Surprise -- Bush Is Leaving A Huge Budget Mess

From the WSJ:

- The Congressional Budget Office said the U.S. budget deficit for fiscal 2008 -- $407 billion -- will be more than double the deficit for 2007, hit by the wars and a weak economy, and predicted it is likely to rise further in fiscal 2009.

"The figures make it challenging to avoid playing the dismal economist," said CBO director Peter Orszag in a statement.

The agency foresees an increase to $438 billion by fiscal 2009, which begins Oct. 1, with the government takeover of Fannie Mae and Freddie Mac further complicating budget projections.

The party of fiscal conservatism strikes again.

Let's back up a bit to the beginning of the fiscal disaster known as the Bush presidency.

1.) Bush cut taxes twice -- once in 2001 and once in 2003. There is nothing wrong with this if there is a commensurate cut in spending. Revenue from individual income taxes increased from $994 trillion in 2001 to $1.1 trillion in 2007. In case you are using Bush administration logic (meaning you move whatever goalposts whenever possible to make your faith look good, revenue from individual income taxes increased from $793 billion in 2003 to $1.163 trillion in 2003, or a nominal increase of 46%. This rate of increase is lower than than the 1990s when individual income taxes were raised).

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2.) There was not a commensurate cut in spending. Instead -- the Republican controlled congress -- increased discretionary spending from 649 billion in 2001 to 1.041 trillion in 2007.

In short, the Republicans went to war and cut taxes. That is a recipe for disaster.

But there is another, deeper problem at work here. The figure that is being reported is a dishonest figure because it counts the social security surplus. Remember in 2000 when Al Gore was talking about a "social security lock box"? What he was saying is we should take all of the surplus money paid into social security and not spend it now. However, that is exactly what we are doing and have been doing for a very long time. As a result, the "unified" budget deficit -- the figure reported in the press -- is, well a lie. The correct way to look at the budget deficit is to see how much debt we are issuing. And that figure is far worse than what is being reported.

Here are the yearly amounts of total debt outstanding.

09/30/2007 $9,007,653,372,262.48
09/30/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/30/2001 $5,807,463,412,200.06
09/30/2000 $5,674,178,209,886.86

The current total is $9,668,844,788,980.66

The point of all this is clear: the US' budget is structurally running a deficit to the tune of $500 billion dollars a year for the last five years. This is far worse than has been reported in the press.

Some commentators have noted that because the debt/GDP ratio is now in the lower 60's everything is all OK and the US can survive just fine. That observation misses a key point. During the latest economic expansion -- when the US should have been tightening its fiscal ship for the not so good times -- it was extremely reckless with the nation's finances. Now that we are in a very difficult economic time (Fannie/Freddie bail-out, auto makers begging at the door) we don't have nearly enough wiggle room in the budget to properly aid the economy. In short, we should have made the tough choices when we were far more comfortable.

In short, Bush -- who promised to balance budgets along with a host of other things -- is leaving the federal government in a far worse shape than when he came into office. Also remember that for 6 of those years, the Republicans controlled Congress. That means the vast majority of these problems lay squarely on their shoulders.

Comments

[Irtnog]

The REALLY scary thing is that none of the estimated $1 Trillion that the war(s) cost are on the budget hence not caluclated in the deficit. If we elect McCain/Palin our country is doomed. If these issues are not addressed and addressed soon, I can see the day when US debt loses its gilt edge status, when the dollar ceases to be the worlds reserve currency and when the current buyers of our debt refuse to buy any more unless interest rates climb precipitously. If THAT happens our already slow economy goes into a prolonged recession and we could face rampant inflation at the same time as the gov't begins wantonly printing money in a futile attempt to cover their obligations.

[robinhood2]

Blessed are the children, for they shall inherit the national debt.

[lletaa]

I dont know exactly what it is but the repubs are lousey for business. look at the stock market. in 8 years it is the same as it was. i spent my working life as a restaurant owner. when the gods own party controls the country no business. somehow the repubs screw up my customer base. they help the rich but screw the little guy. thirty years of economic trench warfare for me as a shopping center retailer. where i live there is so many vacancy signs in strip malls, I can feel their pain. Please do the job of promoting the general welfare as it sez in the preamble. Reagenomics was horrible, but this is really bad.

[zizyphus]

Well, legalizing pot and taxing it would solve the crisis within a decade. Come on, people!

[worldtraveller]

And if it didn't fix it, at least we would all be mellow and not care :-)

[levelshot]

tru tru

[avraamjack]

.
What is $9,692,762,945,925.31 among friends ?
.

[JBS]

With friends like that, what do you need with enemies?

[avraamjack]

.
Money is an excellent method for sorting out your fake friends.
.
Frequently , they all sort out.
.

[WIpatriot]

Well, paint me green and call me Gumby.

[funkalicious]

The saddest chapter of the story is yet to be written whomever is elected next will be the first president to reach the Trillion dollar budget deficit mark. With leadership sorely lacking form both sides to get the fiscal house in order we will be forced to go deeper and deeper in debt. Just to try and jumpstart the flailing economy and the rigged credit markets.

[mamacat]

Wouldn't it be wonderful if we could make the people who voted for the Republicans responsible for paying off the debt they incurred?

[worldtraveller]

Wouldn't it be wonderful if people realized both parties are horrendous and equally responsible and threw EVERY incumbent out of office.

[vippy]

I say from now on hold the politicians responsible for a balanced budget. Vote them out
of office if that cannot be achieved. And Charlie Rangel made a mistake when he
failed to claim taxes for $ 75,000. You and I would be in jail. Charlie needs to resign
and I don't care what and who he is. Pleading innocent does not count and that goes
for Senator Stevens too.

[Aaror]

Mr. Stewart,
I hear a lot about how the national debt is low compared to the GDP. But I wonder if there is a difference between having a national debt at a given percentage of GDP and having a strong savings rate, vs having a national debt at the same rate, but having a significant level of citizen debt?
Put another way, has anyone ever looked at the US as a whole and tried to figure out the balance sheet? I know it would be a pain (every citizen is a partner, and his/her blance sheet has to be evaluated to see the economic picture of the partnership). But perhaps some broad numbers? If we take capital ownership and GDP, and compare it with national and other government debt, investment debt (corporate bonds and business lines of credit), mortgage debt and other personal debt, what does the US balance sheet look like? Are we, collectively, in the red or in the black?
If use assets are not worth as much as US debts, we are truly in an unsustainable situation, and need to know it ASAP. If we are in the black but losing value every year, we can get a good idea of how long we have. If we are stable, then perhaps (not that I believe this personally, but I am willing to be proven wrong) we really are OK...

[worldtraveller]

Consumer and Gov't look pretty much the same... the disease of debt seems to be endemic.

[strangelet]

And 25% of Americans STILL think Bush is doing a good job, and evidently an additional 25% think your truth is less important than the fact that John McCain was once a POW.

$30,000 of debt for every man, woman, and child in the country. Yow.

[heal57]

Just like the credit card companies have done.......get these freakin repubs out of office; they've ruined America. 'W' is the worst president we've ever had, and that includes Nixon.

[mamacat]

I lived through the Nixon years, and I have to agree with you. When he calmed down, Nixon really cared about this country. No one spends as much time on vacation as W has who cares about running the country well.

[optech007]

We should have elected Perot in 1992.

[nomoredead]

I still have his stickers on my toolbox.

[heal57]

He quit the race; remember?

[BethStuart]

I strongly suspect Bush has checked out and doesn't care anymore. McCain has admitted he doesn't understand economics and depends on his old friend Phil Gramm for advice. McCain's claim he will somehow reduce spending by vetoing bills he doesn't like doesn't hold up because he will be faced with omnibus bills that he can't veto and by the fact he doesn't have line item veto authority . Even if he could veto all the earmarks, that works out to around $18 billion, a drop in the bucket.

I'm not sure if he doesn't understand that or if he does understand it and ignores it. Either way, the US economy is in a lot of trouble.

[Shaddup]

"The economy is strong." -- John Mc C*nt This is the issue. In my lifetime the "party of fiscal conservatism has never been able to balance the checkbook. And never been ready to move into the future. Please, let them die like the dinosaurs they are...

[dadw5boys]

SUPRIZE !!!!!

Oct. 1st, 2008 an Interest Payment on the National Debt is due .

$ 511,000,000,000.00 Billion Dollars is due Oct. 1st, 2008.

Where will this money come from ???

Your throughts on this problem Governor Palin ?????

[krocklin]

It is a mystery why this is a bigger issue in the campaign, since Ross Perot made this his primary issue and really woke up the country and attracted a huge following.

[WASanford]

Yes, I still hear that sucking sound.