Today, October 1, is the first day of the 2012 fiscal year.
We don’t have final numbers for the fiscal year that just ended, but let’s look at the CBO Monthly Budget Report, the CBO Economic and Budget Update, and the OMB Historical Tables, and see whether there’s anything worth celebrating.
- The federal government spent about $3.6 trillion in FY2011, more money than any government has ever spent in a 12-month period in the history of the world.
- The FY2011 budget is nearly double the burden of federal spending just 10 years earlier, when federal outlays consumed “only” $1.86 trillion.
- The federal budget in FY2011 consumed about 24 percent of national output, up sharply compared to a spending burden in FY2001 of “just” 18.2 percent of GDP.
- Defense spending is too high, and has increased by about $400 billion since 2001, but the vast majority of the additional spending is for domestic spending programs.
- Federal tax revenue in FY2011 will be about $2.25 trillion, an increase of 7-8 percent over FY2010 levels.
- Economic stagnation has affected tax revenues, which are lower than the $2.6 trillion level from FY2007.
- Federal receipts amount to about 15.3 percent of GDP, below the long-run average of 18 percent of GDP.
- The Congressional Budget Office does predict that revenues will rise above the 18-percent average - without any tax increases - by the end of the decade.
- Record levels of government spending, combined with low revenues caused by a weak economy, will result in a $1.3 trillion deficit.
- This is the third consecutive deficit of more than $1 trillion.
- The publicly-held national debt (the amount borrowed from the private sector) is now more than $10 trillion.
With budget numbers like these, no wonder America has a fiscal hangover.
Fortunately, there is a solution. All we need to do is restrain the growth of federal spending, as explained in this video.
But we also know that it is difficult to convince politicians to do what’s right for the nation. And if they don’t change the course of fiscal policy, and we leave the federal government on autopilot, then America is doomed to become another Greece.