My apologies for those who already know this stuff, but apparently a ton of Wall Street talking heads, as evidenced by Bloomberg TV this morning, have no clue how this works.
Trump's budget proposal would give us several more years of rising deficits and then the deficit would start to shrink where it would approach 0 in 10 years. He's being criticized for this, which is absolutely ludicrous if one understands how the budgeting process works. Here's why:
The CBO (Congressional Budget Office) has a very silly rule for scoring the costs of any proposed legislation. What they do is calculate the costs for the next 10 years, and then completely ignore any costs after that 10 year period. That's like having a retirement plan that only factors in the first 10 years of retirement but ignores every year thereafter. Not very smart, right?
Since politicians/lobbyists all know this, when they roll out a new expensive bill, they just backload the real costs to kick in starting in Year 11. This makes the cost of any new bill easier to sell to the public.
What this also means is that the next few fiscal years, 2020-2022 or so, the budget deficits are impacted by the backloaded costs from legislation passed in 2010-2012. What passed back then? Ridiculous boondoggles like Obamacare and all the other nonsense Obama shoved down our throats.
My point is that you simply cannot blame current budget deficits on the current administration any more than Clinton should have been given any credit for his "balanced" budget in 1999-2000 (achieved only by stealing funds from Social Security).
This ridiculous accounting trick absolutely must be fixed if the Swamp is ever to be drained.
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[–] user17 0 points 2 points 2 points (+2|-0) ago
The purpose of the dollar as global reserve currency is to allow the issuing country (USA) to run a permanent trade deficit; where other countries give us real "goods" and receive "cash" (fake) in return.. Arguably the biggest financial scam in world history.
[–] Paladin_Diver [S] 0 points 1 point 1 point (+1|-0) ago
Agreed. I recall a Barron's article about a decade ago that speculated that ending the Petrodollar reserve status would drop US wealth by 20% overnight.
It'd be a cause concern if America's real worth wasn't intellectual capital.