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The Importance of Education, Transparency and...
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Essay by:Jennifer L. Dietz
George Mason University
During the heightened political season of the 2008 campaign there was considerable discussion of the national debt, yet the extent to which the issue is understood is debatable. While we cannot dispute the fact that deficits and debt result from an imbalance between spending and revenues, there are a number of contributing factors to be evaluated. One issue is the general public’s level of understanding, which has implications for how transparent the process actually is and accountability that the elected officials feel. Currently the U.S. budget process is too complex with confusing differentiating terms that provide room for politicians to try to favorably spin budget terms for their self-serving agendas.
When we discuss core concepts of the budget, deficit and debt we must acknowledge there are multiple definitions, so one can hardly blame the public for being confused. The off-budget captures federal entities of the Social Security trust funds and postal service, while the unified budget is the terms the encapsulates both the on and off budgets. However, even the unified budget still doesn’t include liabilities like the federal bank deposit and private pensions.[i] So we can begin to see how complex understanding the process is when even a concept that seems all encompassing, like ‘unified budget’, fails to capture the entirety of the budget.
Adding to the confusion is the multiple kinds of deficits, which politicians feel no need to convey. Currently the surpluses of Social Security trust funds are used to offset the deficits in the on budget, or at least that is how many in Washington have tried to present it. By relying on unified budget terms politicians have been able to present the deficit at lower numbers than the deficit excluding Social Security. As politicians paint a picture far rosier than reality they have chosen to hide behind the off-budget surpluses when increasing levels of spending, and there has yet to be a truly significant pushback on such actions. Differentiating the deficit without Social Security is significant because as the baby boomer population retires the trust fund will need to call upon the U.S. Treasury for the money that has seemingly ‘offset’ the on budget deficits. Over the years the deficit excluding Social Security has been far larger than the number that has been presented to the public as the deficit. If the public does not understand the difference between the unified deficit and the deficit excluding Social Security then they won’t be able to demand that public officials clearly distinguish the terms during budget proposals.
Even though the deficit is an annual term, they accumulate into the long term consequence of the national debt. Lacking a pushback on budget deficits the reality has become a public not confronting the mounting debt with politicians who are running away from it. Without a sense of clarity on the yearly budget process we face a compounding debt so standardizing the terminology of budget figures can be one step forward. Demanding the politicians rely on the on-budget deficits will not alleviate the standing debt, nor will it solve the looming baby boomer problem for the Social Security trust funds, but it can help in curbing future deficits and adding to the debt.
Just as there is a lack of clarity in budget terms for on/off and deficits, there is confusion over the meaning of debt. The federal debt is defined as ‘the total amount of Treasury debt and agency debt, consisting of the debt held by the public and debt held by trust or special funds’. The publically held debt is where the Federal Government borrows from the public to finance the deficit, and to do this the Government must compete for the financial resources in the credit market.[ii] Congress is responsible for setting a public debt limit, but this has no control on how much the government will borrow/owe as there are other means for financing the debt.[iii] Besides the publically held debt there is also the debt issued to Government accounts, this is how the Government utilizes the surpluses in items like Social Security trust funds. Additionally there has been more borrowing outside the United States as the Federal Government has used foreign holdings, with the percentage of debt borrowing from foreign holdings reaching 72.
[iv] Now we see that there is a plethora of terminology available when discussing debt, deficits and the budget. The implications of this multiplicity is that the actors in the budget process, mainly those pushing their agendas, are able to pick the terms best suited for their proposals. This is made possible not only through the confusion, but through the general public’s lack of understanding. While some can claim the budget to be transparent with documents and hearings being open to the public, this claim is meaningless without an adequate education system to make such transparency effective. It should not take a graduate level course to understand the U.S. budget process that impacts the general public. If we are to truly better ourselves and seek a path to correct our mounting debt, then we must examine the educational system to find ways to incorporate such necessary material.
When education levels on the budget are increased, the public will be better equipped to hold public officials accountable. Understanding the meanings behind deficits/debt the public can empower people to challenge elected officials on their proposals. As the public grasps the extent of our national debt they will be more inclined to stand up against increased spending. They will realize it’s not just the publically held debt, but also the foreign borrowings that need to be considered. Further transparency is needed to reform the problematic earmark process and put new pressures on Congress. Incorporating budget education to high school courses will not make everyone budget experts, nor will it cure people’s tendency to expect government to solve their problems with more spending and simultaneously keeping taxes low. But this can be a vital step in recognizing the alarming national debt and moving forward.
[i] Schick, Allen. 2007. The Federal Budget: Politics, Policy and Process. Brookings Institute, p. 47
[ii] Office of Management and Budget. Analytical Perspective: Budget of the U.S. Government, Fiscal Year 2008, p. 224
[iii] Schick, Allen. 2007. The Federal Budget: Politics, Policy and Process. Brookings Institute, p. 123
[iv] Office of Management and Budget. Analytical Perspective: Budget of the U.S. Government, Fiscal Year 2008, p 234
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