HOW BAD is the deficit, really, and how did we get to this point? The total deficit figures—the ones everyone uses, measuring the gap between total revenue and total expenditure—are frightening enough. But, as the General Accounting Office (GAO) has told Congress, they only partly measure the problem, since they include the mitigating trust-fund surpluses, especially Social Security’s, which is off-budget. When we strip away the Social Security surplus, what emerges is downright appalling. The soaring size of the on-budget deficit, indicated as a percentage of on-budget revenue, shows how badly fiscal discipline has collapsed—despite (or because of) the tax increases of 1982, 1983, 1984, 1986, and 1990 (see Table 1, next page).
Gross interest on the debt, including interest on the Treasury debt in the Social Security and other trust-fund surpluses (which net interest subtracts), now claims over a third of on-budget revenue—something one associates with banana republics. As its share of spending has grown, it has become a force driving spending and deficits higher. That is, our deficits are feeding on themselves.
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