The Balooning Deficit - What's Up With That?

Why the budget deficits?  Find out for yourself here:

http://www.washingtonpost.com/wp-srv/special/politics/30-years-spending-priorities-federal-budget-2012/

The Washington Post provides a nice little interactive tool that helps you see where the money has been coming and going for the last 30 years.  For example:

You can see from the charts where the real problems lie.  First, revenues have declined $600 billion from $2.7 trillion in 2007 to $2.1 trillion the last few years.

Second, spending has gone from $3 trillion in 2007 to about $4 trillion each year since.

So breaking it down further, you will see the exponential growth of the entitlement programs, particularly health care-related expenditures.  You will also see the massive doubling of "income security" which is another word for unemployment benefits.  Oddly, that started in the 2010, most likely due to extending unemployment benefits from one year to two years.

On the revenue side, what happened in 2009?  Individual and corporate income taxes declined by $400 billion.  I believe that was due to an abrubt halt in routine investment gains that had been realized in prior years.  You can't really blame unemployment because payroll taxes hardly budged during that time.  Not only did capital gains evaporate and corporate incomes greatly decline, but you now have a carry-over effect with unrealized capital losses limiting tax revenues.

I guess the most disturbing thing to me is that the 2012 budget calls for a $500 billion increase in tax revenues.  If that doesn't happen we could be staring at a $1.6 trillion budget gap in 2012.  And it could get even worse, with a likelihood of much greater expenditures on interest on the national debt.

$1.6 trillion dollar deficit in a single year - whoa.  That is more than the entire federal budget when the first President Bush left office.  Yet I think the average taxpayer's income is probably not much higher than it was then.  (Mine certainly isn't.)

What can be done about this?  We could probably cut $200 billion from expenditures by getting employment back to pre-recession levels.  That might also add $100-200 billion in revenues.  But primarily the problem is the explosive growth of health care spending.  That absolutely must be stopped, and Obama Care is not going to do it.  Consumers absolutely must become aware of their health costs at the point where they make decisions that affect their health.

I recommend reading a book "The Coming Jobs War" by Jim Clifton.  That's a really good book that explains better than I can do in this blog.