The final budget deception is that even the President’s projected deficit of $10 Trillion by 2008 is understated by trillions of dollars. The reason the actual deficit is understated is because the budget deficit is calculated using an accounting trick called the “Unified Budget”.
The unified budget combines the Federal Budget with Social Security and Medicare. At the present time, both Social Security and Medicare show an annual surplus. They both collect more in taxes then they pay out in benefits. This will come to an end as the baby boomer retirements increase.
In 2003, a comparison of the deficit using the Unified Budget calculation with the Federal Budget, without Social Security and Medicare, was completed using data from the Congressional Budget Office by the Center For Economic And Policy Research. It clearly showed the impact of combining Social Security and Medicare with the Federal Budget. In 2003, the deficit reported by the Bush administration, using the Unified Budget method, showed a deficit of $400 Billion. Looking only at the Federal Budget, the 2003 deficit was $600 billion.
The study concluded that the tax cuts left the budget seriously out of balance and calculated what it would require in spending cuts or tax increases to bring the 2003 budget into balance without Social Security and Medicare. To balance the 2003 Federal Budget alone would require spending cuts of 36.1% or tax increases of 56.6%.
The only reason to distort the true federal deficit by adding the surpluses from Social Security and Medicare is to make the deficit appear smaller. When Social Security and Medicare no longer are generating an annual surplus, the true size of the Federal Budget Deficit will become clear. This process is like taking the income and expenses of two brothers and combining them. One brother spends far more then he earns while the other earns more then he spends. Together they may look fine but the true financial condition of each brother is distorted.