Deficit to hit new high in FY2011, says CBO

posted at 1:36 pm on January 26, 2011 by Ed Morrissey

Let’s look on the bright side: it’s another first for the Obama administration!  Better yet, it’s the last accomplishment of the Democratic Congress, which proved so inept on budgeting that they couldn’t actually pass the FY2011 plan with large majorities in both chambers and a friendly President in the White House.  The Washington Post reports that the CBO blames this in part on the “tax cuts” in the lame-duck agreement, but somehow glosses over the spending increases over the last four years:

The weak economy and fresh tax cuts approved last month will help drive the federal budget deficit to nearly $1.5 trillion this year, the biggest budget gap in history and one of the largest as a share of the economy since World War II, congressional budget analysts said Wednesday.

“Economic developments, and the government’s responses to them, have – of course – had a big impact on the budget,” the Congressional Budget Office said in its semi-annual budget outlook.

This year’s deficit would be the highest on record and would equal about 9.8 percent of the economy, the CBO said, slightly smaller than the 2009 budget gap, which at $1.4 trillion amounted to nearly 10 percent of the gross domestic product. However, at a time when policymakers had hoped to begin closing the gap between spending and revenue, the CBO forecast that it is widening again and is on track to remain well above $1 trillion in 2012, the fourth year in a row.

As a result, the report said, “debt held by the public will probably jump from 40 percent of GDP at the end of fiscal year 2008 to nearly 70 percent at the end of fiscal year 2011.”

There were tax cuts in the compromise bargained between Barack Obama and the “hostage takers” in the GOP, but not on income-tax rates.  Those remained the same as they had been for the past seven years.  The actual tax cuts, which consist of a 2% tax holiday for workers on FICA and a $150 billion tax credit that allows businesses to write off 100% of capital investment in 2011, were championed by the White House.  Republicans supported the latter and were lukewarm at best on the former.

However, tax “cuts” and the economy aren’t the problem.  The problem is a federal budget that has almost doubled in a decade, and increased 38% on an annual basis over the last four years.  Some of that came in discretionary spending, including defense and homeland security, but some of it came in increased mandatory spending, thanks to unsustainable entitlement structures.  Federal revenue has been fairly constant over the last decade, only tailing off a couple of hundred billion dollars during the Great Recession and its aftermath.  That falls far short of an explanation for a deficit which dwarfs that shortfall.

Democrats still haven’t figured out the math.  Rep. Chris Van Hollen (D-MD) told the Post that Congress needs a bipartisan approach on deficit control, but one that doesn’t “blindly slash investments in important priorities.”  The deficit has now grown to 39% of the entire federal budget — how exactly does Van Hollen propose deficit reduction without slashing spending?  Note too the language of “investments” in “important priorities.”  Even if one accepts government spending as “investments,” no one can invest in anything when they don’t have the cash.  And the US ran out of cash a long time ago, which is why we keep borrowing to cover the deficit spending.

The math is clear.  In order to eliminate deficit spending, Congress has to cut 39% of its current budget.  Anything that falls short won’t solve the problem but perpetuate it, and that means that “priorities” need to be recalculated now.


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High speed rail will save us.

Mike Honcho on January 26, 2011 at 1:40 PM

Ha. Too bad the CBO didn’t come out with this yesterday.

ORconservative on January 26, 2011 at 1:40 PM

Chief
Barack
Officer

upinak on January 26, 2011 at 1:41 PM

These numbers acted stupidly.

BigWyo on January 26, 2011 at 1:41 PM

Can’t wait to see that ghoulish grin wiped off his face.

SouthernGent on January 26, 2011 at 1:41 PM

Count it!

-Crr6

portlandon on January 26, 2011 at 1:42 PM

$150 billion deficit in 2007 when the Democrats took over- with all the evil tax cuts and 2 wars. Don’t tell me we need to raise taxes to balance the budget.

Chuck Schick on January 26, 2011 at 1:43 PM

I love the hammering of the word “investment”….it’s the new “green”. That hopenchange is AWESOME!

search4truth on January 26, 2011 at 1:43 PM

Here is my idea to stabilize the economy: We need to launch a dog into orbit.

Bishop on January 26, 2011 at 1:43 PM

Chief Medicare actuary just said Obambi is lying–Deathcare won’t hold down costs and patients won’t be able to keep their insurance.

andy85719 on January 26, 2011 at 1:45 PM

“We are the Deficits we have been waiting for.”

- Pharaoh Obamatutkamin.

portlandon on January 26, 2011 at 1:45 PM

Sputnik,sputnik, sputnik

sandee on January 26, 2011 at 1:45 PM

I don’t get Democrats, it’s as if they live in opposite world. Nothing they say, suggest, or do makes any sense whatsoever.

tommer74 on January 26, 2011 at 1:46 PM


… Congress needs a bipartisan approach on deficit control, but one that doesn’t “blindly slash investments in important priorities.”

That’s the problem, both parties have different ideas of what’s “important”.

Tony737 on January 26, 2011 at 1:46 PM

Here is my idea to stabilize the economy: We need to launch a dog into orbit.

Bishop on January 26, 2011 at 1:43 PM

Hmmmm human or canine version?

upinak on January 26, 2011 at 1:46 PM

Here is my idea to stabilize the economy: We need to launch a dog into orbit.

Bishop on January 26, 2011 at 1:43 PM

That might just work, but how will it make the Muslims feel better about anything???

BigWyo on January 26, 2011 at 1:48 PM

It’s all because the Bush tax cuts were extended…..

4Freedom on January 26, 2011 at 1:48 PM

Of course they are going to blame the gop

cmsinaz on January 26, 2011 at 1:48 PM

Bishop,

Here is my idea to stabilize the economy: We need to launch a dog into orbit.

Here, here.

WIN THE FUTURE BY RELYING ON TECHNOLOGICAL ACHIEVEMENTS FROM THE PAST!.

Mike Honcho on January 26, 2011 at 1:49 PM

That might just work, but how will it make the Muslims feel better about anything??? – BigWyo

Yes, they hate dogs, dogs are ‘unclean’ and are only one step above women.

Tony737 on January 26, 2011 at 1:50 PM

Get to work gop

The blm will trash you anyways, so just go about your business and get it doneo

cmsinaz on January 26, 2011 at 1:53 PM

But we really need high-speed trolleys.

John the Libertarian on January 26, 2011 at 1:53 PM

Of course they are going to blame the gop

cmsinaz on January 26, 2011 at 1:48 PM

In theory that would work if the GOP played along and didn’t slash the budget. But if the House passes a drastically reduced budget and the Democrat Senate and/or Obama shoots it down, they’ll own the resulting deficit.

Doughboy on January 26, 2011 at 1:53 PM

Why is everyone so hard on the Prez? He’s just spreading the Keynesian lie, er, wealth.

pugwriter on January 26, 2011 at 1:54 PM

Agree Doughboy, but it won’t be portrayed that way by the blm
Or by the dems/dear leader

cmsinaz on January 26, 2011 at 1:57 PM

Here is my idea to stabilize the economy: We need to launch a dog into orbit.

Bishop on January 26, 2011 at 1:43 PM

I “Laika” that idea.

YEAAAAAAHHHHHH!

fossten on January 26, 2011 at 1:57 PM

How’s that NASA and Islam relationship project working?

Kini on January 26, 2011 at 1:58 PM

But we really need high-speed trolleys.

John the Libertarian on January 26, 2011 at 1:53 PM

You’re thinking too small. Think of all the employment that could be generated by revitalizing the buggy whip industry!

beancounter on January 26, 2011 at 1:58 PM

That might just work, but how will it make the Muslims feel better about anything???
BigWyo on January 26, 2011 at 1:48 PM

One of the Surahs says “Kill all the dogs”.

If we arrange for Space Pooch to have a little “accident” on reentry the muslims will be appeased.

Jeebus, why do I have to come up with all the good ideas around here?

Bishop on January 26, 2011 at 1:59 PM

SoundByte Americans react to new CBO Projection…

…..what did Katie say? Oh, something about the deficit? Gosh, they are still overspending, shock. Hey what time is Brandon and Missy’s next game? Oh yeah, that’s right, gotta go, thanks. Hey another posting on Facebook from Maddie?…..

…..and so it goes in the Republic of America Oblivia.

PappyD61 on January 26, 2011 at 1:59 PM

Agree Doughboy, but it won’t be portrayed that way by the blm
Or by the dems/dear leader

cmsinaz on January 26, 2011 at 1:57 PM

The Democrats and media(I know, I’m being redundant) can spin it anyway they like. Obama is President. If we’re running $1.5 trillion annual deficits, he’s gonna get the lion’s share of the blame.

Doughboy on January 26, 2011 at 2:03 PM

Now…haven’t we been told over, and over again that the CBO is an unbiased, impartial entity? If this weren’t such awful news, it would be laughable.

capejasmine on January 26, 2011 at 2:03 PM

I had given her a reassuring smile and patted her hand and told her not to worry, I wouldn’t do anything stupid. It was usually an effective tactic, another one of those tricks I had learned: People were satisfied so long as you were courteous and smiled and made no sudden moves. They were more than satisfied; they were relieved – such a pleasant surprise to find a well-mannered young black man who didn’t seem angry all the time. (94-95)

- Barack Obama, Dreams from My Father

Greek Fire on January 26, 2011 at 2:04 PM

fresh tax cuts approved last month will help drive the federal budget deficit to nearly $1.5 trillion this year

That’s funny. During the actual ‘Bush era’ (with these same tax rates) the deficit averaged around $350 billion. Go figure.

kevinkristy on January 26, 2011 at 2:05 PM

beancounter on January 26, 2011 at 1:58 PM

The way the post office is running lately, the pony express would be a welcomed replacement. I send things overnight, and find it takes up to 4 days to get there. What the he!! am I paying those high rates for, if it’s not doing what I’m paying it to do? And why does the PO lie to me about it?

capejasmine on January 26, 2011 at 2:05 PM

the deficit averaged around $350 billion. Go figure.

kevinkristy on January 26, 2011 at 2:05 PM

The…uh..interest is compounding at a rapid pace

TheVer on January 26, 2011 at 2:06 PM

ervativePartyNow on January 26, 2011 at 2:08 PM

I meant to say WON’T keep costs down

ConservativePartyNow on January 26, 2011 at 2:09 PM

The…uh..interest is compounding at a rapid pace

TheVer on January 26, 2011 at 2:06 PM

And, uh, … it wouldn’t have anything to do with additional spending (a trillion here and trillion there) the past couple of years.

kevinkristy on January 26, 2011 at 2:09 PM

Here is my idea to stabilize the economy: We need to launch a dog into orbit.

Bishop on January 26, 2011 at 1:43 PM

I “Laika” that idea.

YEAAAAAAHHHHHH!

fossten on January 26, 2011 at 1:57 PM

These guys will have a field day with that.

John the Libertarian on January 26, 2011 at 2:15 PM

Point taken Doughboy

I’m with ya buddy

cmsinaz on January 26, 2011 at 2:15 PM

Rep. Chris Van Hollen (D-MD) told the Post that Congress needs a bipartisan approach on deficit control, but one that doesn’t “blindly slash investments in important priorities.”

I know, how about we form a bipartisan commission? You know, we could have people on the left on it, like Erskine Bowles and those on the right, like say Alan Simpson or someone.

MJBrutus on January 26, 2011 at 2:16 PM

There were tax cuts in the compromise bargained between Barack Obama and the “hostage takers” in the GOP, but not on income-tax rates. Those remained the same as they had been for the past seven years. The actual tax cuts, which consist of a 2% tax holiday for workers on FICA and a $150 billion tax credit that allows businesses to write off 100% of capital investment in 2011, were championed by the White House. Republicans supported the latter and were lukewarm at best on the former.

The Republican majority in the House Budget Committee has an answer for that (emphasis in the original):

The deficit is $186 billion higher than that of 2010, entirely due to a $252-billion increase in spending: even with the 2-year extension of existing tax rates and other provisions enacted in December, tax revenue increases by $66 billion from 2010 to 2011.

Further, despite the scheduled tax increases after that deal expires (to the tune of $3.8 trillion between then and the end of FY2021), the lowest the deficit will be according to the CBO is $533 billion in FY2014. The last I checked, that’s higher than any non-Obama-influenced fiscal year.

steveegg on January 26, 2011 at 2:24 PM

Someone recently pointed out that what the Bamster sees as the new high-ground in energy production, -solar cells and wind-power, are actually among the oldest means of energy production we have. Solar cells were first made in 1883, and the generation of electricity from a windmill was done by my grandfather in the 1920′s and others well before that. Ditto electric cars.

The newest and most promising form of energy production that we have is the theoretical fusion reactor, and Bammie doesn’t seem to want to acknowledge that. After that comes fission reactors, still much newer than any of his pet projects.

slickwillie2001 on January 26, 2011 at 2:34 PM

How’s that NASA and Islam relationship project working?
Kini on January 26, 2011 at 1:58 PM

The supersonic flying Mosque Space Plane is well ahead of it’s development curve. They are working on the Prayer Rug Floor mats, slated for deployment once funding is approved.

Seriously, I bet you didn’t know that NASA has written protocols guiding Muslims on how to face Mecca while orbiting Earth, so they can pray. I AM NOT KIDDING.

Geochelone on January 26, 2011 at 2:52 PM

Deficit, schmeficit. Who pays attention to that anymore. We’re all about the stimulus, baby.

SKYFOX on January 26, 2011 at 3:01 PM

Solar panels and high speed rail, …Hell, how about a solar powered high speed rail, if that cant solve our problems I dont know what will.

Koa on January 26, 2011 at 3:06 PM

Ignore it, it will go away.

ctmom on January 26, 2011 at 3:08 PM

Here is my idea to stabilize the economy: We need to launch a dog into orbit.

Bishop on January 26, 2011 at 1:43 PM

With the retirement of the shuttles, do we have anything capable of lifting Michelle? /sarc

dominigan on January 26, 2011 at 3:42 PM

Seriously, I bet you didn’t know that NASA has written protocols guiding Muslims on how to face Mecca while orbiting Earth, so they can pray. I AM NOT KIDDING.

Geochelone on January 26, 2011 at 2:52 PM

This must be a b!tch when orbiting the earth at thousands of miles per hour. Muslims would be spinning like tops…

dominigan on January 26, 2011 at 3:44 PM

Entities that are spending 60% more than they make in income on things that have no long term financial return are not “investors”, they are spendthrifts. Those who propose to freeze spending at levels 60% above income level are not fiscally conservative or responsible (MSM sycophancy notwithstanding)

KW64 on January 26, 2011 at 4:33 PM

“We do BIG THINGS!”

Like deficits, Mr. President?

Old Fritz on January 26, 2011 at 4:52 PM