Let’s Talk Deficits Again

My enthusiasm for Barack Obama has definitely flagged. My fundamental problem is that he does not appear to be taking the budget deficit and national debt issues seriously enough.

Now, he is caught between a rock and a hard place. It’s quite likely that taking steps to get the deficit under control will lead to an increase in unemployment and might very well send the country back into a recession. That won’t help him at the polls in 2012.

But that’ no excuse not to be wrestling with the problem.

Back in January of 2010 I wrote a post bemoaning the Federal Deficit. At that time the budget deficits were expected to be 2009: $1.8 trillion, 2010: $1.2 trillion, 2011: $900 billion, 2012: $500 billion and 2013: $500 billion with the understanding that the further out you go the less accurate you get.

It is now about a year and a half later and the actuals for 2009 and 2010 were 2009: $1.4 trillion, 2010: $1.3 trillion so we actually did slightly better than projected. The problem are the new estimates for 2011 through 2013 which are now 2011: $1.6 trillion, 2012: $1.1 trillion and 2013: $770 billion.

How the hell did 2011 have, all by itself, almost as big a deficit as originally projected for 2011 through 2013? We’re now looking at a projected $3.5 trillion in deficits over the three year period instead of $1.9 trillion and who’s to say these estimates aren’t way off as well?

In 2000 the Federal Government spent $1.8 trillion and took in $2.0 trillion. That was a surplus of $200 billion. By 2008, spending had increased to $3.0 trillion while revenues, after dipping to $1.8 trillion in 2003, were at $2.5 trillion leaving a deficit of around $500 billion. That’s when things completely went to hell.

The Stimulus Package sent spending to $3.5 trillion in 2009 and 2010. A increase of $600 billion dollars which was more than the total of $590 billion spent in 1980. Even adjusted to 2011 dollars the 1980 federal government spent only about $1.6 trillion. In the meantime revenues actually dropped to $2.1 trillion.

What the hell is going on? Where is the money going?

If we compare 2000 to 2010 we have a net increase of $1.7 trillion, almost double. So what were the big hitters?

#1 – National Defense +$399 billion to a total of $693 billion
Clearly the toll of our Iraq and Afghanistan wars.

#2 – Income Security +$368 billion to a total of $622 billion
No, this isn’t Social Security. It’s Federal Pensions and Disability, Unemployment, Housing Assistance, Nutrition Assistances and something called “Other Income Security.” Unemployment took the biggest chunk of the increase to the tune of $137 billion followed by “Other” by $94 billion. What I’m guessing are the three main welfare categories, Housing Assistance, Nutrition Assistance and “Other” accounted for a increase of $187 billion up to $335 billion. However only about 50% of “Other” consists of welfare. The rest is money paid into by workers and earned so that reduces true welfare to $242 billion or about 7% of the federal budget.

#3 – Social Security +$297 billion to a total of $707 billion

#4 – Medicare +$254 billion to a total of $451 billion

#5 – Health +$214 billion to a total of $369 billion

These five categories account for $1.5 trillion of the $1.7 trillion increase and $2.8 trillion of the $3.5 trillion budget. This is where you have to make cuts. However you can’t touch Social Security in the short term so that leaves the other four and the dribs and drabs left over. The next biggest item is Interest at $196 billion and that’s a dependent variable.

I don’t think you can get it all with cuts. I don’t see any way to avoid a tax increase. If the Republicans tell you different, they are playing magic with mirrors.