03 February 2010

Comparing Relative Deficit, Debt and Spending Levels

This article from Robert Robb provides a good comparison between the relative debt, deficit and spending levels of the Bush and Obama Administrations, as well as providing several historic benchmarks. The entire article is well-worth reading, but these points jumped out (apologies for excessive quotation):
'From 2008 to 2009, federal spending increased 18 percent. This was a budget year that straddled the Bush and Obama presidencies. But the spending increase was driven by anti-recession measures, predominately the Bush stimulus and bailouts. Obama supported these measures. In fact, his complaint about the Bush stimulus was that it was too small. This raises a question of political ontology: If Obama agreed with Bush, is it still just Bush's fault? ... Obama proposes that the federal government spend over 25 percent of GDP in 2011, compared to a historical average of around 20.5 percent. He justifies this as necessary to continue to fight the recession. Obama, however, projects that the recession will be fully over in 2011 and robust growth under way. Yet he proposes that federal spending continue to be nearly 24 percent of GDP through 2020. In other words, rather than wind down the additional recession spending after recovery, Obama is proposing that it simply become a new, higher base. After the World War II debt was reduced, accumulated federal debt never exceeded 50 percent of GDP until 2009, when it reached 53 percent. Under Obama's recommendations it would grow to 77 percent by 2020. If Obama were to recommend a path to return spending to its historical share of economic output, in 2020 the deficit would be just $255 billion, about what the federal government spends each year on large capital projects, and just 1 percent of GDP. In other words, not a problem. And federal spending would have still increased by more than 4 percent a year since 2008. Instead, Obama recommends a 2020 deficit of over $1 trillion and a troubling 4.2 percent of GDP.'
Scary stuff indeed. Unfortunately, the president seems to feel he only needs to 'explain' things a little more clearly for the public to get over its annoying habit of judging his fiscal policy based on these numbers.

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