Cross posted from www.retiregarrett.com
Scott Garrett wants his constituents to believe that his brand of fiscal conservatism is a solution to the economic woes of the Federal government. After all, the United States has run an annual budget deficit of over $1 Trillion every year Barack Obama has been in office. WOW! That sounds really bad, and it is. But let’s stop for a few minutes to understand how we got in this position; what we’re doing about it; and the history of budget deficits over the last 30 years (after all, you can’t be expected to know where you’re headed if you don’t know where you’ve been).
Deficits are different from debt. Debt is the running total of all the deficits we’ve accumulated over time. Annual deficits are just that; annual. As an example, if I earn $300 dollars a year, but spend $400 a year, I’m running an annual deficit of $100. I need to borrow that $100 difference and let’s say further that you were kind enough to make me a loan. I continue my spending patterns for 5 years, and as a result I’ve had to borrow $100 from you every year and haven’t paid you back. So after 5 years I owe you $500. (to keep things simple I’m excluding interest owed on the borrowed money).