Over 58 million viewers watched the first of three debates between the candidates for President of the United States of America. During the 90 plus minutes of spirited conversation, the voting public was witness to a swirling dervish of statistics and promises. The truth is generally hidden deep somewhere between the rhetoric and the facts.
The ability to get to the facts in any campaign is of tremendous difficulty. Political slant and bias is pervasive whether it is our own bias or that of our favorite publication or news outlet. From CNN to Fox Network and MSNBC, voters often seek political allegiances that match their own. It is up to the American public to go beyond the sound bites and headlines to seek out where the true facts actually reside.
U.S. Bureau of Labor Statistics
The predecessor to the Bureau of Labor Statistics (BLS) was formed by President Chester A. Arthur in 1884 in response to pressure from labor organizations for the U.S. Government to “help publicize and improve the status of the growing industrial work force.” (1) The First Hundred Years of the Bureau of Labor Statistics, 1984. The mission of “The Bureau of Labor Statistics of the U.S. Department of Labor is the principal Federal agency responsible for measuring labor market activity, working conditions, and price changes in the economy.”
Job Creation and Unemployment
The BLS publishes a tremendous amount of data relating to labor and prices. The keen focus this campaign cycle on job creation makes the numbers from the BLS very relevant. The framing of the employment situation will depend on whether you are the incumbent or the challenger. So who should voters believe? Check the facts. The BLS has published a chart of 70 years of Labor Force Statistics that include figures on the employed and unemployed. No spin, no rhetoric; just the numbers.
Two Independent Government Offices
The word “independent” and non-partisan usually does not align with offices inside the U.S. Government. The Congressional Budget Office (CBO) and the U.S. Government Accountability Office (GAO) are truly independent offices. The role of the CBO is to provide nonpartisan, objective analyses of budgetary and economic issues to support the U.S. Congress while that of the GAO is to investigate how the federal government spends taxpayer dollars.
Budgets and the Federal Deficit
The words deficits and debts are often intermingled into the same conversation as if they are one in the same. According to the Merriam-Webster dictionary, a “deficit is an excess of expenditure over revenue.” Debt on the other hand is defined as “something owed or a state of owing.” Here is an example on how deficits and debt work together.
In this example, the U.S. Government collected $1 trillion in revenue and had expenditures of $2 trillion incurring a $1 trillion dollar budget deficit. If the U.S Federal Government starts with $0 in debt and incurs a $1 trillion dollar budget deficit, how does it pay its bills? Through the issuance of U.S. Government debt. In this simple case, let’s say the U.S. Treasury sells $1 trillion dollars of government bonds to investors to cover the deficit spending. The national debt just increased by $1 trillion dollars. The following year, the government reigns in spending and balances its budget with revenues matching expenditures. While this appears fiscally responsible, the U.S. government still has a $1 trillion in debt that needs to be repaid.
According to the U.S. Government Accountability Office, the current federal debt is approximately $14.8 trillion with an annual budget deficit of $1.1 trillion.¹ The full picture is a little more daunting. The website US Debt Clock gives a broader picture of the challenging financial situation looming before the United States.
One of the only ways to pay down debt is to create a budget surplus. The last year in which the U.S. Government had a budget surplus was over a decade ago and amounted to just over $124 billion dollars. So how many years would it take for the U.S. Government to pay off its national debt if it ran a budget surplus of this size year-in and year-out? The simple math puts it around 119 years.
But this kind of math is not simple. Given the fact that the debt was financed through bonds and bonds pay interest, the U.S. Government needs to pay off principal plus interest. Should the overall interest rate on the debt be 3.5%, the interest payment alone would be more three times the $124 budget surplus.
This is akin to a consumer who charges too much on their credit card and the amount of interest charged is greater than the minimum payment made. The debt will never go away and may only compound as interest owed is added to the overall balance. The true figures of a debt reduction plan are a little more complex but the facts don’t lie. We are in a lot of debt and the inability of our elected officials to create a budget surplus only exacerbates the situation. The state of finances in the U.S. are pretty grim.
“Most people can think about political issues either as a game or as a substantive discussion of how best to solve a problem. What the media is doing is simply drawing our attention to whatever thoughts we already have about the game aspect – which is the aspect of politics that is not as valuable to democracy” said Ray Pingree, assistant professor of communication at Ohio State University.
It is up to the voters within our great Nation to go beyond the snippets of what we hear or read in the headlines. Our founding fathers constructed a country upon a foundation of three pillars that have endured for over 236 years. The three pillars represent the branches of government: Executive, Judicial and Legislative.
Elected officials take too much credit when things go well and push blame to others when things go poorly. The reality is that no one branch of government holds supreme power. If there is credit or blame to go around, it must be shared and balanced, just as our founding fathers envisioned over two centuries ago.
¹Congressional Budget Office
Edward Gjertsen II, CFP®
Mack Investment Securities, Inc.