In his Tuesday State of the Union address, President Barack Obama said Americans must “understand [that] if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery—all of which would have an even worse effect on our job growth and family incomes.” This is all true. But then in a total failure of leadership, President Obama went on to completely abandon his own deficit commission’s spending cut proposals.
Today, the Congressional Budget Office (CBO) confirmed that our nation simply can’t afford President Obama’s failed leadership for much longer. This new CBO 10-year budget baseline shows an unprecedented $1.5 trillion deficit for this fiscal year—an increase of $95 billion over their last estimate. This will be the third consecutive year of trillion-dollar deficits.
And the reality is even worse than the CBO report suggests. By law, the CBO is forced to make a number of unrealistic assumptions about federal spending and taxes, including that (1) the 2001 and 2003 tax cuts will expire, (2) the Alternative Minimum Tax will not be annually adjusted for inflation, and (3) non-war discretionary spending will grow no faster than inflation through 2021.
The Heritage Foundation’s Brian Riedl has constructed a more realistic baseline that fixes the distortions mentioned above, and the results are scary. First, the federal government will add an astonishing $19.1 trillion in new debt between 2009 and 2021—$140,000 per household over those 13 years. Annual budget deficits will never drop below $1 trillion, as the debt is now projected to reach 100 percent of the gross domestic product (GDP) by 2020.
Second, these eternal trillion-dollar deficits are being entirely driven by rising government spending. By 2018, recession-depleted tax revenues are scheduled to rebound to their historic average of 18 percent of GDP. By contrast, federal spending (historically 20.3 percent of GDP) is projected to reach 26.4 percent of GDP by 2021.
In just four years (2007 through 2011), the federal budget is set to have expanded by nearly $1 trillion, from $2.729 trillion to $3.708 trillion. This represents a 36 percent expansion of government. The new Congress has already begun force the Obama Administration to make some responsible discretionary spending cuts. And these will help. Discretionary spending increased 25 percent between 2007 and 2010—not counting the $311 billion in discretionary stimulus spending and approximately $170 billion in annual spending on the global war against terrorism. Forcing President Obama and his Progressives allies to reverse this trend is a necessary first step.Continue reading on blog.heritage.org