NCPA - National Center for Policy Analysis

Budget Bloodbath

November 1, 2010

The fiscal year 2010 deficit fell by $125 billion from the previous year's record total, but the problem is that it is only due to the elimination of one-time emergency spending, says Human Events.

  • The federal deficit reached $1.291 trillion in 2010, the fiscal year just ended.
  • It is only the second trillion-plus deficit in U.S. history -- it would be the record, if not for last year's $1.416 trillion deficit.
  • Putting those eye-popping totals into perspective: total federal government spending did not reach last year's deficit level until 1991 -- now we are overspending by the same amount we used to entirely spend just 19 years ago!

In all this budgetary bleakness we are supposed to take comfort that the deficit fell from the year before.  However, as the Congressional Budget Office stated in its October monthly budget report, the savings is due to the absence of last year's one-time emergency spending:  "Excluding those...spending rose by about 9 percent in 2010, somewhat faster than in recent years."

To understand what has happened, look at 2007.

  • In that last year before the recession, federal spending was $2.729 trillion and receipts were $2.568 trillion, for a deficit of $161 billion.
  • That equated to 1.2 percent of the economy -- about one-eighth of today's deficit.
  • Just three years later, the government spent $3.453 trillion -- $724 billion more.

As bad as this additional spending is, its worst effect is likely yet to come.  This is due to federal budgeting's baseline concept.  Baselines are how future federal spending is calculated.  While different programs have different methods, it basically works thusly: Current spending is adjusted upward for inflation and extended outward.

While the private sector continually pushes spending down, baselines continually push the public sector's up.  This is why the 9 percent increase in nonbailout federal spending is so dangerous, says Human Events.

Source: J.T. Young, "Budget Bloodbath," Human Events, October 14, 2010.

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