Washington just closed the book on the federal government’s latest dismal fiscal year. According to the nonpartisan Congressional Budget Office, this year picked up where last year left off – extending spending, deficit, and debt records.
Federal spending this year amounts to $3.453 trillion. To put this in context, consider the fact that total federal debt did not reach that level until 1995. Which means that Washington is now spending annually an amount equal to all it owed just 15 years ago.
At first glance, however, federal spending would seem to have dropped from last year’s record But this apparent drop in federal spending is only because last year’s one-time bailout spending did not recur. Subtract that out, and the rest of federal spending increased 9 percent. And that “rest of federal spending” is what forms the basis for spending in future years.
For that reason, CBO projects next year’s federal spending to exceed both last year’s and this year’s. Without remedial action, over the 2009-2011 period, CBO estimates the government will have spent $10.7 trillion.
Looked at as a share of the economy, the government over 2009-2011, on average, will have spent roughly a quarter (24.2 percent) of everything the U.S. produces. The spending of such a large share of the nation’s economy has not happened since 1946, in the aftermath of WWII – call it America’s peacetime spending record.
Record spending has resulted in record deficits. Last year produced America’s first trillion dollar deficit – $1.413 trillion. This year produced America’s first back-to-back trillion dollar deficits – $1.291 trillion. Total federal spending did not reach the level of this year’s deficit spending until 1990. Washington is now over-spending by the amount it spent altogether just 20 years ago.
CBO estimates Washington will make it a three-peat next year with a $1.066 trillion deficit. Together these three-year deficits equal $3.770 trillion – averaging right at $1.26 trillion annually. America’s entire federal debt – all the debt accumulated over more than two centuries of existence – did not equal $3.8 trillion until 2003. Now seven years later, Washington will have matched that in just three years’ time.
As a fraction of the economy, the federal deficit equaled 8.8 percent of GDP. If not for last year’s level, this would be the highest proportion of the economy in America’s peacetime history. Washington is borrowing about $1 out of every $10 that America earns and overspending its revenue by about 40 percent.
Record spending and record deficits are producing record peacetime debt levels. In 2008, the debt held by the public was at $5.8 trillion. CBO estimates it stands at $9 trillion today and will be over $10 trillion next year. That level of debt will equal 66.1 percent of everything America produces. As a percentage of the economy, the federal debt will have increased 64 percent in just three years. The last time it stood at such levels was 1951, when the country was absorbing the effect of Korean War and WWII spending.
Washington has achieved a dubious peacetime record.
J. T. Young served in the Department of Treasury and the Office of Management and Budget from 2001 -2004 and as a congressional staff member from 1987-2000.