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A Revealing Pre-Election Look at the Budget Deficit

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I’m a visual learner—I don’t get it unless I can see it or read it. Perhaps this is why I find politics and punditry so frustrating. Facts and figures in sound bite format without the benefit of context or analysis are more confusing for someone like me than they are enlightening. Show me the data, let me read the narrative and I’ll formulate my own opinion, thank you very much.

I was thinking about this after the last presidential debate. Once again, I heard how under the current administration the deficit has doubled and spending is out of control. So I decided to take a look at the numbers for myself.

Tax and Fee Revenues — a Closer Look

My first click was to the Office of Management and Budget’s website, where I was able to compare federal receipts (tax and fee revenues) and outlays (spending) for the fiscal years 2008 through 2011. Afterward, I went to the Congressional Budget Office’s site to download its August 2012 projection for the current year ended September 30. Here’s what I learned — when compared to the September 30, 2008 tax receipts:

  • 2009 revenues were 17% less than 2008
  • 2010’s were 13% less than 2008
  • 2011’s were 9% less than 2008
  • and 2012 receipts are expected to be 4% less than 2008

Obviously, the recession took a toll on the government’s checkbook as revenues were $1.1 trillion lower for the four-year period of 2009 through 2012.

There is, however, another way to view this data. After that 17% drop in receipts for 2009 versus 2008, revenues actually increased:

  • by 3% in 2010 versus 2009
  • by 7% in 2011 versus 2010
  • and are expected to increase by 6% in 2012 versus 2011

This is a positive trend worth taking into account.

Out-of-Control Spending?

As for the expenditure side of the ledger, when compared to September 30, 2008 outlays, spending increased:

  • by 18% in 2009
  • by 16% in 2010
  • by 21% in 2011
  • and are expected to increase by 19% in 2012

Which brings a total of $2.2 trillion in increased spending during the same four years.

Once again, these same numbers tell a different story too.

After that 18% increase in 2009 versus 2008, expenditures actually:

  • declined by 2% in 2010
  • increased by 4% in 2011
  • and are expected to decline by 1% in 2012

This is hardly indicative of an out-of-control situation.

Putting the two sets of numbers together—$1.1 trillion in lower income versus $2.2 trillion in higher spending—it’s easy to see how $3.3 trillion of the aggregate federal deficit could be directly attributed to this administration’s actions.

Could Things Have Been Different?

The obvious question is, could the government have immediately reduced its expenditures when revenues took a nose-dive? Frankly, I don’t see how that would have been possible, for a few reasons.

First, according to the Heritage Foundation, which also draws its numbers from the Office of Management and Budget, entitlement spending (Social Security, Medicare, etc.) made up just under 60% of total outlays for the past four years. So ratcheting down that end of the equation would have been difficult. Moreover, after the initial $500 billion increase in entitlement spending that occurred in 2009 versus 2008, which can be attributed to the onset of the financial crisis, the level of this spending actually declined by 7% from point to point (projected 2012 versus 2009).

Also according to the Heritage Foundation’s table, discretionary spending, which makes up the balance of the government’s outlays increased:

  • by 8% in 2009 versus 2008
  • by 16% in 2010
  • by 14% in 2011
  • and is expected to increase by 7% in 2012

However, after that initial 8% increase in 2009 versus 2008, discretionary spending:

  • increased by another 8% in 2010
  • declined by 2% in 2011
  • and is expected to decline by another 6% in 2012

This suggests that the government is actually reducing expenses as the economy slowly improves.

Here’s my point: it’s hard to make a decision on a course of action with selectively presented data. I know this from my experience as a business owner and I’ve come to realize this as a voter during these past several election cycles.

So, to paraphrase the late Timothy Leary, turn down the volume, turn on the laptop, tune in to the details and make up your own mind instead of letting someone else make it up for you.

Image: Jeff Sandquist, via Flickr

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