Deficits Caused by Broad ‐​Based Spending Increases

Chris EdwardsToday ’s soaring federal deficits are a looming disaster and were sadly avoidable. If policymakers had held spending to the same level relative to gross domestic product (GDP) as under President Bill Clinton, this year’s budget would be balanced. Instead, presidents and congresses over the past two d ecades have failed to reform elderly entitlement programs, while also jacking up spending on many other activities.Thefederal budget was balanced the last four years of the Clinton administration from 1998 to 2001, but it has not been balanced since. The imbalance has grown over time, and today ’s policymakers seem to shrug off the huge irresponsibility of adding more than a trillion dollars to accumulated debt every year.The figure shows that federal spending has risen from 17.7 percent of GDP in 2000 to 24.2 percent estimated for 2023. If policymakers had instead held spending to the 2000 level of 17.7 percent of GDP, then the budget would be balanced this year since revenues are expected to be at least that high. TheOMB baseline has revenues at 17.7 percent this year, while theCBO baseline has them at 18.3 percent.Put another way, if policymakers had restrained spending growth over 23  years to the annual average nominal GDP growth rate of 4.2 percent, then today’s budget would be balanced. Unfortunately, actual federal spending grew at an annual average rate of 5.7 percent between 2000 and 2023.The figure also shows that all three components of federal...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs