Fiscal responsibility needed to promote economic growth
We’re more than seven months through the current fiscal year. Is anything really changing after the massive increases in federal spending over the past few years? Unfortunately, though unsurprisingly, the answer is no.
Keep in mind that federal outlays from 2007 to 2011 jumped by 32 percent — from $2.73 trillion to $3.6 trillion. Due to the massive recession and subsequent anemic recovery, federal revenues registered $2.3 trillion in 2011. That number is down from $2.57 trillion in 2007, although revenues have grown slowly from their recent low of $2.1 trillion in 2009.
As a result, the annual federal budget deficit jumped from $160.7 billion in 2007 to $1.33 trillion in 2012. (The annual deficit hit a peak of $1.4 trillion in 2009). Gross federal debt outstanding increased from $8.95 trillion in 2007 to $14.76 trillion in 2011, with debt held by the public doubling from $5.04 trillion to $10.13 trillion over the same period.
According to the latest monthly budget review from the Congressional Budget Office, spending for the first seven months of the 2012 fiscal year was about the same as it was during the same period last year after shifts in the timing of certain payments are taken into account.
And on the revenue front, the CBO reported: “Total receipts through the first seven months of the fiscal year were $74 billion (or 6 percent) higher than receipts recorded during the same period last year. However, they were roughly $20 billion below the amounts CBO anticipated when it prepared its most recent budget projections in March.”
That means nothing has been done to rein in spending, and revenue growth remains relatively sluggish.
As for the latest estimates on where we’ll end the current fiscal year, according to the latest edition of Economic Indicators from the Council of Economic Advisers, federal outlays are expected to increase by 5.3 percent to $3.8 trillion, with the annual deficit rising to $1.33 trillion.
The assertions that recent big government spending increases, especially in 2009, would be temporary — that is, deployed to help the economy — have proven grossly inaccurate. Spending jumped to a dramatically higher level and has continued to grow. Rather than aiding the economy, such massive increases in government spending have only served to stifle growth by shifting resources from the private sector into political hands and increasing the threat of future tax increases on top of already legislated tax hikes.
Fiscal responsibility and economic growth are not mutually exclusive goals. To the contrary, they go hand in hand. The U.S. needs substantial and permanent tax and regulatory relief and serious reductions in government spending to help spur growth. That combination of spending reductions and higher growth will rein in rising debt levels that threaten future tax increases. Unfortunately, such fiscal and economic common sense continues to elude the White House and many in Congress.