A headline in the Wall Street Journal reads, “U.S. Deficit Shrinks to Level Last Seen in ’07.” The problem with this headline isn’t its accuracy (although it should say ’08 unless it’s speaking as a percentage of GDP). The problem is that readers are likely to come away with the false perception that the federal government, which ran a deficit of $483 billion for the 2014 fiscal year, has its finances, and the deficit, and the debt, under control. Here are a few other potential headlines the Journal could have used that might have painted a more accurate picture: “U.S. Runs 6th-Largest Deficit in History,” “U.S. Runs 12th-Largest Inflation-Adjusted Deficit in History,” “U.S. Borrows Nearly Another Half-Trillion Dollars,” or “U.S. Debt Doubles Since ’07.”
Let’s compare the federal government to a relatively average Joe. Percentage-wise, if the government were a citizen (Joe) whose after-tax earnings were $60,000 a year, this is how much it would have spent each year over the past decade (according to tallies from White House tables and this press release from the Treasury Department):
So, over the decade, Joe would have spent $190,638 (or 32 percent) more than he had available to spend — and so did Uncle Sam. How much would we really be applauding Joe for his frugality because he “only” spent $9,593 (or 16 percent) more this year that he had available, thereby adding to his massive debt at a little slower pace than he did during his earlier spending spree?