Great news: Debt as percentage of GDP rises to post-WWII high

posted at 12:55 pm on June 30, 2010 by Ed Morrissey

The CBO delivers the bad news, which squarely falls on the Democrats and their four-year spending spree.  Thanks to falling revenues from an economy that still shows no signs of significant growth and runaway federal expansion, US debt in comparison to GDP will rise to a high not seen since the US vanquished Japan and Nazi Germany 65 years ago:

The national debt will reach 62 percent of gross domestic product (GDP) by the end of this year, the nonpartisan Congressional Budget Office (CBO) said Wednesday.

The budget office said the debt will reach its highest percentage of GDP since the end of World War II. The jump is driven by lower tax revenues and higher federal spending in the recent recession.

Let’s recap how we got here.  The Democrats replaced a free-spending GOP leadership in Congress in 2007, whose final annual federal budget was $2.7 trillion — which had increased over $700 billion in annual federal spending in six years.  In the next three years, Democrats made Republicans look like a combination of Ebenezer Scrooge and Silas Marner by adding over a trillion dollars in annual spending in just three years.

What about the fourth year, for FY2011?  Democrats have refused to produce a budget for 2011, so we won’t know … until after the midterms.

Furthermore, the entire exercise of ObamaCare hasn’t done anything to reduce real pressure on future debt, CBO director Douglas Elmendorf says:

CBO Director Douglas Elmendorf wrote in a blog post explaining the new report that under current laws, “federal spending on major mandatory healthcare programs will grow from roughly 5 percent of GDP today to about 10 percent in 2035 and will continue to increase thereafter.”

Keeping current policies in place would almost certainly force lawmakers to make steep spending cuts and raise taxes, Elmendorf argued, unless changes to address the problems were made sooner rather than later.

Er, wasn’t that the entire expressed point of ObamaCare — to reduce federal deficits by lowering health-care costs?  Instead, it appears that ObamaCare has made it worse, according to Elmendorf:

That estimate includes all of the effects of the recently enacted health care legislation. … All told, CBO projects, the aging of the population and the rising cost of health care will cause spending on the major mandatory health care programs and Social Security to grow from roughly 10 percent of GDP today to about 16 percent of GDP 25 years from now if current laws are not changed. (By comparison, spending on all of the federal government’s programs and activities, excluding interest payments on debt, has averaged 18.5 percent of GDP over the past 40 years.)

All of that government control didn’t deflect the course of the deficit and national debt to any significant extent.  Elmendorf notes that ObamaCare will “slightly reduce” federal spending, but not anywhere near enough to stave off financial ruin.  It did nothing to address the actual driving forces of spiraling medical costs to the federal government, namely an aging population and expansion of membership in Medicare, Medicaid, and so on.

By now it should be obvious that we cannot solve the problems of the national debt and annual deficits by spending more.  It’s time to start cutting government substantially and rethink our entire approach to entitlement programs before we drown in their debt.


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SMART Power!!!111!!!!eleventy

jukin on June 30, 2010 at 12:59 PM

By now it should be obvious that we cannot solve the problems of the national debt and annual deficits by spending more.

Oh great! Now you tell me! I have been spending like a drunken sailor in hope that my credit debt will be reduced.

Electrongod on June 30, 2010 at 1:00 PM

We will look back fondly on these days of hope and change.

faraway on June 30, 2010 at 1:00 PM

Ed, why can’t you be nice instead of being a sm@rtass all the time?

Daggett on June 30, 2010 at 1:00 PM

Sorry cutting government spending isn’t in the agenda of this administration.Prepare for the VAT.

sandee on June 30, 2010 at 1:01 PM

Have you ever gutted a rainbow trout?

That is what we should do to the Federal Government.

Holger on June 30, 2010 at 1:02 PM

Austerity is going to hurt.

I’m wondering what it will be like when we start having seiu/public sector employees marching in the streets to prevent cuts to their pensions, etc.?

This is not Greece or France. I don’t suspect the average Joe/Josephine will react well to that kind of protesting.

WitchDoctor on June 30, 2010 at 1:03 PM

By the way just heard ABC top of the hour news. Obama was speaking about how he is not going to return to the failed policies of the past that caused this recession. Blame Bush, blame Bush, blame Bush.Gird your loins for taxes.

sandee on June 30, 2010 at 1:03 PM

Just eliminate all Federal union jobs. Would that fix the deficit?

faraway on June 30, 2010 at 1:05 PM

So we borrow money from China to pay for teachers. This was added to the defense spending bill today. Why not send our kids to China and have them study the communism fresh and on the spot?

seven on June 30, 2010 at 1:06 PM

Since government is our main growth industry, can we start exporting bureaucrats? Let’s start with the unionized ones. Remember, Cap’n StompAss promised to double our exports.

GnuBreed on June 30, 2010 at 1:07 PM

which squarely falls on the Democrats and their four-year spending spree.

they’ll still blame bush….apparently no one cares in the msm who controlled congress (including senator dear leader)the last 2 years of W’s term…they will still pin it on him…the dems have their trusty msm to let it all slide onto W…

cmsinaz on June 30, 2010 at 1:07 PM

By the way just heard ABC top of the hour news. Obama was speaking about how he is not going to return to the failed policies of the past that caused this recession. Blame Bush, blame Bush, blame Bush.Gird your loins for taxes.

sandee on June 30, 2010 at 1:03 PM

The Lying POS is repeating those mistakes. The mistake has been the Federal Government since Woodrow Wilson’s time. He is expanding that. He ain’t repeating the mistakes, he is doubling down!

Holger on June 30, 2010 at 1:07 PM

Communism 2.0 – cool and fresh

faraway on June 30, 2010 at 1:07 PM

Spend more! Spend more! Spend more!

- Krugman

ya2daup on June 30, 2010 at 1:07 PM

Elmendorf notes that ObamaCare will “slightly reduce” federal spending,

dear leader and gibbsy will run with that…

cmsinaz on June 30, 2010 at 1:08 PM

I think I may need to release my second chakra….

ted c on June 30, 2010 at 1:08 PM

It’s time to start cutting government substantially and rethink our entire approach to entitlement programs before we drown in their debt.

sing it Ed!

cmsinaz on June 30, 2010 at 1:09 PM

Obama was speaking about how he is not going to return to the failed policies of the past that caused this recession. Blame Bush, blame Bush, blame Bush.Gird your loins for taxes.

sandee on June 30, 2010 at 1:03 PM

The “failed policies of the past” don’t have his name attached to them; they are too cramped and narrow. He’s building his own set of kicka$$ failed policies that will set the bar so high that they’ll never be surpassed; his glorious name will be attached to them forever.

ya2daup on June 30, 2010 at 1:10 PM

This is a big f’in’ deal!

Little Boomer on June 30, 2010 at 1:11 PM

Ah, how soon we forget. Remind me again who, as senator. voted for those failed policies of the past?

WitchDoctor on June 30, 2010 at 1:13 PM

It’s time to start cutting government substantially and rethink our entire approach to entitlement programs before we drown in their debt.

Over 100 trillion in unfunded liabilities means we’ve already drowned.

DFCtomm on June 30, 2010 at 1:14 PM

Over 100 trillion in unfunded liabilities means we’ve already drowned.

DFCtomm on June 30, 2010 at 1:14 PM

They spent all this money on dead end policies and nothing has changed. It is a zero-sum game.

Holger on June 30, 2010 at 1:17 PM

62%………?

PFFFT.
Dontcho you know that it’s going to take a heckuva lot more spending to fix this problem?

LAME DUCK CONGRESS anyone?

Executive Order from DOTUS anyone?

Financial Crisis anyone?

Take your pick but it’s coming…….INSOLVENCY LEADING TO A GLOBAL SOLUTION (SLAVERY to the new global governance).

PappyD61 on June 30, 2010 at 1:21 PM

It did nothing to address the actual driving forces of spiraling medical costs to the federal government, namely an aging population and expansion of membership in Medicare, Medicaid, and so on.

I thought that the crux of the talk radio agitation against the bill was precisely that it would do something to address the aging population. It’s either going to kill off all the seniors, or it’s not–you can’t have it both ways.

hicsuget on June 30, 2010 at 1:21 PM

Holger: Have you ever gutted a rainbow trout?

That is what we should do to the Federal Government.

Trout are the easiest thing to gut in the fish world. A few quick strokes with a sharp knife and you’re done.

Cleaning Uncle Sam is more like skinning a giant catfish. Alot of effort for a little flesh.

Terp Mole on June 30, 2010 at 1:23 PM

Have you ever gutted a rainbow trout?

That is what we should do to the Federal Government.

Holger on June 30, 2010 at 1:02 PM

Ever gutted a wild hog? Same dif.

saiga on June 30, 2010 at 1:27 PM

Austerity is going to hurt.

I’m wondering what it will be like when we start having seiu/public sector employees marching in the streets to prevent cuts to their pensions, etc.?

The unions will NEVER be asked to sacrifice under this DOTUS.

The empowered elite (BOTH PARTIES) in Washington DC will NEVER DO WITH LESS.

Like Pete Starks’ attitude to his constituents….Congress and the White House say……

..YOU WILL TAKE THIS MEDICINE and you will freaking like it…..OR ELSE.

Solution:
Start with THROWING EVERY SINGLE ONE OF THEM OUT OF OFFICE IN November.

Second, term limited to one term.

Thirdly, ban post Congressional lobbying positions.

Forthly, BALANCED BUDGET AMENDMENT to the Constitution

Fifthly, IMPEACH DOTUS as soon as possible.

That should start the hope and change.

PappyD61 on June 30, 2010 at 1:27 PM

Trout are the easiest thing to gut in the fish world. A few quick strokes with a sharp knife and you’re done.

Cleaning Uncle Sam is more like skinning a giant catfish. Alot of effort for a little flesh.

Terp Mole on June 30, 2010 at 1:23 PM

I was thinking of killing all entitlement spending…

Holger on June 30, 2010 at 1:27 PM

I thought that the crux of the talk radio agitation against the bill was precisely that it would do something to address the aging population. It’s either going to kill off all the seniors, or it’s not–you can’t have it both ways.

hicsuget on June 30, 2010 at 1:21 PM

You thought wrong, the crux was that it was unconstitutional. Man what a lame attempt at a political score.

I do know for a fact that the crux of the libtard children was that it was going to be “FRRRRRRRRRRRREEEEEEEEEE” and would actually save us money. Like our side has been saying from the start, your side is full of sh1t.

Sorry child, eventually you are going to have to grow up and move out of the government’s basement. I know…growing up sucks.

ClassicCon on June 30, 2010 at 1:28 PM

Cloward Piven. Soros is smiling.

WisCon on June 30, 2010 at 1:29 PM

Meanwhile, in the realm of truly good news:

<blockquote>The Indiana Supreme Court today decided the state’s voter identification law is constitutional. The League of Women Voters sought to overturn the law. Oral arguments on the case were held in March, and the court ruled 4-1 against the League.An e-mail from Kathryn Dolan, public information officer for the Indiana Supreme Court, said, “The conclusion of the majority opinion reads in part, ‘It is within the power of the legislature to require voters to identify themselves at the polls using a photo ID.’”

GnuBreed on June 30, 2010 at 1:32 PM

28. Most Keynesian economists teach that Federal
deficits don’t matter, except when the deficits are not
large enough to stimulate the economy.

30. Most economists believe that economic growth will
enable all Federal debts to be rolled over at relatively
low interest rates.

33. Most economists have said that Federal Reserve
policy in 2008 was necessary: a doubling of the monetary
base.

34. Most economists have remained either supportive
or silent about the Federal deficits in 2008, 2009, and
2010.

35. Most economists deny that either hyperinflation
or long-term deflationary depression is possible for the
United States.

39. Austrian School economic theory teaches that
politicians defer solutions until the problems cannot be
solved at politically acceptable prices.

40. Austrian School economists teach that government
makes existing problems either more expensive to solve or
illegal to solve.

41. Austrian School economists teach that government-
imposed solutions create new problems.

42. Austrian School economists teach that government-
created problems are likely to be cumulative until a fiscal
or monetary crisis leads to a default on government debts

43. Austrian School economists note that the one
exception — Great Britain after 1814 — was not a mass
democracy with Social Security and Medicare.

44. Austrian School economists also note that there
was an international gold standard from 1815-1914.

45. Most non-Austrian economists dismiss Austrian
School economics as: (a) outmoded, (b) ideological, (c)
methodologically amateurish, (d) pessimistic, and/or (e)
crackpottery.

53. Most Americans say they do not trust Congress,
but they trust the FDIC, Medicare, Social Security, and
Homeland Security.

63. Few Americans understand that monetary inflation
produces price inflation.

64. Few Americans understand that price inflation can
be a way for the government to disguise its default on its
debts.

68. Most Americans believe that Chinese workers will
sell them cheap goods forever.

69. Most economists believe that China’s central bank
will continue to buy Treasury bills at close to a zero
interest rate indefinitely.

70. Most Americans and most economists therefore
believe in free Chinese lunches (“hold the MSG”).

71. Most Americans believe that Franklin Roosevelt
saved capitalism from itself.

72. Most Americans believe that without tax-funded
education, millions of American children would never learn
to read or do arithmetic above a second-grade level (as if
they were graduates of inner-city high schools).

73. Most Americans believe that without government-
funded safety nets, millions of Americans would be trapped
in lifelong poverty (as if they were fourth-generation
welfare clients).

76. Some Americans are beginning to doubt that
Federal deficit spending on stimulus programs will restore
economic growth.

77. Hardly any economists have doubted this.

78. Most economists believe that high rates of income
taxation on the rich will not reduce investment and
economic growth.

79. Most voters agree that the rich should pay their
fair share, which is at least double the rate most Americans pay.

87. The Federal Reserve doubled the monetary base in
late 2008.

88. Only bankers’ unwillingness to lend money has
kept this increase from doubling M1.

95. The U.S. government owns Fannie Mae and Freddie
Mac, which supply at least 90% of home mortgages.

96. The rate of foreclosures is increasing.

97. Banks are refusing to lend money to local
businesses.

98. Local businesses supply most of the new jobs.

99. The unemployment rate is close to 10%. (This isn’t the real unemployment number, but the Federal reported one.)

100. Employment supports the housing market.

101. “Things that cannot go on forever have a tendency to
stop.” — Herbert Stein

Gary North on Thoughts about the Economy.

Tim Burton on June 30, 2010 at 1:33 PM

Coverage of this on ABC, CBS, NBC….NADA

angryed on June 30, 2010 at 1:34 PM

bending the cost curve…..downward! (giggles.)

search4truth on June 30, 2010 at 1:36 PM

R E P E A L

O J E $ U $ C A R E!

——————–

Oh yeah, and Q U I T

S P E N D I N G

N O N – E X I S T E N T

M O N E Y.

hillbillyjim on June 30, 2010 at 1:37 PM

I’m wondering what it will be like when we start having seiu/public sector employees marching in the streets to prevent cuts to their pensions, etc.?

WitchDoctor on June 30, 2010 at 1:03 PM

I’d recommend searching the net for “Rodney King” riots. Find some coverage of that and multiply by about 100 cities across the nation and that’s what we’ll have.

BowHuntingTexas on June 30, 2010 at 1:39 PM

By now it should be obvious that we cannot solve the problems of the national debt and annual deficits by spending more.  It’s time to start cutting government substantially and rethink our entire approach to entitlement programs before we drown in their debt.

Tell this to useful idiots like Krugman.

Vyce on June 30, 2010 at 1:42 PM

Obama and his merry little band of democrat thieves have looted the United State’s treasury and future generations of American tax payers. They act just like the ghetto looters in New Orleans or L.A. and accordingly should be imprisoned or shot for treason! Remember in November!

Marco on June 30, 2010 at 1:43 PM

I thought that the crux of the talk radio agitation against the bill was precisely that it would do something to address the aging population. It’s either going to kill off all the seniors, or it’s not–you can’t have it both ways.

hicsuget on June 30, 2010 at 1:21 PM

You were expecting this CBO projection to show the effects of death panels not yet in operation? Or a projection of how many seniors whose medical care will be cut short?

Or did you just want to throw out some crap and see if any flies land on it?

tom on June 30, 2010 at 1:46 PM

which squarely falls on the Democrats and their four-year spending spree.
they’ll still blame bush….apparently no one cares in the msm who controlled congress (including senator dear leader)the last 2 years of W’s term…they will still pin it on him…the dems have their trusty msm to let it all slide onto W…

cmsinaz on June 30, 2010 at 1:07 PM

That’s what is so maddening. Every time some liberal idiot says “we inherited this economy from Bush” I scream at the Repub on the set: “say that Senator Obama, Nancy and Harry and the Dems inherited a good economy in 2006!!!!!!!!!!!!”

But alas, no one EVER makes that point. It drives me crazy.

mrsmwp on June 30, 2010 at 1:50 PM

I thought that the crux of the talk radio agitation against the bill was precisely that it would do something to address the aging population. It’s either going to kill off all the seniors, or it’s not–you can’t have it both ways.

hicsuget on June 30, 2010 at 1:21 PM

It won’t kill off the seniors. Just make the seniors live a life of unimaginable daily pain.

angryed on June 30, 2010 at 1:53 PM

Obviously we need to SPEND MORE in order to regain our prosperity. It’s the Obama Rule.

GarandFan on June 30, 2010 at 2:02 PM

Who cares what the debt numbers are now. Once we went to trillions the numbers have no meaning. The debt will never, let me repeat, never be paid back. I would only get concerned if we run out of ink.

We may.

patrick neid on June 30, 2010 at 2:36 PM

For those scoring at home Japan is at 200%.

Gives us something to shoot for!

patrick neid on June 30, 2010 at 2:38 PM

Don’t tell me. Let me guess!

Next week, Pelosi will announce we need another stimulus!

pilamaye on June 30, 2010 at 2:40 PM

We are living in Demmitude.

pain train on June 30, 2010 at 2:42 PM

Clearly, the cost of health care is being caused by an increase in the number of old people. How would Stalin solve this problem?

hawksruleva on June 30, 2010 at 3:11 PM

The debt will never, let me repeat, never be paid back. I would only get concerned if we run out of ink.

We may.

patrick neid on June 30, 2010 at 2:36 PM

Debt is borrowed from somewhere. At some point, the people loaning us the money will charge us more interest, or stop loaning us money. What do we do then?

You think the IMF has enough money to bail us out like they did Greece?

hawksruleva on June 30, 2010 at 3:12 PM

Cutting the Medicare fraud will save billions.

Oleta on June 30, 2010 at 4:19 PM

That’s what sixty years of entitlements and two generations of living on easy credit gives ya.

DDT on June 30, 2010 at 6:30 PM

But but but

At least the Russians are our friends and will never ever spy on us again.

MaiDee on June 30, 2010 at 6:47 PM