June 18, 2007
Criticism of President Bush by politicians of all stripes and media of all types for failing to rein in federal spending and letting deficits "soar" is based largely on misconceptions, says Investor's Business Daily (IBD).
- Last year's $248 billion deficit in a $13.6 trillion economy is the equivalent of a $900 dollar credit card charge for someone with a $50,000 income.
- As a share of gross domestic product (GDP), the budget deficit last year was 1.9 percent; that's down from 3.6 percent in 2004 and below the long-term average of 2.5 percent.
- This year, says the Congressional Budget Office, the deficit will be about $177 billion, or 1.3 percent of GDP; if current trends continue, the deficit will be erased by 2010-2012 at the latest.
- Bush's tax cuts -- which are most often blamed for the deficit -- each year boost real GDP by $75 billion, employment by 709,000 and real personal income by $200 billion.
- Overall, the United States had deficits in 24 of the past 27 years; during that time, real GDP has grown 122 percent to $11.5 trillion and 46 million new jobs have been created.
- In addition, bank interest rates have fallen from almost 20 percent to about 8 percent, 42 million new homes have been built and per capita incomes have almost tripled.
That's not saying the deficit should be ignored, says IBD. Long term, there is a problem. It's a result of entitlement spending, says IBD. In just the next 10 years, Medicare and Social Security costs will jump from 8.5 percent of GDP to 10.7 percent, as 76 million baby boomers start to retire.
Source: Editorial, "Deficit Deceptions," Investor's Business Daily, June 18, 2007.
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