A WORLD-CLASS DEFICIT
March 30, 2009
What's bigger than the combined economies of India, Russia, Brazil, Spain and Canada? The U.S. budget deficit over the next 10 years, if the Obama budget plan becomes law, says Kevin Hassett, director of economic policy studies at the American Enterprise Institute.
President Obama plans to borrow about $7 trillion over the next ten years to finance all of his spending plans. Yet, he will accrue these enormous deficits by spending a lot early, and spending a lot late, continues Hassett:
- The deficit this year in his budget is projected to be about $1.7 trillion, a bit larger than the entire Canadian economy and a bit smaller than the Italian one.
- The deficit in 2019, the 10th year of his projected budget, is $712 billion, about two-thirds the size of the Indian economy.
- It's worth mentioning that these deficit numbers are likely much lower than what would occur if many of President Obama's policies were adopted.
- The Obama budget has an astonishingly rosy outlook for the economy, especially if one considers the likely impact of all of this spending.
While the president likes to blame the Bush administration for all of his troubles, the fact is that the Congressional Budget Office (CBO) 10-year budget forecast called for a 10-year surplus of a few hundred billion dollars. The economy has taken some of the steam out of revenues in the first few years, but the spending increases do the majority of the work.
Furthermore, back when the first round of Bush tax cuts were passed, the CBO estimated that their ten-year cost would be $1.35 trillion, and the long-term economic outlook has not changed. Yet, the Obama budget calls for a deficit that is roughly double the size of the one forecasted, says Hassett.
Source: Kevin A. Hassett, "A World-Class Deficit," National Review/American Enterprise Institute, March 23, 2009.
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