Persistent U.S. Federal Budget Deficits

In various posts as well as seen in the "America's Trojan Horse" discussion, I have discussed various aspects of both the federal deficit and federal debt.  Both of these issues remain highly problematical in many ways.  At the same time, many aspects of the problems and their future implications lack recognition, either partially or fully.

One notable chart that I recently came across depicts, on a long-term basis, the level of the federal deficit as a percentage of GDP.  This chart is from the Peter G. Peterson Foundation, and is dated March 10, 2016:

(click on chart to enlarge image)

I find the depiction above to be notable in many ways.  As one can see, prior to 1950 (substantial levels of) deficits corresponded with wartime periods, and many other periods showed budget surpluses.  Beginning at around 1950, deficits became not only commonplace but also increasingly larger as a percentage of GDP.

Also notable is that over (roughly) the last 15 years, the U.S. has been unwilling and/or unable to produce a federal budget surplus.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2082.78 as this post is written

The Quality Of Deficit Spending

In the Wall Street Journal on Saturday, February 13 there was an editorial titled "High-Speed Spending." This discussed the dubious financial dynamics of a long-proposed "high speed" Orlando-to-Tampa rail project.

I also heard of a proposal to do a similar project between St. Louis and Chicago.

I have lived in the Chicago area for most of my life and have never heard anyone expressing a desire to have faster transportation (or such a "high speed" rail option) between St. Louis and Chicago. Yet, in this case, as in the Orlando-to-Tampa case, the proposed "high-speed" rail project would cost billions of dollars.

If we are looking to spend money on infrastructure, perhaps it would be wiser to spend on our existing infrastructure, which is literally crumbling. Estimates to fix our existing infrastructure range into the trillions of dollars. These estimated figures are rapidly growing.

Examples of wasteful deficit spending are innumerable, unfortunately. In my opinion, we, as a nation, are not in a position to waste any money at this point.


SPX at 1102.12 as this post is written

Editorial Of Note: "Greece's Crisis: A Warning To Profligate U.S.?"

On February 10th an editorial by Scott S. Powell appeared in Investor's Business Daily titled "Greece's Crisis: A Warning To Profligate U.S.?" The link can be found here.

I am highlighting this editorial as it discusses many important issues, most of which I have previously mentioned on this blog. As well, it compares our current financial situation to that of Greece's.



SPX at 1099.51 as this post is written

The Deficit And Federal Expenditures

With the recent unveiling of the proposed FY2011 budget, I would like to make a few comments with regard to budget deficits and federal expenditures.

Here is a historical chart of federal expenditures. This chart is from the St. Louis Federal Reserve website. This chart helps one put rising government expenditures in a historical context:




A February 1 Wall Street Journal article concerning the FY2011 proposed budget noted the deficit in the proposed budget would shrink from $1.6 trillion this year to $700 billion (4% of GDP) in 2013.

Various underlying economic assumptions from which this future deficit figure is derived can be found here:

http://www.whitehouse.gov/omb/budget/fy2011/assets/econ_analyses.pdf

I believe these assumptions are rather sanguine - even if one believes that we are in a sustainable recovery.

Our nation has a long history of being far too optimistic during budgeting. This appears to be yet another example in-the-making. What is particularly disconcerting in this instance is that even if these economic assumptions are met, there is still a $700 billion shortfall in 2013. This deficit level does not continue to decrease after 2013, as seen in the budget.



SPX at 1066.19 as this post is written

The Latest 10-Year Budget Projection

Yesterday, The Wall Street Journal came out with a story titled "A Decade of Debt" that can be found at this link:

http://online.wsj.com/article/SB125119686015756517.html

It discusses the latest 10-year budget projections that amount to a cumulative addition of $9 Trillion in debt.

I would like to briefly comment on this latest budget projection:

-As seen in the article, there are no projected budget surpluses throughout the entire 10-year period.

-Historically (at least the last couple of decades) these projections always seem to be too optimistic - meaning that the deficits realized are usually higher than planned. I wouldn't doubt this to be the case for this budget as well. The economic projections of the last budget were criticized as being too optimistic, and as seen in the chart indicated in this article, economic projections to 2012 assume a very favorable economic climate including robust GDP growth and low inflation.

As well, an additional issue is presented, one that I have commented on as recently as my post of August 21. There seems to be a "growing insensitivity to higher deficits and debts." No one seemed especially surprised or aghast upon release of these numbers. It appears that as time goes on, ever-larger deficits and debts seem to "legitimize" even larger deficits and debts, to the point where even a Trillion dollars, once inconceivable as an annual budget deficit, now almost seems "normal."

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For those who may not be aware, I recently wrote an article titled "America's Trojan Horse - A Different Look at The National Debt" which can be found listed under the Pages section on the right-hand side of the home page.


SPX at 1018.35 as this post is written

The National Debt and Deficits

The National Debt and Deficits
Tuesday, June 9th, 2009

John Taylor wrote the following article “Exploding Debt Threatens America”:

http://www.ft.com/cms/s/0/71520770-4a2c-11de-8e7e-00144feabdc0.html?nclick_check=1

Although I don’t agree with some of his figures and reasoning, the central point is important: This debt level is a serious problem.

It also illustrates the difficulty of ridding ourselves of this level of indebtedness.

These issues will likely get greater attention now that sovereign debt levels are coming under renewed scrutiny.

Furthermore, a question that should be asked is whether amassing ever-greater deficits and debt levels is compatible with the concept of sustainable prosperity.

I’ve been meaning to write an article about our national debt, as I think the topic deserves much greater discussion.

SPX at 944.37 as this post is written