Don't confuse U.S. deficit with debt

This article is in today's Union.

President Obama's State of the Union address was generally well-received, but during his speech, he continually preached that we need to “reduce the deficit.” That is a great sound bite, but the untuned ear, however, confuses “deficit” with “debt.”

In 2009, the United States was almost $13 trillion in debt and the annual deficit was $1.416 trillion, but what do these astronomical figures really mean? The deficit is the amount we spend in any given year that exceeds our income for that year. The debt is all of the deficits added together for a grand total. “Reducing the deficit” to anything greater than zero still increases our national debt. What we really need is a zero deficit — in other words, a balanced budget.

Let's look at the United States budget in terms of a regular family budget. For purposes of demonstration, let's call the U.S. government “the Smiths.” All of the following figures are adjusted figures that reflect the actual U.S. income, deficit, debt, and unfunded liabilities (Social Security and Medicare) in terms that are more understandable to all of us.

In 2009, Mr. and Mrs. Smith made about $70,000, so they are doing all right as far as income goes. They have a modest house and couple cars. By all appearances, the Smiths seem to be doing great, but in 2009, the Smiths ran up $26,617 on their credit cards — a practice that they have done since their marriage began.

Now, they owe credit card companies almost $264,000! To make matters worse, their family members have informed them that they cannot file bankruptcy and also notified them that they have to come up with $1 million by 2038 to pay for the retirement and medical care of others.

In a very eloquent speech, Mr. Smith told his family not to worry, as he has everything well under control. His solution is that next year, the Smiths promise to charge less on their credit card.

This easy-to-understand example demonstrates how deficit spending and running up a huge debt is not a long-term economic success strategy for the Smiths — or for the U.S. This message resonates with the American people because all Americans can relate to the fact that running up their personal debt by deficit spending is not a personal economic success strategy.

We, the people, need to take bold steps. We need to make the tough choices. First and foremost, we need to stop digging.

With these three bold and difficult steps, American can get back on track. First, we need to balance the budget. Second, we need to deal with and start paying off our national debt — most of which is owned by countries that do not like us very much. Finally and concurrently with resolving our national debt issue, we need to deal with our unfunded liabilities.

We are at a crossroads in America. Unless we choose to make the tough choices and tackle our debt and unfunded liabilities (instead of half measures like “reducing the deficit”), America's greatest century could be our previous one.

The article can be found in The Union.