Tuesday, February 15, 2011

Houston, we have a spending problem

Source: Wall Street Journal
What this chart makes clear is that the federal government's problem is not a lack of revenue -- i.e. insufficient taxes -- but rather runaway spending. While the left frequently loves to cite the budget surpluses which occurred under the Clinton administration as evidence of their commitment to fiscal responsibility, this chart reveals that those surpluses were a direct product of spending restraint.

If federal spending were held to just over 18 percent of GDP, as was the case in the 2000 and 2001 fiscal years, the federal budget would be in surplus starting in fiscal year 2014 and growing thereafter. That the budget is projected to be in deficit is a direct product of the spending binge taking place.

Don't believe me? Consider this: in fiscal year 1999, before the Bush tax cuts had been enacted and the economy was near the zenith of the go-go internet boom with unemployment around 4.5 percent, federal receipts as a percentage of GDP was just over 20 percent. Looking forward, at no point in the next 9 years is the amount of federal spending projected to be less than 22 percent. Thus, even if the economy was to replicate its very best form and run on all cylinders with tax rates restored to their Clinton-era levels, this would still be insufficient for the budget to merely break even.

And if you aren't already sufficiently depressed, Jim Pethokoukis points out that this budget projection, as bad as it is, makes the assumption that no recession will take place the rest of the decade!

Update: Not only does the budget assume no recession through 2020, The Wall Street Journal editorial board notes that GDP growth 2012-2014 is projected at over 4 percent.

1 comment:

Ben said...

I love this chart.