Welcome to Washington in 3-D: deficits, debt, and denial, that is. The continuing deterioration in America’s fiscal figures has indeed added another dimension to the nation’s capital. So much so, that the current period has become the photo negative of the pre-9/11/01 budget estimates. Then surpluses continually multiplied, now deficits do. Just a decade ago, we wondered whether America would eliminate the national debt. Now we wonder whether it will eliminate America.
Last year’s budget figures went well beyond dismal. Washington spent $3.5 trillion. That is the equivalent of 24.7% of everything America produced. Not since 1946, in the immediate aftermath of WWII, has Washington consumed more of the nation’s economy – and then only slightly (24.8% of GDP).
Naturally, Washington’s deficit was equally depressing. Washington overspent its receipts by $1.4 trillion. That means 40% of Washington’s spending was borrowed and this borrowing amounted to 9.9% of the nation’s total production. Not since WWII has Washington borrowed a bigger slice of America’s economic pie.
The only thing that seemingly could be worse, would be to do it again. Well, guess what? According to the nonpartisan Congressional Budget Office’s projections, Washington is poised to do just that. This year’s federal spending, assuming there are no changes in current law, is estimated to be…$3.5 trillion with a deficit of $1.3 trillion.
In the category of small favors (perhaps the only time “small” is used to describe an aspect of the federal budget), due to slight growth in the economy, these nearly identical nominal amounts of spending and deficits only respectively amount to 24.1% and 9.2% of GDP this year. Both would be post-WWII records, had it not been for last year’s totals.
If that’s not worrisome enough, consider that the early returns on the current fiscal year show it actually exceeding last year’s totals. According to CBO’s latest figures, if timing shifts in payments were excluded, spending in January was $10 billion more than the previous year’s and the deficit was $33 billion more. For the first third of the fiscal year, the deficit was $40 billion higher than last year’s and federal spending was only lower because financial bailout expenditures were $150 billion less. CBO states, excluding bailout money, “[o]ther spending was up by $127 billion (or 12 percent)…”
What is driving this spending surge? Two things: one near-term and the other long-term. Both are insidious.