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From time to time I've shared my historical perspective on Debt, Taxes and Politics. Let's now look at what's happening this week.
Congress continues to squabble over trivial budget cuts ($33 billion) for the 2011 fiscal year, for which the Congressional Budget Office (CBO) projects a staggering deficit of $1.48 trillion. Meanwhile the word is out that tomorrow Republicans will unveil a plan to cut $4 trillion from the budget, primarily from Medicare and Medicaid, over the next decade. Against these political maneuverings, a partial government shutdown looms if congress can't pass a budget by Friday.
Let's put some additional perspective on the U.S. budget. Here is a slide from a presentation I made last month at the Retirement Income Industry Association (RIIA) spring conference in Chicago.
As we can see, 2010 entitlement costs exceeded the entire tax revenue for the year — personal, corporate, and social. However, according to the CBO, entitlements only accounted for about 55% of 2010 spending. Defense spending took another 20%, nondefense discretionary 19%, and interest payments 6%. Thus we ended 2010 with a deficit of $1.294 trillion.
Let's put 2010 into the larger pattern of federal spending behavior. I created the next two charts from a combination of CBO historical data since 1971 and their budget projects for 2011-2021. The first chart shows the astonishing growth of entitlements.
The next chart shows the projected gap between revenues and outlays over the next decade together with an overlay of the accelerating growth of public debt.
Will this week see a shift in congressional focus from squabbling over peanuts to addressing our rapidly growing debt crisis? Stay tuned. I'll have more analysis in the days ahead.
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