Obama’s ‘Path Toward Fiscal Discipline’ is Paved with Average Annual Deficits of $900 Billion, Says White House Report
The figures were calculated by the White House Office of Management and Budget and published in a document entitled, “Mid-Session Review—Budget of the U.S. Government—Fiscal Year 2010.”
“Despite the demands put on the treasury to respond aggressively to avoid economic collapse, the President in February put forward a Budget that re-oriented the Nation back to a path toward fiscal discipline,” says the review.
This year’s deficit, according to the review, will be $1.580 trillion. The largest annual deficit in the history of the country before this year was in fiscal 2008, when it was $458.5 billion, according to the OMB.
In other words, the average annual deficit of $905 billion that the White House says the Obama administration now envisions the government running over the next ten years will be almost twice as large as the largest deficit the United States ever ran before Obama entered office.
According to the Bureau of the Public Debt, which is a division of the Treasury Department, the total national debt is now $11.73 trillion. Under the new deficit spending President Obama has planned, the national debt will reach $20.78 trillion in 2019.
In fiscal 2008, according the Bureau of the Public Debt, the federal government paid $451 billion in interest on the debt. In July of last year, the Treasury was paying an average interest rate of 4.382% on that debt. This July, Treasury is paying an average interest rate of only 3.418%. If interest rates go up, the government would be forced to pay more per year to service the debt—even if the debt itself did not grow.
The large annual budget deficits anticipated by the Obama budget projections will be driven by massive increases in federal spending.
According to the budget review, the federal government will spend $3.766 trillion in fiscal 2010 and $5.307 trillion in fiscal 2019.
When President Reagan came into office in 1981, total federal spending was $678.2 billion and the annual federal deficit was $78.9 billion, according to the OMB. Prior to this year, the most money the federal government ever spent in one year was the $2.98 trillion it spent in fiscal 2008.
The new White House budget prediction that the federal government will run average annual deficits of $905 billion over the next decade are based on the White House’s assumption that after this year the economy will grow vigorously during Obama’s time in office.
“Real GDP is expected to decline by 2.8 percent this year, and to increase by 2.0 percent in 2010,” says the budget review. “The growth rate is projected to accelerate in 2011 to 3.8 percent and to exceed 4 percent per year in 2012-2014.”
In the last economic growth cycle before the current recession, real GDP peaked at 3.6 percent in 2004, according to the Bureau of Economic Analysis.
If the economy does not grow as rapidly as the White House now predicts, the average annual deficits will be larger than the $905 billion the White House anticipates, and the national debt will grow by more over the next decade than the $9.05 trillion the White House now estimates.