Posted on 08/31/2009 8:18:37 AM PDT by Thebaddog
According to the Obama administration’s mid-session budget update, the federal government will have to borrow nearly 40 percent of its total expenditures in 2010, a level not seen since World War II.
The report, “Mid-Session Review, Budget of the U.S. Government, Fiscal Year 2010,” shows that 39.9 percent of all federal income will be borrowed, making borrowing the single largest share of revenue in 2010. The next largest component of federal revenue is the personal income tax, which accounts for only 27.3 percent of federal funds.
This is only slightly lower than in 2009, when the federal government borrowed 43.3 percent of the money it has spent so far. The 2009 fiscal years ends Aug. 31, 2009.
The 2010 figures are estimates, based on current policy proposals which have not all been enacted yet. However, all new spending proposals, including spending from initiatives such as health care reform and a proposed cap-and-trade program, would be added to the 2010 deficit.
The revised budget estimates mean that the government will be borrowing the largest share of federal spending since World War II, when the federal government borrowed 62 percent of the budget in 1943, at the war’s apex. Borrowing, however, dropped off quickly after the war, falling to 28 percent in 1946 – with the government running at a surplus by 1947.
That does not seem to be the case this time, because Obama administration projections show the borrowed share of the budget staying at Cold War levels until 2019, when government will borrow 17.3 percent of its budget.
Overall, the Obama administration forecasts spending to be higher than tax revenues, with spending projected to total $43 trillion from 2010 to 2019, borrowing 20 percent of it – or $9.05 trillion.
Office of Management and Budget logo This level of borrowing is unprecedented even during recessions. During the long recession of the 1970’s, federal borrowing never rose above 20 percent of total expenditures despite nearly a decade of sluggish economic growth, high inflation and an international oil crisis.
Debt as a share of the budget reached 15 percent during the 1987recession. Borrowing was generally high during much of the early Reagan administration, reaching a peak of 25 percent in 1983.
However, Obama’s borrowing is 10 times greater than Reagan’s, which was fueled largely by defense spending as America battled the Soviet Union for dominance in the Cold War.
Obama’s 2010 spending is almost entirely domestic, by contrast, with mandatory spending programs, such as the bank bailout and stimulus spending programs nearly equaling defense expenditures despite two ongoing wars.
In fact, defense spending, including the wars in Iraq and Afghanistan, account for 19 percent of federal spending while mandatory programs such as the bailout and the stimulus spending programs account for 18.9 percent.
Entitlement programs, by contrast, including Social Security, Medicare, and Medicaid account for 38.2 percent of total government spending.
Non-defense discretionary spending, which includes the rest of the federal government, accounts for 18.5 percent and interest payments on the current federal debt, valued at $11.7 trillion, accounted for 5.2 percent of spending.
Brian Riedel, budget analyst at the conservative Heritage Foundation, said that the historic levels of borrowing proposed by Obama are not likely to abate, due to what he said were anti-growth policies pursued by the president.
“Two-thirds of the budget was eliminated after World War II ended,” Riedel told CNSNews.com. “But that’s not going to happen now. The White House thinks growth is going to rebound pretty quickly … which I find unrealistic, given some of the anti-growth policies that are a part of the president’s budget.
“Tax increases, cap-and-trade, health care, all of these are going to harm the economy, and they’re going to reduce the growth rate long-term,” he added.
“The lower economic growth is – the lower tax revenues come in, and that means higher borrowing is needed to compensate,” said Riedel.
Wouldn’t that be something conveniant for Obama; a nice national disaster for him to declare martial law and finally not have to worry about polls and pleasing the voters.
It’s hard to calculate when we don’t have a clear picture of what GNP will have fallen to by the end of the year, and what revenues of that will be. I suspect there is a lot of wishful thinking going on.
We are probably over that edge, we just don’t know it yet.
“In fact, defense spending, including the wars in Iraq and Afghanistan, account for 19 percent of federal spending while mandatory programs such as the bailout and the stimulus spending programs account for 18.9 percent.
Entitlement programs, by contrast, including Social Security, Medicare, and Medicaid account for 38.2 percent of total government spending.”
If anyone ever needs proof that the government spends most of the money it gets through taxes bribing voters, here it is. Of course, you first have to convince them entitlement programs are bribes and not something people actually need.
This has never been done before. So... maybe they are correct. Maybe the government can spend untold trillions of dollars from suckers who still have money to lend and grow a private sector economy. If they are right, the United States will be a strong vibrant free market economy again real soon...
I don't believe a word of this nonsense. can anyone tell be what I am missing? Why can't I believe this will work? Is it just because I'm a stupid, knuckle dragging Republican from Fly Over Country who owns guns, prays and drives a big car while eating junk food? Maybe Mr. Bernanke can send me Freepmail and explain how this is going to work???
Democrats’ attitude toward money reminds of a five-year-old, told by his parents they don’t have the money for something, who says, “But you have plenty of checks! Just write a check!” Not laughable in 40- or 50- or 60- year olds!
Those numbers are probably going to double by years end. Those were probably 2008-2009 numbers, when unemployment and welfare rolls hadn't begun to climb yet.
In his first two weeks in office he pretty much maxed out credit with China, so who’s going to loan us THIS money?
You can just follow the Obama administrations lead: get another credit card to pay off the first one, then get ANOTHER credit card to pay off the second one, and on and on...
And it’s not borrowing. It’s taking it at gun point!
The money they are spending is on growing the size and cost of government, and the cost of those being paid by these programs is no different than the cost of those collecting welfare. The net result is an increased demand for tax revenues, which are falling, not growing.
Increasing the size of government and the cost that goes along with it requires a growing robust private sector business/industry to provide the increased revenues to pay for it.
Any entity that takes on this type of debt load ends up insolvent and in bankruptcy. Governments are no different.
This is some brazen brinksmanship. Simply brazen.
Well, it's pretty clear nobody wants to buy treasury notes judging by dismal sales the last two months, so Obama has been running the printing presses. If he runs them to pay for all this borrowing, he'll trigger hyperinflation for sure. China will probably start selling at the first sound of printing presses running however, and trigger a run before Obama gets too much run off.
If the US goes “bankrupt” before the world, the world can’t actually do anything to get something back unlike an actual bankruptcy. The world will simply be stiffed. What that would look like, I cannot imagine.
I wish there were some way to stop him. It’s terrifying.
The Republicans are smart... they know that tax revenues are just a smidgen of federal spending but they in cent small business and individuals. The economy takes off, more tax revenues are generated, Gault's Gulch empties out and the bitching stops from the productive class. If Obummer doesn't figure this out, he is either a socialist or an idiot (or, frankly, both). The private sector is in shock at the moment. Nobody is spending money on anything because nobody knows how bad its going to get.
Wanna bet? You'll need a suitcase full of money to buy a loaf of bread. Imports? forget it. Exports? They'll be very cheap. We'll become the "China of the west" working our butts of for what amounts to pennies a day compared to other currencies, and producing cheap junk- Government Motors cars etc. for the world.
Yes, that would be hard to imagine. If the bottom falls out of the dollar, perhaps the only way for the US to get the foreign goods it depends on would be to trade food.
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