Memo to Media: Deficits Rapidly Shrinking, Spending Flat under Obama
After first threatening to destroy the American economy if Obamacare wasn't defunded or delayed, desperate House Republicans have sent the President a new ransom note. Now, the GOP will grant a six-week extension to the debt ceiling and reopen the government if President Obama, among other things, accepts cuts to mandatory spending programs including Medicare and Medicaid.
That is an offer President Obama and Congressional Democrats can and should refuse, and not merely because the Republican Party is now only slightly more popular than gonorrhea. As I documented with these five charts yesterday, after $2.5 trillion in reductions over the next decade already achieved since 2011, the U.S. national debt is stable in the near and mid-term. Simply put, there is no crisis to justify the additional spending cuts Republicans are now trying to extort. As it turns out, federal spending has hardly budged and deficits have plummeted since Barack Obama first took the oath of office in January 2009.
These four charts showing the data from the nonpartisan Congressional Budget Office (CBO) tell the tale.
About two weeks before President Obama first sat in the Oval Office, the CBO published its last budget forecast of the Bush presidency. With the recession which began in December 2007 costing 800,000 jobs a month and spending on the Troubled Asset Relief Program (TARP) now underway, CBO predicted a $1.186 trillion deficit for fiscal year 2009.
Ultimately, Uncle Sam finished FY 2009 with a deficit of roughly $1.4 trillion. But as former Reagan administration official Bruce Bartlett explained, that extra red ink wasn't due to extra spending on the stimulus package or "counter-cyclical" programs like Medicaid, unemployment insurance or food stamps.
Instead, tax revenue, it turned out, had fallen off a cliff:
According to the Congressional Budget Office's January 2009 estimate for fiscal year 2009, outlays were projected to be $3,543 billion and revenues were projected to be $2,357 billion, leaving a deficit of $1,186 billion. Keep in mind that these estimates were made before Obama took office, based on existing law and policy, and did not take into account any actions that Obama might implement...
Now let's fast forward to the end of fiscal year 2009, which ended on September 30. According to CBO, it ended with spending at $3,515 billion and revenues of $2,106 billion for a deficit of $1,409 billion.
To recap, the deficit came in $223 billion higher than projected [in January], but spending was $28 billion and revenues were $251 billion less than expected. Thus we can conclude that more than 100 percent of the increase in the deficit since January is accounted for by lower revenues. Not one penny is due to higher spending.
As it turns out, spending has remained flat under President Obama. In May, CBO forecast federal outlays for FY 2013 (which ended on September 30) at $3.46 trillion. That's less than the budget George W. Bush bequeathed to Barack Obama in January 2009. Looking ahead, federal spending will start growing again beginning in FY 2015, as the impact of retiring baby boomers and the expenditures for the Affordable Care Act ramp up.
Uncle Sam's tax revenue is also starting to rebound after hitting levels not seen since the Korean War. As a percentage of the U.S. economy, revenue plummeted to 14.9 percent of GDP, a low not seen since 1950. The Treasury's estimated take for 2013 ($2.8 trillion) will finally reach the level previous hit in 2007. It should also be noted the extent to which the Bush tax cuts of 2001 and 2003 drained--and continue to drain--Uncle Sam's coffers. Only in 2006 did the Treasury collect as much revenue as it had in 2000.
Looking ahead to the rest of President Obama's second term, the federal budget deficit is under control. After topping 10 percent of GDP during the depths of the recession in 2009, the deficit will drop to only 2.4 percent in fiscal year 2017. But with annual deficits predicted to begin increasing again toward the end of this decade as Medicare (and not Social Security) drive up federal spending, new cost controls and more revenue will be needed.
But not now. Not today, tomorrow, next week, next month or next year. Especially with persistently high unemployment and a fragile economic recovery, this is not the time to cut another dime of federal spending. And despite the Republican histrionics, no reason to keep the federal government shut and the full faith and credit of the United States at risk.