Why the Budget Deficit Is Closer to $500 Billion Than $168 Billion

The U.S. Treasury reported that the FY2007 Federal budget deficit is $168 billion, less than the last year's deficit on $248 billion. The President's goal was to reduce the budget deficit ($521 billion in 2004) in half by 2009. These latest figures show the President is reaching his goal ahead of schedule.

However, the U.S. debt is now at $9.2 trillion, which is $500 billion more than last year. If the debt is an accumulation of each year's budget deficit, then why didn't the debt increase by only $168 billion?

The answer is that the additional debt is owed to the Social Security Trust Fund. More money is being paid into Social Security than is needed, so the government loans itself the revenue in the form of Government Account Securities. Since it is money it owes itself, the government does not count this liability as part of the deficit.

However, as the Baby Boomers retire, this debt will need to be paid. It should be included as a government liability, and added to the reported budget deficit. Therefore, it is more accurate to say that the real budget deficit is $500 billion, not $168 billion.

What It Means for You

In the long term, this debt that the government owes itself could mean no funds for your own Social Security retirement. Make sure in this Presidential Election that your candidate has plans for being fiscally responsible. This includes paying Social Security and balancing the budget to help reduce both the deficit and the debt.

U.S. Deficit and Debt Related Articles

• How the U.S. Federal Debt and Deficit Affect Each Other
• The U.S. Federal Budget Deficit
• The U.S. Debt and How It Got So Large