- The Congressional Budget Office said the U.S. budget deficit for fiscal 2008 -- $407 billion -- will be more than double the deficit for 2007, hit by the wars and a weak economy, and predicted it is likely to rise further in fiscal 2009.
"The figures make it challenging to avoid playing the dismal economist," said CBO director Peter Orszag in a statement.
The agency foresees an increase to $438 billion by fiscal 2009, which begins Oct. 1, with the government takeover of Fannie Mae and Freddie Mac further complicating budget projections.
The party of fiscal conservatism strikes again.
Let's back up a bit to the beginning of the fiscal disaster known as the Bush presidency.
1.) Bush cut taxes twice -- once in 2001 and once in 2003. There is nothing wrong with this if there is a commensurate cut in spending. Revenue from individual income taxes increased from $994 trillion in 2001 to $1.1 trillion in 2007. In case you are using Bush administration logic (meaning you move whatever goalposts whenever possible to make your faith look good, revenue from individual income taxes increased from $793 billion in 2003 to $1.163 trillion in 2003, or a nominal increase of 46%. This rate of increase is lower than than the 1990s when individual income taxes were raised).
2.) There was not a commensurate cut in spending. Instead -- the Republican controlled congress -- increased discretionary spending from 649 billion in 2001 to 1.041 trillion in 2007.
In short, the Republicans went to war and cut taxes. That is a recipe for disaster.
But there is another, deeper problem at work here. The figure that is being reported is a dishonest figure because it counts the social security surplus. Remember in 2000 when Al Gore was talking about a "social security lock box"? What he was saying is we should take all of the surplus money paid into social security and not spend it now. However, that is exactly what we are doing and have been doing for a very long time. As a result, the "unified" budget deficit -- the figure reported in the press -- is, well a lie. The correct way to look at the budget deficit is to see how much debt we are issuing. And that figure is far worse than what is being reported.
Here are the yearly amounts of total debt outstanding.
09/30/2007 $9,007,653,372,262.48 09/30/2006 $8,506,973,899,215.23 09/30/2005 $7,932,709,661,723.50 09/30/2004 $7,379,052,696,330.32 09/30/2003 $6,783,231,062,743.62 09/30/2002 $6,228,235,965,597.16 09/30/2001 $5,807,463,412,200.06 09/30/2000 $5,674,178,209,886.86
The current total is $9,668,844,788,980.66
The point of all this is clear: the US' budget is structurally running a deficit to the tune of $500 billion dollars a year for the last five years. This is far worse than has been reported in the press.
Some commentators have noted that because the debt/GDP ratio is now in the lower 60's everything is all OK and the US can survive just fine. That observation misses a key point. During the latest economic expansion -- when the US should have been tightening its fiscal ship for the not so good times -- it was extremely reckless with the nation's finances. Now that we are in a very difficult economic time (Fannie/Freddie bail-out, auto makers begging at the door) we don't have nearly enough wiggle room in the budget to properly aid the economy. In short, we should have made the tough choices when we were far more comfortable.
In short, Bush -- who promised to balance budgets along with a host of other things -- is leaving the federal government in a far worse shape than when he came into office. Also remember that for 6 of those years, the Republicans controlled Congress. That means the vast majority of these problems lay squarely on their shoulders.