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#1 Where the Budget Deficit Actually Came From
04-20-2011, 04:38 PM
- Join Date
- Aug 2005
I found that in thinking about the budget, I did not have a good mental picture of where, exactly, and when, exactly, things had gotten out of line. So I decided to do a quick analysis of the "big pieces" of the federal budget just to get a feel for the magnitude of our financial problems and where in the budget they were located. It occurred to me that others might be interested in this as well, and that thought is the provenance of this essay.
Just to begin at the beginning, this chart is a "50,000 foot view" of the battlefield. This is a chart of GDP at the top and federal budget expenditures at the bottom.
The orange vertical line is at 2008, the end of the Bush (43) Administration. All the numbers and all the charts in this essay are in current dollars. That means that they are in dollars not adjusted for inflation. The growth rate of GDP that one typically hears -- 4% or 3% or 2.5% -- is a real rate that has been adjusted for inflation. But since the budget in any year concerns dollars for that year, there is no point in adjusting a historic study like this for inflation. Inflation is a different issue and is not important here because everything -- receipts, GDP, expenditures -- are in dollars of the same year and thus of the same value for that year.
This issue comes up right away in the above chart.. You might ask, "Where are the recessions?" in the GDP data. The reason you don't see them is that in current dollar terms they are very small -- they are significant in real terms, but inflation mutes them in a time series like this one. The current recession is so deep that it does show up in the data.
All the charts in this essay are 1960 - 2011. I chose 1960 as the beginning year because roughly speaking this is when socialism started to come to America. This chart starts in the last year of the Eisenhower Administration.
The chart shows that GDP and the federal budget both grow over time. No surprise there. If we are being charitable, it is very likely that this is the way a typical liberal Dem sees the problem -- i.e., that there really isn't a serious problem: both the GDP and federal outlays are growing and in a time series it doesn't look like anything catastrophic is happening.
So that's the background. Now let's zoom in for a finer view. The next chart shows the federal budget as a percentage of GDP:
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