The chart above tracks the rolling 12-month total of federal spending and revenue. From my perspective, the most notable thing to observe here is that spending has been relatively flat for the past three years. In fact, since the end of 2009, federal spending has increased by only 2%! Thanks largely to a deadlocked Congress, this "austerity" has brought spending down from a high of 25.2% of GDP in 2009 to 23.5% today. That still leaves the government commandeering a greater portion of GDP than at any time since WW II, but it is progress that cannot be denied, even by ardent conservatives. If Congress can keep this up we will eventually balance the budget without the need to raise anybody's tax rate.
The top chart also shows that federal revenues have been increasing fairly steadily since the end of 2009, and are now up by a total of over 18%! The chart above shows how monthly receipts have exceeded those of the prior year in most months this year. This is a natural part of every recovery, as incomes rise, the number of workers increases, and corporate profits rise. Revenues are still unusually weak for this stage of the business cycle, but that's mainly due to the very weak recovery and the still-large number of unemployed. The best way to boost revenues is to boost the economy.
Thanks to very slow growth in spending and the continued rise in revenues, the federal deficit has declined from a high of 10.5% of GDP in late 2009 to 8% as of last June. That's still painfully large, but it is below the 9% level that is said to be something like the point of no return—beyond which deficits can become destabilizing and the economy spirals downward.
According to my projections, by the end of this year outstanding federal debt held by the public (thus excluding debt the government owes itself, e.g., to social security) will reach approximately 75% of GDP. The chart above puts this into context, tracking the increase (red) or decrease (green) in the federal debt burden (best defined by comparing debt outstanding to GDP) by Presidential terms. Even though Obama can correctly claim to have overseen a very slow rate of growth in federal spending, he will have presided over the largest 4-year increase by far in the federal debt burden since WW II.
Federal deficits are not necessarily a reflection of the current president, but perhaps past presidential policies:
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Federal interest payments to GDP is
ReplyDelete2.23%.All time high was 2q 1991 at 4.22%. This ratio was above 3% from 3q 1981 to 2q 1999.
The primary causes of the debt burden during Obama's term happened before Obama became the president.
ReplyDeleteFurthermore, Bush squandered a huge surplus during his terms. Had the surplus been preserved going into the crisis, the federal government would have been much better equipped.
Scott, it is clear that you care about this country and would like to help. Unfortunately, your method is deeply flawed!
Those that disagree with you will see your misinformation and half truth a mile a way.
Those undecided and are smart will see the deep flaws in your argument and will question your integrity and intelligence.
Those undecided and are dumb are probably irrelevant in the scheme of things. Even if you do want to recruit the idiots, you really should reconsider. After all, what if you are wrong and no one tells you that you are wrong!
Will you feel good if your ideology won and your country is worse for it?!
Yes, Obama inherited a mess. But it is a matter of fact that he did nothing to extract us from the mess. Indeed, I think it is arguably the case that he made things worse, which is why the recovery has been so miserable. I as well as others predicted in 2009 that the "stimulus" spending would only work to slow the recovery. And in spite of the huge deficits year in and year out, he continued to propose more spending. And his proposed budget this year was put to a vote and not a single Democrat voted in favor. Obama cannot continue to put the blame on others for the miserable results he has overseen. Oh, and did I mention that he had full control of the Congress for his first two years, and yet still failed to do anything to improve the situation?
ReplyDeleteSheesh, given that we can monetize debt without consequence, I would think debt is the least of our problems....
ReplyDeleteScott Grannis says that more QE will do nothing at this time. He may be right (I suspect we need more QE).
But if Grannis is right, we are missing the opportunity of a lifetime. The Fed could buy up US Treasuries, and relieve the taxpaying public of this burden.
According to Grannis, the only result would be that bank reserves swell. A very small price to pay.
Milton Friedman said QE would stimulate an economy near or at zero bound. I tend to believe Friedman.
But other way, QE is a winner.
"I as well as others predicted in 2009 that the "stimulus" spending would only work to slow the recovery. And in spite of the huge deficits year in and year out, he continued to propose more spending."
ReplyDeleteYou also predicted roaring inflation, to which there has been none, which indicates there perhaps should in fact be more easing.
As for more spending, the chart I linked to in my response above shows he has spent LESS than all other recent presidents. Where are your facts? The fact is deficits are higher due to the slowdown and you can't cut military, medicare, or social security benefits without major reform.
He also has a different route to fix the deficit than you prefer, raising taxes on those earning more than $250k (i.e. he isn't increasing spending and decreasing taxes). You disagree because you believe in less government.
Let that be the vote, more or less government, not made up facts and figures.
Foofar's statement is correct:
ReplyDelete"The primary causes of the debt burden during Obama's term happened before Obama became the president."
Exactly, the 2009 Federal Budget began on October 1, 2008. Indeed only a couple weeks before leaving office on January 20, 2009, then President George Bush II's Office of Budget and Management presented his Budget (as require each January by law) which had a projected $1.2 Trillion deficit.
Let's not forget which President entered office with a projected Budget Surplus and left 8 years later with a project deficit of $1.2 Trillion: George W Bush
That the US budget has only increased by 2% during this period of very high unemployment with very high outlays for Unemployment benefits, Food Stamps (SNAP) - up 40%, and financial support to states to help them during this crisis to maintain police, firefighters, unemployment benefits and teachers IS truly remarkable.
Most of the "blame" for this financial mess belongs to Bush's TWO WARS, MASSIVE INCREASE IN SPENDING FOR HOMELAND SECURITY, MEDICARE PART D AND OVERLY GENEROUS a TAX CUTS.
Which brings us to the major problem with Keynesian economic theory: when the economic times are good, the US government should cut back on spending and pay down debt. This is almost impossible to do in a Democracy especially when Republicans are ALWAYS clamering for more TAX CUTS.
Jake,
ReplyDeleteYour chart is a joke. Liberal Ungar's dishonest stats whitewashes Obama's ruinous spending by using as a benchmark the supposedly one-time emergency spending of 2009. It's easy to pretend your guy is a tightwad using percentages when the budget is already blown out. Further, as the Washington Examiner noted: "The Democratic Congress, confident Obama was going to win in 2008, passed only three of fiscal 2009′s 12 appropriations bills (Defense; Military Construction and Veterans Affairs; and Homeland Security). The Democrat Congress passed the rest of them, and Obama signed them.
So whereas Bush had proposed spending just $3.11 trillion in fiscal 2009, for a 3 percent increase, Obama and the Democrats ended up spending $3.52 trillion, for a 17.9 percent increase in spending — the highest single-year percentage spending increase since the Korean War.
By the end of Obama’s first year in office, spending as a percentage of GDP was 25.2 percent, the highest it has ever been since World War II. As Obama’s stimulus spending has receded, spending as a percentage of GDP has gone down, but only slightly. Under President Bush, spending averaged 19.6 percent of GDP. Under President Clinton, it was 19.8 percent. The historical post-World War II average is 19.7 percent. In 2012, after four years of Obama’s fiscal leadership, it is expected to be 24.3 percent."
Finally, I love how the guys who whine about Bush's spending are always the same guys who want Obama to spend even more.
"That the US budget has only increased by 2% during this period of very high unemployment with very high outlays for Unemployment benefits, Food Stamps (SNAP) - up 40%, and financial support to states to help them during this crisis to maintain police, firefighters, unemployment benefits and teachers IS truly remarkable."
ReplyDeleteObama expanded food stamps eligibility and upped the allotments. He bailed out his government union cronies. He launched a war on capitalism. Yes indeed, truly remarkable.
Here's Ann Coulter smacking down Rex Nutting, from whom Ungar presumably cribbed his stats:
ReplyDelete"Obama didn’t come in and live with the budget Bush had approved. He immediately signed off on enormous spending programs that had been specifically rejected by Bush. This included a $410 billion spending bill that Bush had refused to sign before he left office. Obama signed it on March 10, 2009. Bush had been chopping brush in Texas for two months at that point. Marketwatch’s Nutting says that’s Bush’s spending. There are other spending bills that Obama signed in the first quarter of his presidency, bills that would be considered massive under any other president — such as the $40 billion child health care bill, which extended coverage to immigrants as well as millions of additional Americans. This, too, is called Bush’s spending. . .Frustrated that he can’t shift all of Obama’s spending to Bush, Nutting also lowballs the spending estimates during the later Obama years. For example, although he claims to be using the White House’s numbers, the White House’s estimate for 2012 spending is $3.795 trillion. Nutting helpfully knocks that down to $3.63 trillion. But all those errors pale in comparison to Nutting’s counting Obama’s nine-month spending binge as Bush’s spending."
One last thing to keep in mind: the 2009 blown out budget that is blamed on Bush contains the outgoing funds for Tarp. The money was paid back when Obama took office, padding his numbers while making Bush's look worse.
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