You'll hear from the mainstream media over the next few weeks how the deficit in the United States has fallen to "only" $483 billion in the 2014 fiscal year. While a deficit of that size seemed unimaginable back in 2007, it appears on the surface to be a massive improvement from the trillion dollar plus deficits than have been running since 2008.
But is it?
David Stockman, the former Director of the Office of Management and Budget under Ronald Reagan from 1981 to 1985, penned an excellent article this morning on the magic of government accounting.
As seen in the chart below, the amount borrowed (the real debt that must be payed back by American taxpayers in the future) was actually $1.086 trillion in 2014.
The deficit reported was largely wiped away due to accounting sleight of hand during the debt ceiling debate and movement of the debt into "other" off-budget categories.
For the complete breakdown see Washington Accounting Magic: US Deficit $483 Billion, New Borrowing $1.1 Trillion.