By now everybody knows the size of America's public debt—it's really, really Big—and perhaps you also know that the 2011 deficit is expected to come in at 1.5 trillion dollars (1,500,000,000,000). Obama's proposed budget, if passed intact, would create a deficit of $1.6 trillion in fiscal year 2012.
That's hardly likely in the current political atmosphere. Among other significant money savers, cutting heating subsidies for the poor and taking Sesame Street off the air will surely allow the Congress to pare down the 2012 deficit to $1,553,000,000,000 and pocket change.
I don't know about you, but I'm feeling much better already knowing Big Bird won't be out there poisoning impressionable young minds. This belt-tightening stuff is intoxicating. It's a lot like sniffing glue, and not just any old glue—I'm talking about the good stuff!
I thought it might be entertaining to cruise over to the non-partisan Congressional Budget Office (CBO) to see what they have to say about current and future deficits. It turns out the CBO has been sniffing glue, too.
Here's the only graph in the The Budget And Economic Outlook: Fiscal Years 2011 To 2021.
The alert reader will immediately see that Federal revenues soar toward the heavens just like a big Atlas rocket starting in 2012. Up and up they go, way beyond average revenues during the 1971-2010 period. Clearly, the CBO expects the economy to rebound in a big way over the next decade.
As the recovery continues, the economy will add roughly 2.5 million jobs per year over the 2011–2016 period, CBO estimates. However, even with significant increases in the number of jobs, a substantial reduction in the unemployment rate will take some time. CBO projects that the unemployment rate will gradually fall in the near term, to 9.2 percent in the fourth quarter of 2011, 8.2 percent in the fourth quarter of 2012, and 7.4 percent at the end of 2013. Only by 2016, in CBO’s forecast, does it reach 5.3 percent, close to the agency’s estimate of the natural rate of unemployment (the rate of unemployment arising from all sources except fluctuations in aggregate demand, which CBO now estimates to be 5.2 percent).
Source The unemployment rate falls from 8.2% in 2012 to 5.3% in 2016
To inflate Federal revenues into outer space after 2012, those new jobs we're going to create can't be like those part-time crappy jobs serving caffè lattes and cleaning up hotel rooms we've been creating up to now. No siree! They're going to be high-paying, high-status jobs that make life worth living. But that is all I can tell you about it at the moment, because I have no idea where those jobs are going to come from, and neither does the Congressional Budget Office.
Now, if we turn back to the first graph, we see that Federal outlays come down some after 2012, but remain elevated (at about 23-24% of GDP) from 2013 until 2021. Outlays continue to be far above the 1971-2010 average.
I am only a humble blogger, a person of little knowledge, even less acuity, and no insight at all. Dare I inquire about, dare I question, the CBO assumptions? Yes, Yes, Yes! I'm going to go for it—
What if those terrific jobs and that miraculous GDP growth don't materialize?
Oh, my! What if the future isn't so bright? Such a dark thought. That certainly would open up a can of worms, wouldn't it? For instance, most Americans won't be able to afford to drive to work by 2021, and will have no other way of getting there. But why quibble?
To give you some idea of what the near-term future looks like, let's consult USA Today's Obama's budget: Tax revenue rising, deficit declining from January 7, 2010.
Americans are paying more taxes, a sure sign of economic recovery — and one that has the federal budget deficit declining ever so slightly.
That's the word from the non-partisan Congressional Budget Office (CBO), which just released its review of the first quarter of fiscal year 2011, which began in October.
The good news: Revenue increased 9% from the same period a year ago, while spending grew only 3%. That translated into a $371 billion deficit for three months, $18 billion less than in October-December 2009.
Biggest reason for the improvement: a $33 billion increase in taxes withheld "as a result of strengthening economic conditions," the CBO says.
Strengthening economic conditions? Clearly, the well-off are making more money and paying more taxes. Love it, love it, love it! But why the paltry decrease in the deficit in the last quarter of 2010?
Biggest reason for only a small improvement: interest payments on the national debt, [which is] fast approaching $14 trillion, rose 10%, while defense spending was up 7%, mostly for procurement as well as operations and maintenance.
In addition, spending for Medicaid rose 13%, but unemployment benefits declined by 15% because of fewer new claims and lower average benefits.
Revenues were up 9% year-over-year on a quarterly basis, but increased spending on interest on the debt, defense, and health care meant that the resulting savings was a whopping $18 billion dollars.
I love budget economics, and I hope you share my enthusiasm. I mean, don't you find it liberating, don't you find it exhilirating, to be so completely, unalterably screwed?