Posted by
John David Powell on Wednesday, February 03, 2010 8:48:57 AM
President
Obama’s proposed $1.267-trillion budget deficit will be the subject of much
haranguing and scrutiny in the coming months. Opponents will assail the shortfall as a giant step toward the economic
destruction of the Union and will use it as a fiscal call to arms as the November
mid-term elections draw nigh.
But
who really understands the budget? A
trillion is a huge number to grasp. Journalists, it seems, have a hard time comprehending it, which explains
why few news stories put the budget deficit in terms the rest of us can easily appreciate.
Any
good reporting of a budget, whether it comes out of Washington, your state
house, or your school board, should always include the basic information:
revenues and expenditures. How much does
the entity expect to take in, and how much does it expect to spend?
Financial
reporters understand this, because most of them have business degrees or some
background in accounting. I’ve tried
unsuccessfully for more than twenty years to convince heads of university
journalism programs to require their graduates to take one or two accounting courses. Here’s why. Most J-school graduates will cover local government for small-town news
organizations. Passage of the annual budget
will be one of the bigger stories of the year. The budget is a fertile source for enterprising journalists in search of
waste, fraud, and abuse stories. But you
have to know a credit from a debit, an asset from a liability, revenues from expenses.
Journalism
department heads come up with the same academic excuse for not requiring their
students to acquire the financial tools needed for good, basic reporting. Accounting courses, they say, are in the
business school. End of discussion.
Well,
guess what? Business schools now require
writing courses.
The
Houston Chronicle devoted about thirty column inches, including a graphic, on
the proposed budget, but omitted revenues and expenses, which the budget lists
as receipts and outlays. I mean, come
on, the federal budget isn’t baseball where you can get away with reporting
just a player’s batting average. A truer
picture requires knowing total hits and at bats. A player may retire with a batting average of
.500, which sounds impressive until you learn he had one single from two times
at bat.
The
192-page federal budget (available at whitehouse.gov/omb) is best explained for
us regular folks in terms of a household budget. What is our income this week? What are our expenses? What’s left over?
The
proposed budget estimates receipts of $2.567 trillion and outlays of $3.834
trillion. Subtract outlays from receipts
and there’s your $1.267-trillion deficit.
You
may understand trillions, but I understand hundreds. A proportional reduction brings the budget
story closer to home.
Say
you expect to bank $493 in cash money each week, and you plan to spend $737. Well, you’d be in the hole $244 by the
weekend because you overspent your income by about 50 percent.
Where
do you cut back? Unlike the government,
you can’t print money, and no bank will give you a loan because of your fiscal
irresponsibility. So, you decide not to eat at restaurants and to forgo that
flat-screen TV. Those are discretionary
expenses, unlike your rent or mortgage, utilities, car payments, and other
legally binding financial obligations, also known as mandatory expenses.
The
federal government also has mandatory and discretionary spending. Mandatory programs (Social Security,
Medicare, Medicaid, TARP, and others) account for around 57 percent of total
outlays, or $2.165 trillion in the proposed budget. The realty
of that figure hits home when it’s compared to income. Mandatory programs take 85 cents of every
dollar going to Washington.
See
what we’ve just done? We’ve converted
trillions of dollars to pennies, a much easier amount to understand. Using pennies we see the federal government
has only 15 cents left out of every income dollar to fund Agriculture, Defense,
Interior, Homeland Security, NASA, the Environmental Protection Agency, the
Small Business Administration, and the rest of the government agencies and
programs.
But,
the government needs 65 cents to fund all of its discretionary outlays. That’s why it goes into debt by 50 cents for
every dollar it takes in, which comes to $1.267 trillion.
So
that’s the budget. But just how much is $1
trillion? Well, it’s a million million
dollars. And if you placed $1 bills end
to end, the chain would go up to the moon and back 200 times. Something
NASA won’t be doing even once under the Obama budget.
(Video commentary at http://www.youtube.com/user/jdp1953#p/u/4/kLsYOWb730Y)