Trillion Dollar Deficits as Far as the Eye Can See
Remember that balanced budget we were going to get? Not so fast.
President Barack Obama‘s budget would generate deficits averaging almost $1 trillion a year over the next decade, according to the latest congressional estimates, significantly worse than predicted by the White House just last month. The Congressional Budget Office figures, obtained by The Associated Press Friday, predict Obama’s budget will produce $9.3 trillion worth of red ink over 2010-2019. That’s $2.3 trillion worse than the White House predicted in its budget.
A trillion here, a trillion there . . .
Worst of all, CBO says the deficit under Obama’s policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level.
The latest figures, even worse than expected by top Democrats, throw a major monkey wrench into efforts to enact Obama’s budget, which promises universal health care for all and higher spending for domestic programs like education and research into renewable energy. The dismal deficit figures, if they prove to be accurate, inevitably raise the prospect that Obama and his allies controlling Congress would have to consider raising taxes after the recession ends or paring back his agenda.
As Dave Schuler likes to say, that which is unsustainable won’t be sustained. Of “raising taxes” and “paring back his agenda,” I think we all know which a Democratic president and Democratic Congress will pick. Hell, it’s what a Republican president and Republican Congress picked for six years.
But without referencing the figures, Obama insisted on Friday that his agenda is still on track. “What we will not cut are investments that will lead to real growth and prosperity over the long term,” Obama said. “That’s why our budget makes a historic commitment to comprehensive health care reform. That’s why it enhances America’s competitiveness by reducing our dependence on foreign oil and building a clean energy economy.”
Asked and answered.
To be sure, these long range estimates are absurd flights of fancy. Even the most honest and expert forecasters couldn’t tell you with any accuracy what 2019’s revenue is going to be within half a trillion dollars. So, we’re working with fantasy numbers either way.
Still, the best guess from the beginning has been that Obama was operating from budget numbers that were complete BS incredibly optimistic. He isn’t the first president to do so nor will he be the last.
Hey! I’ve said that too. Of course to give due credit it is something Herbert Stein used to say.
By the way, I like several of those posts under related stories…hmmm oh maybe because I was making this point awhile ago? Of course I was excoriated for such a position.
Wait, what?
While no one ever accused President Bush or the Republican Congress of his era of paring back their agendas, they raised taxes?
Do we live in alternate universes, James?
As a California resident, let me say that what is unsustainable can be sustained (a) longer than you expect, and (b) make things considerably worse.
FWIW, the thing I haven’t gotten personally figured in this is how much these trillions should be compared to global equity losses.
(Some stories around the world say equity markets have lost $50 trillion, or $50,000,000,000,000 to Steve 😉
To put this in perspective, just the first two years of Obama will have a 50% higher deficit than all 8 years of Bush. I have a liberal friend who voted for Obama based on “budget discipline” compared to Bush. Even he is starting to see what conservatives mean by tax and spend liberals. Of course it is a bit late now.
My prediction, by then end of the year the most popular bumper sticker will be “Don’t blame me, I voted for McCain”.
Numbers please? The national debt grew by nearly 5 trillion dollars under Bush from 5.7 trillion to 10.4 trillion. We’ll be nowhere near that amount, much less 50% higher, two years into Obama’s term. On the other hand, at this pace, Obama would certainly catch and pass Bush by early in his second term. Or are we playing the Bush deficit accounting game where stuff like the war in Iraq, Katrina, and such are off-budget and we pretend they don’t count?
But to James, the answer to our situation will be, for better or worse, one word: “inflation.”
It is estimated that there is over 12$ trillion in dollar denominated deposits parked off shore due to our punishing tax code. Over $350 billion per year is spent on tax code compliance. Over 10 years, the compliance cost saving alone would provide a $3.5 trillion stimulus.
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The CBO numbers are based on a recovery where GDP growth in the next decade never exceeds 2.2%–I don’t know ANYBODY who thinks it’s going to be that bad. Except, apparently, the CBO. The OMB projections are based on a more historically accurate average of 2.6% GDP growth, as is the Federal Reserves.
Okay James, I hope you will allow me to use the Fair Tax as a basis of debate without attaching the Fair Tax banner. And since the idea is making me no money but is for the betterment of this country, I would think you would approve.
Alex,
You are aware that growth rates have been slowing…by historical standards, right?
Oh, and based on this document from the CBO I’d like to know where you got your numbers Alex. In looking at table 2-5 it looks like the CBO is forecasting some years with growth over and above 2.2%. Projected annual average real GDP percentage change is 3.6% from 2012 – 2015 and 2.3% for 2016 – 2015. Growth for 2010 is projected to 2.9% and for 2011 4.0%.
Hm… I based my comments on Pete Orzog’s discussion on MSNBC. Apparently I misunderstood or he did.
So long as every comment you post, regardless of the topic, isn’t about your pet project, sure. If we’re debating alternative tax policies, it’s fair game. Otherwise, give it a rest…
Gosh, what could have happened in the last six months of the Bush administration to set this up?
(Note that I believe this is a global crisis, note that I do not think Bush was responsible, just that he was … irresponsible.)
I’d like to talk about the abuse of pit bulls and how it impacts the deficit….
Sorry James couldn’t resist.
But to bring it back to the topic at hand, I think that looking at alterntaive tax structures is within the bounds of the topic. IIRC, the fair tax would be made revenue neutral and its proponents (Hall and Rabushka, again IIRC) claim it would even increase GDP growth rates. But it has been awhile since I read up on that issue.
See Pete, I am aware of the issue. It just doesn’t consume my every waking moment. Now, pit bulls on the other hand…. 🙂
No Mr. Knapp,
Orzag lied. Plain and simple.
He is selling his book and nothing less.
I have rarely seen such B.S., even from a government official.
Hmmm Orszag is now director of OMB…a post that has to trumpet the party/President’s line even if it is complete Bravo Sierra. I’d say he is less of a disinterested observer than the CBO is.
Not sure where he gets that 2.2% from though. I don’t see that number anywhere.
Bernard,
Numbers you want, numbers you shall have.
Year Revenue(T) Spending(T) Deficit(B)
2000 2 1.8 236.2
2001 2 1.9 128.2
2002 1.9 2 157.8
2003 1.8 2.2 377.5
2004 1.9 2.3 412.7
2005 2.2 2.5 318.3
2006 2.4 2.7 248.1
2007 2.6 2.7 162
2008 2.5 3 459
2009 2.1 3.9 1843*
2010 2.4 3.6 1400*
Total for Bush’s first 4 years $948B
Total for Bush’s second 4 years $1187.4B
Total for 6 years of Bush and Republican congress $1514.4B
Total for 2 years of Bush and Democratic congress $621B
Total for 8 years of Bush $2135.4
Total for one year of Obama and a democratic congress $1843
Total for two years of Obama and a democratic cong. $3243
$3243B/$2135.4 – 1.52 ergo Obama’s deficits for 2 years will be over 50% higher than 8 years of deficit’s under Bush. I’m not holding Bush up as a model of budget restraint, but Obama is clearly Obama is looking at least 6 times worse than Bush.
*The last two deficits come from a combination of the USA Today article and the AP article James links to.
Odograph,
Look at the revenue numbers. $500 billion off of the peak for Bush. If the economy was perfect and chugging along at that rate, the Obama deficits in two years would still be ~25% higher than Bush over 8 years. My liberal friend pointed to Obama’s very centrist language about budget restrain and holding the line on the deficit during the campaign to counter my charges of Obama being nothing more than a tax and spend liberal. Obama didn’t “waste a good crisis” to implement his tax and spend ideas. Of course right now we have primarily the spend part. Do you still believe that only the “rich” will be taxed?
The CBO projects 4.1% growth in real GDP for 2010.
Who the hell belives that, even with the increase in G from stimulus and other government spending?
Does the FED belive that? If so, why are they going all in with QE? I would say that the FED looked at their projections and were scared sh**less.
Orzag is trying to downplay the CBO projections, but even those seem optimistic.
In what way is that kind of Fantasy Politics useful?
To expand … if your position is that Obama’s spending would be exactly the same in a healthy economy, I laugh at that.
We’d have battles, and political realities, and budgets … but they’d be different ones with different outcomes than we have now.
It’s possible that he’d do a quiet centrist budget, or it’s possible that he’d be mired in healthcare.
Here, you are the first one to deserve this quote since I put it up. Obama is your “cause.”
Okay, good, so these are the “official” deficit figures that don’t count the massive Bush off-budget expenditures. Got it. Happy to see at least one person — you — was taken in by that scam.
If you’re an honest person you’ll look at the year-by-year national debt figures to see what the real deficits were.
Bernard,
Lets use the total debt numbers. Same source as above.
Year debt(T)
2000 5.6
2001 5.8
2002 6.2
2003 6.8
2004 7.4
2005 7.9
2006 8.5
2007 9.0
2008 11.1
2009 15.3
2010 17.8
So from a 5.6T debt in 2000 to 2008, we see 5.5T increase in debt.
For Obama in two years we see 6.7T increase in debt. So two years of Obama is still much more than 4 years of Bush.
So explain to me how I am the one being fooled and not the suckers who heard Obama promise that every spending increase will be matched by a budget cut and believed it.
Obama is a tax and spend liberal. No matter how much lipstick you put on the pig, there is no changing that fact. Add to that his inexperience and you can understand why Obama has done so much to wreck this country’s economy in 8 weeks.
Odograph,
What I was trying to point out is that you can’t blame the economy for Obama’s deficit. If the economy was roaring along, Obama would be spending like a drunken sailor. The administrations comments about not wasting a good crisis wasn’t a slip of the tongue, but just the mask slipping about what their intent was anyway.
That is what we call a naked assertion. There is no way to prove what Obama’s path would be in a strong economy.
… and there is the whole parallel world problem: would Obama have been elected in a strong economy?
I can’t find the debt estimates for 2011… are they in the actual budget document? Where did those come from.
If they are actually planning on 17.8 trillion in debt at the end of 2011, I offer my apologies to you for my tone and ignorance.
Bernard,
The debt numbers are based on the original article I cited. Obama estimated the debt at 17.6T in 2010. The article James cited says the deficit spending would be an additional 400B more than Obama claims. So the 17.8 trillion is probably closer to 18T. Of course the Obama 17.6T was based on the economy turning around and expanding healthily the rest of this year. You can decide if you believe that fairy tale.
Odograph,
You are right that we can only prove the reality that we live in. But if you think that Obama is somehow being forced to spend, you just aren’t paying attention. I believe that this sort of massive increase in government spending was his plan all along. In a strong economy, the spending would be the same, the rhetoric to support it would be changed slightly.
You gotta be kidding me, right?
This is a global downturn in which $50,000,000,000,000 suddenly went “poof” around the world.
Do you think any market democracy can avoid “spending” in that situation?
Can you name any market economy anywhere in the world who did not suddenly need to pay out more for unemployment, social services, welfare …
(BTW, a variety of “stimulus” are in play around the world, ranging from electronic debit cards (Asia) to special worker retraining (Europe))
Relax; it’s all part of the plan,ask the Bolsheviks!
I am really not trying to be a jerk… maybe my browser is screwy and it isn’t giving me the whole article, but I don’t see the 17.6 figure anywhere. I am willing to believe you, but is anyone else having trouble find that specific estimate in the article?
re: Floyd | March 20, 2009 | 06:28 pm | Permalink
Well, hopefully, you’ll be one of the first to be rounded up and sent to the reeducation camps…who knows, maybe with the proper “motivation”, you might even develop a fondness for David Axelrod…
Assuming that you are an interested party;
Hear this, I would never make it to your reeducation camps.
It is just as well though, since “motivation” techniques won’t work on those of us who remember the taste of freedom.
You mean a little waterboarding “motivation” wouldn’t bother you? As for not making it to “my” camps (don’t you know what sarcasm is?)…a bullet to the temple instead, eh? Such a shame…perhaps you will become a martyr to the cause…