Obama and the budget numbers

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.

3 thoughts on “Obama and the budget numbers

  1. A couple facts that you seemed to completely leave out; (could it have been on purpose?)
    Out of the proposed 2011 Federal budget,
    about 42 cents out of every Federal dollar spent is either being borrowed OR created out of thin air.
    Since talking about ‘Trillions’ is out of the realm of understanding, let’s try to bring it down to a more common man’s perspective, shall we ?
    This budget is so far out of whack that
    If a man earned 100k a year, and borrowed 42k this year and EVERY YEAR for the next 10 years, paying ONLY the interest, at the end of the 10 years he’d be paying nearly ALL OF HIS INCOME just against the interest and never touch the principal.
    That is what is projected for the Federal government, and ON TOP OF THAT, It’s already 14 TRILLION IN THE HOLE.

    To ignore such numbers is lunacy and God knows we have plenty of that running the show in DC these days.

    1. Sorry. For a “facts” guy, you sure are off the mark.

      America produces about $14.4 trillion of value in a year. So that is the real amount of “earnings” available.

      The people, through their reps in Congress, want $3.8 trillion of that as government spending. But the flip side is, they only want to be taxed $2.2 trillion. The difference must be borrowed.

      You’re right, they probalbly can’t borrow 11% of the GDP forever. But most of the deficit, the 11%, is due to the Recession. Myself, I would say it’s also due to Bush’s tax cuts against no change in spending, and then add on two wars and a Medicare drug program.

      Remember, back in the “olden days” (1980’s), the claim Reagan made was that tax cuts pay for themselves in increased economic activity. Clearly, that was a line of horsesh*t.

      The Bush tax cuts did not pay for themselves, and should be backed out on the rich as scheduled. Ideally, they should pay a higher rate to make up for the fact that the scheme did not work as billed.

      The U.S. federal government credit rating is AAA–the best. And so the feds can borrow at the best rates for as long as that AAA holds up.

      It ideally needs to hold up until the recovery is in full force. After that, we shouldn’t need to do so much fresh borrowing, and perhaps can get back to paying down.

      1. Here’s another fact:

        Most of the entire federal debt was rung up during Ronald Reagan and the two George Bushes. $14 trillion or $7 trillion, depending if you want to factor out debt that is held by other things related to the government like the Federal Reserve, and the money that technically sits in social security as a surplus.

        Barack Obama is not responsible for that debt hike, or the current deficit, which was $1.3 trillion when he took office.

        It’s the Republicans. Then they spend it on their Red State friends and on rich people.

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