In the fiscal year just ended, federal spending was nearly 25 percent of GDP while federal revenues slipped below 15 percent because of the financial crisis and recession. We have not seen a budget deficit of this magnitude since World War II, which surely was a greater challenge than recent economic troubles.The Democrats' policies are sending us to junk bond status. Think of that.
Apologists for the Obama administration argue that some 2009 spending, like that on financial bailouts, is nonrecurring. True, but as the Congressional Budget Office has reported, the trajectory of administration spending and revenue is pushing the annual deficit toward $1,000,000,000,000 -- that's $1 trillion -- for the next decade.
Congressional Democrats' health care bills threaten to add to that. The bill currently before the Senate is advertised as costing less than $1 trillion. But significant spending doesn't kick in till 2014 and over the ensuing 10 years adds up to $1.8 trillion, nearly double that.
Thanks to current low interest rates, servicing the debt costs the government only $200 million this year. But the White House estimates that debt service will exceed $700 billion in 2019. "In a few years," the Economist editorializes, "the AAA rating of Treasury bonds, the world's most important security, could be in jeopardy."
And the spending won't end. What do you think will happen as states try to craft budgets next year after a second year of declining revenue? We'll hear more stories of teachers being let go and the elderly going without heat. And the federal government will decide that they need a second or third stimulus to give the states more money to pay their state employees.
Looking further ahead, Scott Winship notes in the Progressive Policy Institute's progressivefix.com blog that federal spending is on course to exceed 40 percent of GDP because of scheduled spending on entitlements -- Social Security, Medicare, Medicaid -- within the lifetime of today's children.And this is the model that the Democrats want to follow.
Yet the congressional Democrats who are pressing to expand federal health care spending do not seem much fazed by the prospect that, as Winship writes, "the level of taxation it would require to meet projected spending needs is far higher than anything the country has ever seen-slash-tolerated."
That suggests that, at least for some Democrats, huge looming budget deficits are not a bug but a feature.Just as Ronald Reagan hoped that cutting taxes would force politicians to cut spending, these Democrats hope that increasing spending will force politicians to increase taxes to levels common in Western Europe. Never mind that those economies have proved more sluggish and less creative than ours over the long haul.