Budget Deficit: What's $2.9 Trillion Between Friends?

by: Philip Davis

$2.9 trillion -- that's the budget Bush has submitted to Congress.

It's $239 billion short -- a little less than the tax cuts Bush insists on keeping. That $239B is $241B less than the $470B interest we pay on our $8,698,540,152,659.45 National Debt, up from $5.4T when Bush took office. On September 27th of 2000 President Clinton announced a record budget surplus of $230B -- topping the prior year's surplus by over $100B and a great turn around from the $290B deficit he was handed his first year in office.

"The key to fiscal discipline is maintaining these results year after year. We need to put our priorities in order," Clinton said. He vetoed tax cuts demanded by the Republican Congress that year...

Just 5 months later, on February 22nd, 2001 -- newly elected President Bush said: "We thought long and hard about the right number," he said of the $1.6 trillion tax cut proposal. "We think it's just right."

"I have a reasonable and balanced budget," Bush said. "It funds priorities, and my administration has no higher priority than education." He said the budget would "honor the commitments to America's senior citizens," including support for Medicare and Social Security.

"Our budget is fiscally responsible. If enacted, it will reduced the deficit by an unprecedented amount over the next four years."

Well here we are just 6 years later, half a decade late and $3.2T short.

Was our suffering under the Clinton regime really that onerous? Was the burden of our taxes really crushing the life out of the economy (which was already in debt) to the point where we had to take a second mortgage on the country?

Budget Image 06 02 2007 Anyway, I'm not here to point fingers -- mainly because anyone who needs to see where the finger gets pointed is already looking so far the wrong way that I doubt they really want the answer. So let's just take a quick look at the budget...

Receipts ($2.662 trillion):

  • Individual Income Taxes: $1.246T
  • Social Security, Medicare: $927B
  • Corporate Income Taxes: $315B
  • Excise Taxes: $68B
  • Customs/Duties: $29B
  • Estate Taxes: $26B
  • Miscellaneous: $51B

Outlays ($2.901 Trillion):

  • Medicare and Medicaid: $919B
  • Social Security: $608B [includes $209B interest on $4T funds "borrowed" from SS (no lock-box!)]
  • National Defense: $603B
  • Non-Defense Spending: $511B
  • Interest: $261B

What do most people do when they have a $239B deficit?

Some spend less, some try to earn more -- rare is the man who will both spend more ($716.5B in new defense spending over the next 20 months) and decides to earn less (pushing for extensions of the tax cuts beyond the scheduled 2010 expiration).

Our GDP is projected to be $14.5 trillion in 2007 -- can't we just act like mature adults and pay 2% of it as a deficit reduction tax? That may seem like a lot now, but Europe balances their books with a VAT (value added tax) and it's a heck of a lot higher than 2%!

SeeSaw 06 02 2007I'm not going to pick apart what we should and shouldn't be spending money on; the fact that the Defense Department gets an extra $49B while Education is cut $1.5B speaks for itself (no point in teaching them more than they need to know to point a gun I guess), and we will be hearing no end of debate over the matter during the month.

I'm just saying that an economy that generates $250B a week should be able to at least be mature enough to make a sacrifice... If there's no room left to cut, then we all have to reach 2% into our pockets and pay a little more. If you object to that, object to the spending, not the fiscally responsible act of trying to balance a budget!

 06 02 2007

Read all of Phil Davis's articles on Seeking Alpha