As you know, I try not to post about politics -- but this little graph has been haunting me of late. So let's call this a post about economics, not politics. Or perhaps we'll just call it a horror show.
Until this year, the 2008 budget deficit was the highest in United States history. A lot of people were very upset about it, and rightly so. If a family were to spend $412 billion more than its income in one year, we wouldn't exactly think of it as prudent budgeting. But as it turns out, we ain't seen nuthin' yet. The deficit for 2009 is expected to be $ 1.75 trillion -- not billion, trillion -- according to the White House, or $1.85 trillion, according to the Congressional Budget Office. (The difference between 1.75 and 1.85 doesn't look like much. But for a little perspective on the sheer size of these numbers, consider this: the $100 billion difference between the predictions, all by itself, is close to one-fourth of last year's entire deficit.)
The estimated population of the United States as of July, 2009 will be 307,212,123. According to Google Calculator:
1.85 trillion divided by 307 212 123 = 6 021.89778
In other words, the deficit for 2009, as forecast by the CBO, is $6,021.90 for every man, woman, and child in the United States. Or, for the Murphy family, $30,109.50 just for 2009. I don't dare do the math for the other 10 years on the graph.
Young people -- and middle-aged and old people, for that matter -- will be paying for this in taxes, inflation, higher interest rates and a flabbergasted economy for a long, long time.
4 comments:
After years of hearing "clarifications" that don't make any sense, I STILL don't understand exactly what is meant by "budget deficit."
http://gardenstatepatriot.blogivists.com/2009/04/16/jonathan-hoenig-speech/
Here, Jonathan Hoenig says, "The US Government has pledged, promised or spent an unfathomable amount of your money over the last year. The total amount, as calculated by Bloomberg, is over $12.8 trillion dollars, which amounts to $42,105 for every man, woman and child living in America today."
Where is he getting this number? And why is it so much bigger than the 1.85 trillion one?
I wonder if Jonathan Hoenig is adding up the predicted deficits in the Obama budget for the next 10 years. Just looking at that graph, it seems possible that the total might be some such number.
As I understand it, the budget deficit is the difference between what is spent in any given year and what is taken in for that year. So, if I earn $50,000 in 2009 and spend $60,000, I have a budget deficit of $10,000. The debt (at least in national terms) is the total of all the deficits so far incurred and unpaid -- in other words, the total overspending we've done. The current figure for our national debt is somewhere around 11 trillion dollars, I believe.
Anyway, looking at that graph, the line for each year represents THAT YEAR'S difference between income and outgo, without reference to what had gone before or what comes after. So you have to add them all up to know the cumulative effect.
Why does the CBO estimate of the deficit from '12 to '19 increase so much whereas the White House's estimate doesn't?
Hi, Jesse. The reason for the difference is that the White House and the CBO disagree as to how fast the economy will grow after the recession ends. The forecasted deficits are educated guesses because, in each year, how much the government will collect in taxes depends on how much money is out there to tax. If the economy is healthy and there's lots of economic activity to be taxed, the government's "income" will be higher. If the economy is not so healthy, tax revenues will be lower and the difference between what comes in and what's spent (which is the deficit for each year) will be greater. Here's a brief explanation from the Wall Street Journal:
"One main reason for the difference in budget estimates is a difference in economic forecasts, with congressional views of long-term growth less optimistic than those of the White House -- in part because of the long-term effects of so much government borrowing. The White House said its projection is more in line with those of private-sector economists. Congressional forecasters also use different accounting rules that tend to be more conservative. The CBO analysis showed deficits would run around 4% of U.S. gross domestic product for much of the next decade, even after the economy recovers. Administration officials have testified that such high deficit levels wouldn't be sustainable over the long run. Their own budget blueprint predicted deficits would run at around 3% of GDP after the recession has run its course."
So, both the White House and the CBO think that the economy won't be healthy enough to deliver as much tax revenue as the government wants to spend in any year between 2010 and 2019. But, the CBO thinks the economy will suffer from the big spending and won't grow as fast as the White House thinks it will.
The whole field of economics is, basically, glorified educated guessing. They are making different guesses about our economic future -- and betting the farm based on their guesses!
Post a Comment