Wednesday, July 8, 2009

Surging Spending in a Receding Economy

J.T. Young writes about what is likely to be the biggest political issue of the next few election cycles: The deficit and government spending.

America's emerging policy issue is the federal budget deficit. According to the 7/2 released CNN/Opinion Research Corp. poll of 1,026 adults (conducted 6/26-28 with a 3.1% +/- margin of error), the federal budget deficit ranked second only to the economy as "the most important issue facing the U.S. today." That's ahead of health care, the wars in Iraq and Afghanistan, and energy policy.

The public's concern is not surprising. While the U.S. economy has been shrinking, the U.S. government has been anything but. The recession's effect on the federal spending and the deficit can be painted in a few bold strokes. Even using the Congressional Budget Office's March estimates -- which do not include the effect of recent spending legislation -- it's not a pretty picture.

Federal outlays, the true measure of the government's size, are estimated by CBO to be $3.853 trillion this year. This is greater than the entire U.S. economy was in 1984. The federal government now consumes more than America produced just a generation ago.

Those federal outlays now account for 27.4 percent of all America produces today. Less than three-fourths -- 72.6 percent -- is left for all the nation's other uses. This ratio of spending to the total economy is higher than at any point since WWII.

As a result of this spending, the deficit is 11.9 percent of the economy. The deficit too is higher than at any time since WWII and would pay for two-thirds of all America's health care spending.

So, while Barack Obama pushes his Obamacare takeover of our health care system by complaining that Americans could spend as much as 5 percent of their total income on health care ten to twenty years from now, he creates a situation in which most working Americans could spend upwards of 60% on taxes and increased prices directly due to taxes, and we still will not put a dent in the deficit mess that he did not inherit.


conservative generation July 8, 2009 at 6:51 PM  

Excellent point. I've never thought about the fact that even if his policies work, any savings/benefit would be far surpassed by the negative effects of government spending.

Anonymous,  July 8, 2009 at 9:17 PM  

Great Post.
we can not spend our way to prosperity.

Euripides July 8, 2009 at 10:49 PM  

Wow, that gives a whole new meaning to the use of the term "surge." This time the media can't blame Petreus.

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