Advancing a Free Society

Why you should worry about the budget

Wednesday, February 16, 2011

Let’s look at President Obama’s proposed long run budget path.

obama-long-term-policy

I am comparing the past 50 years with the next 50 years under President Obama’s proposed policies.

The dotted red line shows us that, over the past 50 years, federal government spending averaged just over one-fifth of the economy (20.2% of GDP).  The dotted blue shows us that, over the past 50 years, federal revenues averaged just over 18% of GDP.  The small yellow double arrow between the dotted red and blue lines shows the average deficit over th2 same period: 2.1% of GDP.

The vertical white line at 2011 separates the past from the projected future of the President’s policies.

You can see the assumption of the economy recovering as the blue revenue line recovers from an extraordinary low share of GDP.  As more people get jobs, the government will get more income and wage revenues.  You can also see spending declining from the 2009-2011 phase which spiked principally because of TARP and stimulus.

Three things should jump out at you from the future portion of this graph:

  • The red and blue lines diverge enormously, and the gap grows over time.
  • The blue line is flat while the red line slopes upward.
  • Both the red and blue lines shift upward significantly.

Let’s take each in turn.

Continue reading Keith Hennessey…

(photo credit:  lucidialohman)