News this week is that President Obama is submitting the fiscal 2011 federal budget to Congress on February 1.
Everything I’ve seen involves “trillions”, but this is the heart of it:
Total production in America (so-called Gross Domestic Product): $14.4 trillion (as of December 2009)
Total proposed budget for 2011: $3.8 trillion
Expected deficit: $1.6 trillion
Tax revenue to come in: $2.2 trillion.
If we divide all these numbers into that $14.4 trillion gross production, we get:
Government spending: 26.38% of GDP
Tax revenue: 15.27% of GDP
Deficit: 11.11% of GDP
While these numbers aren’t great, they are not so far afield from what the United States has experienced in the past. For years, federal spending was around the range of 23-25%. Tax revenue is kind of low (historically, this has been more like 19%-20%, but this is mostly due to the high-end of the Bush tax cuts, that we clearly just can’t afford.)
The deficit is the gap between the two, the part of the tablecloth that can’t cover the table.
It’s good to see that Obama is keeping spending high enough to help the so-called “aggregate demand” in the economy. The focus really needs to be how to get taxation back to that historical 20% or more, once the economy is clearly on the road to recovery.