21% increase in federal spending in two years and the deficit has eclipsed 1.3 trillion.
The 2010 deficit is the second-highest shortfall — 2009 is the highest —since 1945, as a percentage of the economy.
To the extent that spending is slightly less than in FY 2009, it is due to the spending provided during the financial crisis to the banking industry.
Outlays ended the year about 2 percent below those in 2009, CBO estimates. That decline resulted primarily from a net reduction in outlays for three items related to the financial crisis: the costs of the TARP ($262 billion lower than in 2009), payments to Fannie Mae and Freddie Mac ($51 billion lower), and federal deposit insurance ($55 billion lower).
This cut in spending, which obviously followed a gigantic increase in spending on these programs, is probably why Paul Krugman had this piece on Sunday claiming that there hasn't been a big expansion of government:
Here's what you need to know: The whole story is a myth. There never was a big expansion of government spending. In fact, that has been the key problem with economic policy in the Obama years: we never had the kind of fiscal expansion that might have created the millions of jobs we need.
Now, let's go back to the CBO data. According to the monthly budget review, once we exclude those three programs (TARP, Freddie and Fannie, and the FDIC), spending rose by about 9 percent in 2010. This is my favorite part (in a horrified kind of way) of the CBO piece. This 9 percent spending growth, CBO explains, is "somewhat faster than in recent years." Now, I am not sure how you feel about this, but I think that something is really wrong when a 9 percent growth in spending is not that big of a deal anymore.
Veronique explains why, in the above piece, Krugman excused Obama's spending spree. Seth Forman goes further in breaking down Krugman's bulls#@t:
Krugman is being purposely obtuse. In fact federal spending rose a mind-numbing 34 percent from 2008 to 2009 (the finals for 2010 are not in, but are estimated to be somewhere near the 2009 level). You'd have to go back to 1952 before observing a higher percentage increase in federal spending in one year, and that was mostly a function of the severe federal spending drops in the years immediately after World War II. Indeed, even between 1932 and 1941, the depths of the Great Depression before preparation for World War II began, Franklin Delano Roosevelt raised federal spending by more than 34 percent only once, in 1934. In that year, federal spending increased by 42 percent in a failed attempt to quash a national unemployment rate of 21.7 percent. In that year, federal spending only amounted to 10.5 percent of gross domestic product. By contrast, with less than half of FDR's unemployment problem, federal spending as a percentage of the economy surged to an estimated 24.4 percent in 2010 (from 21.1 in 2008 last year). Spending for all governmental levels is running at 42.7 percent of GDP in 2010, up from 36.4 percent only two years ago.
Surely Krugman is aware of these simple, irrefutable facts, so he contrives to redefine public sector growth. "When people denounce big government," he writes, "they usually have in mind the creation of big bureaucracies and major new programs. And that just hasn't taken place." It is true that the number of total government employees is roughly the same in 2010 as it was in 2008 (22.6 million in 2008 vs. 22.2 million in 2010), but this is true only in the most literal and meaningless sense. At the same time that private sector jobs have declined by 5.7 million, the number of government jobs has remained stable. If public sector payrolls had declined proportionately to that of the private sector, there would be 900,000 fewer government jobs than currently exist. As it stands, government employment has risen to 17.1 percent of all jobs, up from 16.6 percent in 2008.
But hey….it's all good. We'll recover:
The Obama administration is projecting that the deficit for the 2011 budget year, which began on Oct. 1, will climb to $1.4 trillion. Over the next decade, it will total $8.47 trillion.
Bad and getting worse.
Ch-ch-change baby!
Exit graphic:
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