Tuesday, February 9, 2010
By Dr. Jason White
Principal and Director of Investments
Family Investment Center
The White House delivered its proposed 2010 budget to Capitol Hill by forklift, which was an interesting visual to say the least. The economy is slowly clawing its way back from the worst recession since the Great Depression, or at least since 1980-81, depending on the measures used to evaluate our current circumstance. Either way, the situation has been grim, but there are signs of life.
The “green shoots” have sprouted into seedlings in various industry and geographic pockets in the United States, but I am far from declaring economic victory for the private sector. The proposed federal budget concerns me deeply.
The Obama budget, if approved as submitted (which will never happen), sets a new standard for fiscal irresponsibility and governmental intrusion. Fully 25 percent of Gross Domestic Product, $3.4 trillion of spending, will come from Washington, DC – far more than during any year of Dubya’s presidency. In fact, the projected 2010 budget deficit of $1.4 trillion is 9-times higher than is was in 2007. Unbelievable!
As a practicing economist and financial professional, I truly do understand the continued need for federal deficit spending, given tepid demand in the consumer sector. In particular, states from coast to coast are struggling with budget imbalances and are looking to federal injections to help solve their own budget woes.
When the economy is mired in recession, Keynesian economists believe that the federal government can help mitigate conditions through deficit spending AND targeted tax cuts. The Obama administration has had no problem satisfying the deficit spending part of Keynesian expansionary policy, but tax cuts have been viewed as heretical and “not affordable,” according to the Democrats in power.
I will set aside a discussion of tax policy for a future column, but I do have a few comments on the federal budget Obamination.
At this moment, the National Debt of the United States of America stands at $12 trillion, $360 billion and some spare change. Our Debt-to-GDP ratio is 86.62 percent, thus if every dollar’s worth of goods and service produced in our great nation were funneled to pay down the national debt, it would take almost an entire year to retire it. This amounts to $40,051 per citizen, or more importantly, $113,113per taxpayer.
The data is staggering, sad and outrageous. The federal budget is completely and apparently deliberately out of control. One can only hope that the House of Representatives has the will to take a meat cleaver to this budget Obamination.