I just had a tough time reducing the deficit in a new game from Brookings. Called The Fiscal Ship, the game lets you win only if you become a deficit hawk and maintain a steady federal debt level for the next 25 years.
Where are we going? To two graphs, one chart and a game that tell you all you need to know about the federal debt.
Past, Present and Future Debt
Spending and Revenue
Defined as when yearly spending exceeds revenue, the deficit became a bigger chunk of the GDP when we had the 1982, 1991, 2001 and 2008 recessions. You can see below that the deficit or surplus as a percent of GDP is shown as the gap between the blue and green spending lines, Do note that 1998-2001 was the only recent time we had a surplus:
As our next step, we should ask about where our money goes. Dominated by mandatory entitlements like Social Security and Medicare, federal spending also includes the interest we have to pay to our bill, bond, and note holders for the money we’ve borrowed from them. The third category, discretionary spending, is topped by defense but also takes us to interstate highway maintenance, the FDA, Homeland Security and many other smaller items.
As a result, with more money going out than coming in, we have had to borrow. Defined as all that the nation owes at a specific time, the debt as a percent of GDP is growing larger:
Our Bottom Line: The Federal Budget
If you decide to play the game and steer “The Fiscal Ship” on a stable course, you will enter turbulent budgetary waters because almost any decision you make will be controversial. On the spending side, cuts would mean diminishing a social safety net, or education spending or neglecting the transportation infrastructure. Meanwhile, your tax decisions will shape the incentives that motivate individuals and business firms. As a whole, all you decide will reflect your vision of the role of government.