Thursday, January 07, 2010

Let’s Talk About the Federal Deficit

This has kind of been simmering in the back of my mind. Has anyone taken a close look at the budget and deficit estimates moving forward through about 2014?

First of all, let’s understand the situation we’re in. The economic stimulus package, plus maintaining forces in Iraq and Afghanistan plus the normal operations of the government is going to call for record expenditures in 2009 of approximately $3.9 trillion.

Yes that is TRILLION with a T and not Billion with a B or Million with an M. This is a full TRILLION dollars more than the government spent in 2008. The number is so large as to be utterly incomprehensible to the average mortal. Let me put it in perspective for you. The population of the US is 308 million. The Federal Budget therefore represents the expenditure of around $13,000 per person. You got that? That’s $13,000 for every man, woman and child in the whole US of A.

Let me put in another way. If you were to pick up $1 per second, it would take you something like 126,000 years to pick up $3.9 trillion.

The average Household Size in the US is 2.6 people. That means the average household would have to be paying about $34,000 in taxes to cover this expenditure. Obviously that’s not the case.

The fact is that the total revenue of the US in 2009 is expected to be $2.1 trillion. Due to the economic recession this is down about $400 billion dollars from 2008. That translates into a budget deficit of $1.8 trillion (yes Virginia, that’s TRILLION with a T again) or $6,000 for every man, woman and child in the US. That’s $15,600 per household.

And it doesn’t get terribly better anytime soon. Over the next five years the deficits are estimated to be $1.2 trillion, $900 billion and then $500 billion for 3 years.

Allow me to put this into perspective. The total budget deficit over the 8 years of the Bush Administration was $2.0 trillion and over the 8 years of the Clinton Administration it was a total of $320 billion. Most of the Clinton era deficit was in the first 3 years. Over the last 3 years there was actually a budget surplus of $430 billion.

WTF happened?

What happened were the disastrous economic and foreign affairs policies of the Bush Administration and the questionable economic stimulus strategy of the Obama administration. Let’s us try not to forget that if it weren’t for the former we wouldn’t have had the latter. A full $800 billion of the budget increase in 2009 is the stimulus package which may, or may not, ultimately pay for itself.

However, that doesn’t excuse the strategy if it fails. It’s always a stupid thing to throw good money after bad. On the other hand, it may have been even stupider to let the entire US economy collapse IF that would have happened. I would dearly love to see the projections that frightened the economic advisors of both the Bush and Obama administrations into thinking that going an additional $800 billion in debt when we were already facing a record deficit was a good idea.

Certainly the Bush tax cuts that conservatives think were so wonderful had a disastrous effect upon revenues which DECLINED from $2.0 trillion in 2000 to a low of $1.8 trillion in 2003. They then recovered to a high of $2.6 trillion in 2007, dropped slightly to $2.5 trillion in 2008 and then dropped precipitously to $2.1 trillion in 2009. You got that? Government revenues in 2009 were about the same as they were in 2000.

In the meantime, government expenditures rose from $1.8 trillion in 2000 to $2.9 trillion in 2008. Mind you, that’s with a so-called small government conservative Republican in the White House and a mostly Republican controlled Congress.

Please, give me Slick Willy back. Under this “spendthrift Liberal” revenues rose from $1.2 trillion to $2.0 trillion while expenditures rose only from $1.4 billion to 1.8 billion. Yes Virginia, in the year 2000 we had a $236 billion budget surplus.

A breakdown of the 2009 deficit goes something like this. About $1.0 billion is inherited. $500 billion was the 2008 deficit, the drop in revenues was $400 billion and $100-$150 billion represents the typical rise in operating expenses that seems to occur regardless of anything else. The remaining $800 billion is the stimulus package.

The $1.2 trillion deficit estimated for 2010 follows a similar road but to my mind is harder to justify. We start with the $1.0 trillion deficit from 2009, add the $100-$150 billion standard increase in operating expenses and subtract the estimated $200 billion revenue increase we should get a deficit of around $900 billion. The extra $300 billion comes from an estimated $400 billion increase in operating expenses rather then the typical $100 - $150 billion. It’s unclear where the extra $300 billion is going at this point.

Guys, if these estimates are right, we’re pretty much screwed. If the budget estimates are right, we would be accumulating a debt of over $5.6 trillion between the years of 2009 and 2014. That’s $18,300 for every man, woman and child in the US. That’s $47,500 per household.

I find this more than a little disturbing. As a matter of fact, this is nuts. As a matter of fact, ARE WE OUT OF OUR COTTON PICKING MINDS???

How the hell do you ever get out from under this kind of debt?

1 comment:

Anonymous said...

What a great resource!