Ten federal budget facts from U.S. Sen. Patty Murray, which is All good news regarding the annual federal deficit, but some people say this is ALL bad news for the U.S. economy. Of course, other people would disagree: The fiscal year for 2014 ended on September 30th. With the release of the end-of-year totals for fiscal year 2014, below are 10 facts you may not know about the federal budget. 1) Overall federal spending has been flat for five straight years, for the first time since the end of World War II. When measured in simple, raw dollars, spending has historically risen year to year. This is not surprising given that the size of the population and the cost of living (inflation) both increase from year to year. However, from 2009 to 2014, spending was largely unchanged at $3.5 trillion per year. The last time spending did not rise over a five year period, even in nominal dollars, was during the post-World War II phase down from 1946 to 1951. 2) In terms of GDP, federal spending in 2014 was 4 percentage points lower in 2014 than it was in 2009, which is the equivalent of about $690 billion. That’s the largest five-year drop since the end of World War II. Federal spending as a percentage of the economy in 2014 was 20.4 percent of GDP, compared to 24.4 percent of GDP in 2009. From 1946 to 1951, federal spending dropped by 10.3 percentage points. 3) Federal spending in 2014, as a percent of GDP, was lower than it was in every single year of the Reagan administration. Federal spending as a percentage of the economy in 2014 was 20.4 percent of GDP. Federal spending averaged 21.6 percent under President Reagan. The lowest level of federal spending as a percentage of GDP during the Reagan Administration was 20.5 percent in 1989. 4) Over the last three years, federal spending has come in lower than the levels proposed by Chairman Ryan in his first House Republican budget resolution. Chairman Ryan proposed in his FY2012 budget resolution that federal spending for FY2012 to FY2014 would total $10.67 trillion. Actual spending was $10.50 trillion, $175 billion less over that time frame. For FY2014, Chairman Ryan called for $3.583 trillion in spending, but actual spending was $3.504 trillion. 5) The deficit in 2014 as a percentage of GDP was lower than the average budget deficit from the last four decades. CBO now estimates that the deficit in 2014 was 2.8 percent of GDP, which is 0.3 percentage points below the 40-year average deficit of 3.1 percent. 6) The budget deficit in 2014 was lower under the Murray-Ryan agreement than it was expected to be two years ago assuming full sequestration. In January 2012, the 2014 deficit was projected to be $658 billion, using reasonable assumptions of current policy, including sequestration. In fact, the deficit in 2014 was only $483 billion, even though the Murray-Ryan deal replaced two-thirds of the nondefense discretionary cuts and roughly one-half of the total discretionary cuts for 2014. 7) The scale of the fiscal improvement from 2009 to 2014 exceeds the scale of the improvement from 1993 to 2000. In the five years from 2009 to 2014, the federal deficit as a percentage of GDP dropped from 9.8 percent to 2.8 percent, a swing of 7 percentage points. In the seven years from 1993 to 2000, a 3.8 percent deficit turned into a surplus of 2.3 percent, a swing of 6.1 percentage points. The 1990s are generally viewed as a period of substantial improvement in the federal budget. 8) We’re spending less than the bipartisan Bowles-Simpson commission called for, but we’re also generating a lot less revenue. In 2010, the Bowles-Simpson commission called for federal spending to total 21.4 percent of GDP by 2014. In fact spending in 2014 was just 20.4 percent of GDP, one percentage point lower than the commission called for. Bowles-Simpson called for revenue to be 18.8 percent of GDP in 2014, but it was actually 17.6 percent of GDP. 9) It would take about $4.5 trillion in additional revenue over the coming decade to hit the Bowles-Simpson revenue targets. The Bowles-Simpson commission called for a revenue target equivalent to 20.7 percent of GDP by 2022 and recommended a path to achieve that. Based on the revenue-to-GDP levels called for by Bowles-Simpson, it would take over $4.5 trillion in new revenue to meet the Commission’s targets. 10) Long-term debt projections are roughly two-thirds lower today than they were four years ago. The improvement in the near-term outlook is expected to continue. CBO projected in the June 2010 alternative fiscal scenario that federal publicly held debt would reach 339 percent of GDP by 2050. In their July 2014 long-term outlook, CBO projected the debt would reach 126 percent by 2050, nearly two-thirds lower. While clearly more needs to be done to address the long-term fiscal imbalance, the federal budget is undoubtedly in a better position today than was projected a few years ago. But David Wessel - who wrote for many, many years for the Wall Street Journal - has this to say about the slowdown in government spending: The Federal Reserve has done a lot, more than some Fed policymakers would have liked, not enough for its critics. But fiscal policy in the U.S. at the local, state and federal levels has been a restraint on growth. And gridlock in Congress is an obstacle to anything that might give the economy a lift–be it a dose of infrastructure spending (which has the double benefit of boosting demand and supply) or thoughtful corporate tax reform or your favorite remedy. Wessel is not necessarily arguing for bigger annual federal deficits, but he is arguing that some type of economic stimulus is still needed for the U.S. and world economy. Here is a chart he uses to make his point on the U.S. economy.
Posted on: Tue, 21 Oct 2014 17:35:25 +0000
Trending Topics
Recently Viewed Topics
© 2015