Downsizing Blog
Huge Deficits, Massive Debt
According to the administration’s latest budget figures, the federal government is projected to run huge annual deficits throughout the coming decade. The actual figures could end up being considerably larger, particularly if policymakers continue to justify additional budget-busting for alleged “emergencies.” As a previous blog shows, these deficits would be driven by excessive spending.
Debt held by public as percentage of GDP would also reach dangerous heights:
The Congressional Budget Office’s estimates of the president’s budget forsees even higher debt levels than the administration projects.
Spending is the Deficit Problem
The figure shows projected federal spending and revenues in coming years, according to the administration’s new budget figures. The deficit is the gap between the lines:
Federal spending as a percentage of GDP will remain well above the average for the last half century (20.3 percent from 1959-2009). Revenues as percentage of GDP are projected to rise in coming years as the economy recovers (the Obama forecast assumes most of the Bush tax cuts are continued). Average federal revenues the last half century (1959-2009) have been 18 percent of GDP. Obviously then, the deficit is cause by above normal spending, not a lack of revenues.
Spending to Cross New Thresholds
Federal spending reached $1 trillion in fiscal year 1987. Then it took fifteen years for spending to reach $2 trillion in 2002. Then it only took six years to reach $3 trillion in 2008. President Obama’s new midsession budget projections show that it will reach $4 trillion in 2014 and take only four more years to top $5 trillion in 2018. Meanwhile, the Washington establishment is getting all worked up about the deficit effects of extending recent tax cuts, which amount to just a few hundred billion dollars a year.
