Before 1987, Americans only needed to understand the word “billion” to get a handle on federal budget numbers. Today, the word “trillion” is the needed metric in budget discussions.
The Congressional Budget Office released an update to its budget projections today, and the figures show that the federal deficit for fiscal 2009 will be $1.2 trillion. That deficit represents 8.3 percent of GDP, the highest share of the economy since World War II. Thus, a burden the size of 8 percent of all income earned in the United States this year is being thrust onto tomorrow’s taxpayers.
Here are some other observations on the data:
- If Congress passes a so-called stimulus package in coming weeks of say $800 billion, the 2009 deficit will top $2 trillion. Even the biggest critics of Washington’s spendthrift ways never thought they would see a number like that.
- The CBO shows federal spending in 2009 will be about $3.54 trillion. This number includes the spending effect of TARP and the federal takeover of Fannie and Freddie. But let’s consider those to be extraordinary items and take them out for a minute. And let’s add in $24 billion more for Iraq this year, as CBO indicates. The result is that — even aside the financial bailouts — federal spending would be about $3.165 trillion this year. That figure is up 6.3 percent over 2008, and up 70 percent over 2001, Bush’s first year in office.
- The CBO puts the deficit in fiscal 2010 at $703 billion. But that low-balls Iraq costs again, and doesn’t include extension of the AMT and other minor expiring tax provisions. Add those in, and the deficit in 2010 will be at least $829 billion.
Keynesian economists believe that government budget deficits “stimulate” the economy during a recession. But we’ve got $1.2 trillion this year and $800 billion next year of deficit “stimulus” without any special “stimulus” package.
Isn’t that enough? If I get up in the morning and drink five cups of coffee and that doesn’t stimulate me, I don’t go and drink another five. I’d recognize my addiction problem and start reforming my bad habits. Federal policymakers should do the same.