A HISTORIC EXPANSION OF GOVERNMENT

March 26, 2009

The 2009 federal spending surge is nothing short of historic.  The 25 percent spending increase represents the largest non-war government expansion since the New Deal.  Domestic discretionary spending (including stimulus funds) has been hiked more than 80 percent over 2008 levels.  As a result, Washington will run a budget deficit of 12.3 percent of gross domestic product (GDP), by far the largest since World War II, says Brian M. Riedl, a researcher with the Heritage Foundation.

Some justify this spending as a necessary, temporary response to a recession.  Setting aside the flaws in that argument, excluding the recessionary period does not improve the fiscal picture, says Riedl:

  • In 2007, before the recession, Washington spent $24,172 per household.
  • By 2019, the President's budget would spend $32,463 per household -- an inflation-adjusted $8,000 per household expansion of government.
  • In 2007, Washington spent 20 percent of GDP.
  • President Obama would permanently elevate federal spending to nearly 23 percent of GDP by 2019 -- a level reached only three times since the end of World War II.

Yet even that may be an underestimate, says Riedl.  The President's budget unrealistically assumes that:

  • All temporary stimulus spending, such as higher spending on Pell Grants and health care, will be allowed to expire.
  • Discretionary spending growth will be held to 2 percent annually after 2012, compared to the 8 percent annual growth of the past two years.
  • The $634 billion down payment on universal health care will not be expanded.
  • Fixing these assumptions brings spending to 25 percent of GDP by 2019 -- with annual $1.2 trillion deficits.

Taxpayers already cannot afford today's federal programs.  Over the next decade, Social Security, Medicare and Medicaid costs are projected to increase automatically by nearly 7 percent annually.  Much of the $800 billion of "stimulus" spending will likely be made permanent.  The seemingly endless string of financial bailouts will also likely continue.  Despite all of these existing commitments that tax­payers cannot afford, President Obama would pile on another $1 trillion over the decade for:

  • $429 billion in new domestic discretionary spending.
  • $326 billion as the spending portion of new or expanded tax credits, such as the Make Work Pay credit.
  • $318 billion as a down payment on universal health care.
  • $117 billion to convert Pell Grants into an entitlement and put its budget on autopilot, preventing Congress from easily controlling its growth.

Source: Brian M. Riedl, "The Obama Budget: Spending, Taxes, and Doubling the National Debt," Heritage Foundation, Backgrounder No. 2249, March 16, 2009.

 

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