The ENTIRE Government Runs on Borrowed Money

By Ron Olive.

  (To the Editor of the Wall Street Journal)

  Sir:

  In “Revenues Are Rising” (Review & Outlook, January 12th), you tell us that, according to the Congressional Budget Office, federal receipts “have climbed by $44 billion, or nearly 9%, to $531 billion” during the first quarter of fiscal 2011, that is, the last three months of 2010. You also tell us that federal spending “rose by $26 billion to $902 billion.”

So the federal budget deficit was a staggering $371 billion during the last three months of 2010. If federal receipts and spending stay the same for the next three fiscal quarters, the federal budget deficit for fiscal 2011 would be $1,484.0 billion. But the bad news doesn’t end there.

In the third quarter of 2010, federal receipts were running at $2,416.4 billion a year, and expenditures were running at $3,760.7 billion.  Transfer payments, that is, a payment of money for which no good or service is received in exchange, amounted to $2,352.3 billion, annualized.

So transfer payments were 97.3% of federal receipts!  The federal government is borrowing money to pay wages and salaries of federal workers, interest on its debt, the Iraq and Afghanistan wars, and everything else that we usually think of as “the government”, and using nearly all of its tax receipts to pay claims related to Medicare, Social Security, and other transfer payments.

Ronald W. Olive
Economics Department
UMass/Lowell
Lowell, Massachusetts 01854
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