When it comes to spending, President Obama’s proposed budget for 2011 takes fiscal irresponsibility to Greece and beyond. Ernest S. Christian and Gary A. Robbins, both former Treasury tax officials, write in the Washington Times that “the president’s planned fiscal excesses beyond 2010 cannot plausibly be attributed to the recession, blamed on George W. Bush or justified by economic principles, Keynesian or otherwise.”
Growth in spending will only aggravate the nation’s currently poor fiscal outlook. By 2020, the public debt will be 91 percent of Gross Domestic Product (GDP), and the gross debt will be upwards of 123 percent of GDP. Christian and Robbins put this into perspective by pointing to the debt held by Greece—currently in financial crisis–of 123 percent of Greek GDP. This is the projected fate for America’s federal public debt, scheduled for this decade if nothing changes.
In the 2010 Budget Chart Book, Heritage has put into pictures the astronomical levels federal spending has already attained. In 2010, federal spending per American household will exceed $30,000. And though both taxes and spending have been on the rise since the sixties, the 2008 recession has pushed them in opposite directions, with spending growing at a breakneck pace while revenues plummet. In 2010, spending will total $3.69 trillion, while revenues will come in at only $2.15 trillion.
It may seem logical to propose tax hikes to reverse this growing problem, but as Christian and Robbins point out, regardless of how it’s funded, maintaining this level of spending will ruin the U.S. economy. Heritage’s budget expert Brian Riedl argues further that growing deficits are due to runaway spending, not a lack of taxation, since, “as deficits expand by 5.9 percent of the economy, nearly 90 percent of the growth will come from higher-than-average spending, and just over 10 percent from lower-than-average revenues.”
If spending is not curbed, it can only be addressed in one of two ways: increasing the federal debt until our own debt crisis emerges or increasing taxes. Concerning growing the federal debt, Christian and Robbins point out that continuing to do so would mean that the United States’ Triple A bond rating would be downgraded within few years, and the cost of the Treasury’s borrowing would skyrocket, the effects of which would be far-reaching. Higher interest rates would spread to result in higher rates for mortgages, car loans, and business loans, all of which would stifle the economy.
Not a pretty picture. Plan B, to raise taxes to meet new spending levels, isn’t any better: “…a tax increase big enough to make a dent in Mr. Obama’s spending-and-debt spree will, dollar for dollar, do far more damage to the economy than it adds to the Treasury’s revenue receipts.”
So when it comes to expanding big government, the president and other fans will have to choose their weapon of choice to beget America’s economic decline. Of course, there is a third option: step back from the ledge and reverse irresponsible spending.