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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