Since Washington and the mainstream press corps are pretending that our deficit woes are the result of a roughly equal blend of excessive federal spending and insufficient federal taxation, let’s review the evidence. According to official government figures published by the Congressional Budget Office (CBO), in fiscal year 2008, the federal government took in $2.524 trillion and spent $2.983 trillion. So the federal government, then under the leadership of President George W. Bush and a Democratic House and Senate, was spending well beyond its means. For every $6 that it had, it was spending a little over $7 — an unsustainable course. At the end of fiscal year 2008, our national debt was $9.986 trillion (see table S-9) — and rising.
In the 50 months since — again according to official CBO tallies (see here and here) — the federal government has proceeded to make the profligate federal government of 2008 look downright frugal. Over that 50-month span — all of which has coincided with Democratic control of the Senate and the vast majority of which has coincided with President Obama’s control of the executive branch (the House has been split roughly evenly between Democratic and Republican control) — the federal government has taken in $9.365 trillion in tax revenue, and it has spent $14.749 trillion. So for every $7 it has taken in, it has spent a little over $11.
As a result, our national debt is now $16.370 trillion— a staggering 64 percent higher than it was just fifty months ago.
So, has this unprecedented spurt of fiscal irresponsibility been the result of far too much spending or far too little taxation? Well, average annual federal tax revenue over the past 50 months has been 11 percent lower than it was in 2008, while average annual federal spending has been 19 percent higher. So, in comparison to 2008, federal spending has risen almost twice as much as federal tax revenues have dropped.
Moreover, that spread has widened substantially over time. If we compare fiscal year 2012 to fiscal year 2008, federal tax revenues dropped just 3 percent. (They were $2.524 trillion in 2008 and $2.449 trillion in 2012.) Meanwhile, federal spending rose 19 percent (from $2.983 trillion in 2008 to $3.538 trillion in 2012) — more than six times as much as federal tax revenues dropped.
But even this doesn’t tell the whole story. The reason why tax revenues have declined since 2008 is not because income tax rates have declined; rather, it’s because most Americans aren’t making as much money as they made back when we had a relatively vibrant economy. The decline in tax revenues is directly attributable to our decline in economic growth. Thus, we need more economic growth, not higher tax rates. Or as Marco Rubio puts it, “We don’t need new taxes. We need new taxpayers, people that are gainfully employed, making money and paying into the tax system. And then we need a government that has the discipline to take that additional revenue and use it to pay down the debt and never grow it again. And that’s what we should be focused on, and that’s what we’re not focused on.”
So, to recap, over the past 50 months, a span of time during which the Democratic party has generally been in control of the vast majority (and sometimes all) of the federal government, federal spending has risen by almost twice as much as federal tax revenues have dropped, our national debt has risen by a whopping 64 percent, and for every $7 that our federal government has taken in, it has spent a little over $11.
Our problem, therefore, is not that our federal government has been overly respectful of everyone’s unalienable right to keep the fruits of their own labor. Our problem is that our federal government has an insatiable appetite for spending. Those filling its offices of power are determined to spend whatever they want, even if they have to borrow $4 out of every $11 that they spend to feed that desire. We are indeed headed toward a looming and frightening fiscal cliff, but it has nothing to do with the piddly fiscal step that Washington and the press corps are obsessed with.
So, what can be done? The same thing that can be done when a family that makes $70,000 a year keeps spending more than $110,000 a year: Stop spending the extra $40,000.