The Congressional Budget Office this week updated the its estimates for the federal deficit for the current fiscal year and projected estimates for several years into the future. The forecast is suspect, however, because it assumes that cost savings deals that resulted from the budget deficit limit negotiations will actually occur and that the Bush tax cuts will expires as required by current law. They have already been extended once and will probably be extended again -- the last thing we want to do in a faltering economy is to raise taxes.
The forecast for this fiscal year shows minor changes. The deficit will continue to be 35.7% of total expenditures -- thus, over one/third of the federal budget is funded by the issuance of debt. The federal government continues to spend 55.5% more that than it receives from taxes and other sources of revenue.
As reported in the Wall Street Journal, "CBO said that this year's deficit—at 8.5% of GDP—will be larger by that metric than all but two other years in the past 65, exceeded only by 2009 (10%) and 2010 (8.9%.) Spending, at 23.8% of GDP this year, is significantly higher than the historical averages. Revenues are significantly lower at 15.3% of GDP this year."
August 6, 2011
FederalExpenditures Exceed Receipts by More Than One-third
It seems to me that the recent debate over the debt ceiling has treated the enormous amounts involved in an abstract manner. It is difficult to get one's mind around figures such as $2 or $3 trillion. We already know that the Treasury took advantage of the increase in the debt level to raise the total outstanding federal debt to more than 100% of the gross domestic product. That means that the national debt exceeds the revenue generated by the entire economy in 2010. And yet, because this can be paid off over time, many on the left do not believe we should be concerned about this.
It may be more relevant for some people to compare the deficit to expenditures on an annual basis. Recently, I heard a radio talk show host announce that, in the latest month, federal expenditures totaled $300 billion, while its receipts totaled $180 billion– in other words, that expenditures exceeded revenues by more than 40%. The most recent Monthly Budget Review issued by the Congressional Budget Office (August 5, 2011) generally confirms this. For the first ten months of Fiscal 2011, federal receipts were $1893 billion, while expenditures were $2996 billion. (Or receipts = 1.892 trillion and expenditures = 2.996 trillion). During this period the deficit was $1.1 trillion. This means that receipts were only 63.2% of expenditures, or put another way, we spent 58.3% more than we received. No family could go through life spending 58% more than their income, and this is also true for the federal government.
Looked at in this light, it is beyond my comprehension how anyone could argue that we do not have a massive problem, or that we need not reduce the size of the federal government to solve it. Since it would not be possible to raise taxes by 58% without destroying the economy, the only alternative is to reduce costs. I am afraid that, only if we elect a Republican President and Republican Congress, will we be able to do this.
It may be more relevant for some people to compare the deficit to expenditures on an annual basis. Recently, I heard a radio talk show host announce that, in the latest month, federal expenditures totaled $300 billion, while its receipts totaled $180 billion– in other words, that expenditures exceeded revenues by more than 40%. The most recent Monthly Budget Review issued by the Congressional Budget Office (August 5, 2011) generally confirms this. For the first ten months of Fiscal 2011, federal receipts were $1893 billion, while expenditures were $2996 billion. (Or receipts = 1.892 trillion and expenditures = 2.996 trillion). During this period the deficit was $1.1 trillion. This means that receipts were only 63.2% of expenditures, or put another way, we spent 58.3% more than we received. No family could go through life spending 58% more than their income, and this is also true for the federal government.
Looked at in this light, it is beyond my comprehension how anyone could argue that we do not have a massive problem, or that we need not reduce the size of the federal government to solve it. Since it would not be possible to raise taxes by 58% without destroying the economy, the only alternative is to reduce costs. I am afraid that, only if we elect a Republican President and Republican Congress, will we be able to do this.
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