US dollar has been a trusted store of value for a long time.

  37. john nilsen
    Feb 21, 2018 at 6:51 am

    Wolf if memory serves, I think they beat your expectation of somewhere near 750 billionish. XD

  38. John
    Feb 21, 2018 at 11:46 am

    I’m glad Mr. Bergman mentioned Dept. of Energy DOD related spending, because when you add it up DOD + Veterans + Energy (Nuclear weapons) spending is larger than Social Security.

    And about that War spending, again Mr. Bergman mentions DOD has failed to pass an audit for over two decades -as required by law since 1996. But what DOD has done is rack up unsupported fraudulent budget adjustments of over $21 trillion. Yes Trillion.

    “$21 trillion is equal to 40% of all federal expenditures from 1998 to 2015, and three time the total DOD budgets from 1998 to 2015. […]
    There appear to be at least five possibilities: 1-The missing money was spent appropriately, but existing accounting infrastructure is incapable of tracking it. 2-The money was “wasted,” i.e. spent unwisely. 3-The money was directed into black projects and Special Access Programs in massive amounts outside the Constitutional appropriations process, and therefore without the knowledge of Congress and the citizenry, for purposes unknown. 4-The money was used to manipulate markets to maintain the reserve status of the dollar. 5-The money is being stolen by fraud and collusion between government and private interests. Or perhaps a combination of all of these.

    We must recognize the possibility that massive fraud is being perpetrated against the American people. If that is not the case, it would take relatively little effort and expense to put that concern to rest. On the other hand, what malfeasance might investigation reveal, and who might be responsible?
    At the very least, we should be asking the secretaries of DOD, HUD, and the Treasury, the chairman of the Federal Reserve, and the President of the NY Fed what they know, and we need independent audits of all those entities plus the Exchange Stabilization Fund. Anything less will be to acquiesce in an ongoing financial coup d’état.”

    ‘The Federal Government Can’t Account for $21 Trillion. Does Anybody’
    Care?
    https://solari.com/blog/the-federal-government-cant-account-for-21-trillion-does-anybody-care/

    • John
      Feb 21, 2018 at 12:09 pm

      Speaking of more non-contractual and un-Constitutional money going by-by:

      $16.11 trillion of financial assistance -July 2011 GAO Report to Congressional Addresses FEDERAL RESERVE SYSTEM, table 8, page 131 http://www.gao.gov/new.items/d11696.pdf

      (There is a 10 second dely before the Forbes pieces open)
      “Most people think that the big bank bailout was the $700 billion that the treasury department used to save the banks during the financial crash in September of 2008. But this is a long way from the truth because the bailout is still ongoing. The Special Inspector General for TARP summary of the bailout says that the total commitment of government is $16.8 trillion dollars with the $4.6 trillion already paid out. Yes, it was trillions not billions and the banks are now larger and still too big to fail.” http://www.forbes.com/sites/mikecollins/2015/07/14/the-big-bank-bailout/#7665887c3723

      “The audit of the Fed’s emergency lending programs was scarcely reported by mainstream media – albeit the results are undoubtedly newsworthy. It is the first audit of the Fed in United States history since its beginnings in 1913. The findings verify that over $16 trillion was allocated to corporations and banks internationally, purportedly for “financial assistance” during and after the 2008 fiscal crisis.” http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-feds-16-trillion-bailouts-under-reported/#3c0656016877

      • Feb 21, 2018 at 12:41 pm

        Ha, I reported on the 2011 audit of the Fed by the GOA:

        https://wolfstreet.com/2011/10/21/the-gao-audit-of-the-fed-doesnt-call-it-corruption/

        What the individuals at the New York Fed did (which was the Fed entity doing the bailouts) didn’t pass the smell test. For example, GE received a bailout, and its CEO Inmelt was on the board at the NY Fed and was involved in those decisions. The way these bailouts were decided and the insider trading by individuals at the New York Fed and elsewhere at the Fed was very ugly.

        But…

        What the New York Fed as an institution did in terms of these bailouts were short-term emergency loans to banks and industrial companies with financial branches (such as GE). These were loans designed to deal with a frozen credit market. The Fed acted in its role as lender-of-last-resort because companies like GE couldn’t get the money anymore to meet payroll. This was the Financial Crisis, when credit froze up in a credit-dependent economy. In this respect, the Fed acted legitimately in its role as lender-of-last-resort.

        The US government didn’t get any of these short-term loans, and didn’t need to because Treasury securities were in huge demand, which caused yields to plunge, as everyone was going for risk-free places to put their money (US government debt)… one of the reasons the corporate credit market froze up.

  39. John
    Feb 21, 2018 at 2:11 pm

    Have to hand it to you, as you are one of few that mentioned the FED “assistance”. The FED was actually audited, be it very narrowly.

    Now if we can just clean up that $21 trillion gone unaccounted for. The Army just had a FY2015 yearend journal voucher adjustment of $6.5 trillion, very very much more than the whole DOD budget. There has been a pattern for why this is happening for twenty years -like the systems don’t talk to each other but we are working hard on it, and claiming incompetence, to “it is complicated”. As Dr. Skidmore, who did the research last year discovering the $21 trillion of discrepancies noted, these are textbook red flag signals of fraud. The DOD made great hoopla announcing new audits, days after Skidmore announced his findings. They are not auditing further back than FY2016. If DOD and those with oversight duties in Congress can’t be forced to come clean and honestly account for more dollar adjustments than the amount of our National Debt, then all other conversations and budgets are pointless. Someone referred to this as the Post Constitutional Era.

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