Federal Deficit: Did Someone Forget How Budgets Work? — It’s Spending AND Revenue

I know there is a line of thinking out there that posits once a president takes office, everything that happens within the federal government is under his control. This line of thinking was no less false when Bush was president then it is now when Obama is president. It’s not about blame, it’s about facts, and when it comes to the federal budget, and more specifically the year-after-year trillion-dollar plus deficits, it seems people need a few lessons.

People need to learn how budgets work. People need to learn when the fiscal year starts for the federal budget and people need to understand that there are two things that drive deficits, outlays and receipts, which is the official terms used by the federal government. For you and I, we can call it spending and revenue (taxes).

I know you’ve heard people say things like “Obama has gone on a massive spending spree,” or “spending is out of control during Obama’s presidency,” but these statements are only factoring in one side of the ledger, spending. They are conveniently leaving out the revenue side of the equation. They are also conveniently leaving out the Great Recession and the fact that most of the federal budget carries over from year-to-year.

When people talk about massive spending, what they are actually talking about is a massive federal deficit that then gets piled on to the national debt each year. But would you be surprised if I told you Obama has not gone on a massive spending spree? Would you be surprised to know that spending has actually gone down during Obama’s first term? If you are a conservative partisan and likely Romney voter, then you certainly think I’m lying to you. But it is true that spending is down during Obama’s first term.

While it is true that spending has not returned to pre-Great Recession levels, it is also true that revenue has not returned. And so there is your federal budget deficit in a nutshell. Let’s look at the numbers from the past 14 years (source OMB):

[1998] 1,721,728 - 1,652,458 = 69,270
[1999] 1,827,452 - 1,701,842 = 125,610
[2000] 2,025,191 - 1,788,950 = 236,241
[2001] 1,991,082 - 1,862,846 = 128,236
[2002] 1,853,136 - 2,010,894 = -157,758
[2003] 1,782,314 - 2,159,899 = -377,585
[2004] 1,880,114 - 2,292,841 = -412,727
[2005] 2,153,611 - 2,471,957 = -318,346
[2006] 2,406,869 - 2,655,050 = -248,181
[2007] 2,567,985 - 2,728,686 = -160,701
[2008] 2,523,991 - 2,982,544 = -458,553
[2009] 2,104,989 - 3,517,677 = -1,412,688
[2010] 2,162,724 - 3,456,213 = -1,293,489
[2011] 2,303,466 - 3,603,061 = -1,299,595
[2012] 2,468,599 - 3,795,547 = -1,326,948 *estimated

From 1998 to 2001 we saw budget surpluses, with 1998 being the first year the federal budget swung to surplus during the Clinton administration. From 2002 until present the federal budget has been in deficit, growing each of Bush’s first three fiscal years before falling the next three years (due to increased revenues  not reduced spending) only to skyrocket in 2008 and 2009 during the Great Recession. You might be saying to yourself, “Obama was president in 2009.” Yes, outside the first few weeks of the year, Obama was indeed president that year, but the fiscal budget year starts in October. So that means most of the 2009 spending was already in place before Obama was sworn into office. That’s also why, for the sake of this analysis, I will ignore Bush’s first year in office (2001) and shift both the Bush and Obama analysis back by one full year to capture the years in which one could argue they had control of their respective budgets.

Federal spending in Bush’s first full budget year in 2002 was $2.01 trillion. This increased every single year he was in office. Bush cannot claim he ever decreased spending during his time in office. In the final budget year that Bush is responsible for, 2009, federal spending ballooned to $3.51 trillion, but to be fair, that number reflects federal outlays to combat the effects of the Great Recession, a trend that continues through Obama’s presidency. That means during Bush’s time in office he increased spending by $1.51 trillion for an average increase per year of $188 billion.

Federal spending in Obama’s first full budget year in 2010 was $3.45 trillion. Spending increased in 2011 and again in 2012, with a total outlay of $3.79 trillion (according the 2012 estimate, more on this in a moment). To date, Obama has increased spending by $340 billion for an average increase per year of $113 billion.

I gotta ask you, who went on a spending spree? But yes, I did say this isn’t about blame. The purpose of this article is to explain the facts. These are simply numbers after all, or as Bill Clinton said, “It’s arithmetic.”

About that 2012 estimate: For the sake of referencing one set of data I chose to use the official OMB numbers, which have not yet been updated for 2012 (they are still reporting an estimate). Less than two weeks ago the official 2012 budget numbers were reported at $2.4 trillion on the revenue side and $3.5 trillion on the spending side for a deficit of $1.1 trillion (not $1.3 trillion). Using the official numbers, the picture is even better for Obama. Spending actually decreased in 2012, something that never happened during Bush’s eight years. The official numbers mean Obama has only increased spending by $50 billion for an average increase per year of a little under $17 billion.

As for the revenue side of the ledger, tax receipts still have not quite returned to pre-Great Recession levels, although it is getting close. Factor in the 2001 and 2003 Bush tax cuts (extended by Obama and congress until the end of 2012) and that makes up a large part of the remaining deficit. Not all of it, but certainly enough to get the deficit back down to pre-Great Recession levels or better (several hundred billion) if the economy continues to grow and if all Bush tax cuts are allowed to expire at the end of the year. Of course we know at least one of those things is unlikely to happen.

But I gotta ask again: Did Obama go on a spending spree?

EconomyElection 2012GovernmentPolitics

#budget#debt#deficit#federal budget#OMB#outlay#President Bush#President Obama#receipt#revenue#spending