The Budget That Devoured America?
Federal Spending: It’s a good thing President Obama isn’t in the private sector. If he was, the budget he just put forward for the next 10 years just might get him indicted for fraud.
Of all the promises the president made during the 2008 presidential campaign and last year’s budget debates, none rings so hollow now as the pledge of “fiscal responsibility.”
As a recent nonpartisan analysis by the Congressional Budget Office shows, our current budget path is, to use the euphemism du jour, unsustainable. It will leave a nearly insurmountable mountain of debt and spending to future generations.
Just last year, U.S. public debt totaled $7.5 trillion — a sum equal to all the indebtedness accumulated from our 225 years in existence as a nation. But by 2020, total U.S. public debt will be $20.3 trillion — an increase of 171% in just 10 years.
By itself, such a sum wouldn’t matter. But it’s the weight it will place on the economy that’s important. Last year, debt as a share of GDP — the recognized measure for how indebted a country is — stood at 53%. By 2020, it will be over 90%.
And that’s not including the hundreds of billions of debts run up by Social Security and Medicare, which, technically, the government says it “owes to itself.”
But that 90% number is key. A recent study conducted by economists Carmen Reinhart and Kenneth Rogoff for the National Bureau of Economic Research found that high levels of debt can have a severe impact on a nation’s economy — and thus, its ability to pay.
“Above 90%,” they reckon, “median growth rates fall by 1%, and average growth falls considerably more.” So all the budget’s grandiose projections, including economic growth of over 3% a year, are doubtful at best.
We are not only stealing money from the pockets of our children and grandchildren. We are impoverishing them as well.
Spending, of course, is the big reason. As David Freddoso of the Washington Examiner points out, the budget plan submitted by the president shows spending growing each and every year over the next decade — despite the worst fiscal crisis of our nation’s history.
All told, spending will swell from $3.5 trillion, or 20% of GDP, in 2009 to $5.7 trillion, or 25.2% of GDP, in 2020. Since World War II, debt has averaged 20% of GDP, so the 2020 projection represents a permanent increase of 25% in the size of government that will weigh like a millstone around the economy’s neck. Spending over the next 10 years will balloon by $19.7 trillion.
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