The federal government set a new monthly record for the largest monthly budget deficit in February. Sorry to burst the bubble of all those optimistic souls who thought the spending binge was over.
According to a report released by the Congressional Budget Office the federal government racked up a $229 billion deficit last month, the single largest monthly figure in American history. All told Washington has racked up $578 billion in debt in just the first five months of the fiscal year. For comparison’s sake, that’s about $50 billion more than the cumulative deficit of President George W. Bush in his first three years in office.
That historic deficit comes despite tax revenues of $895 billion – a 3 percent increase over last year. The problem is that spending increases have far outstripped any revenue gains. The federal government, with Obama at the helm, has already spent more than $1.5 trillion in just five months. That’s roughly the same amount as Washington spent in an entire year as recently as 1996.
But wait, weren’t we promised that our enormous deficit were just a product of the recession? Didn’t Obama say that Washington’s higher spending was just needed to fill in the hole being left by consumers? And haven’t all the stimulus funds been spent? What the heck is going on here?
After all, the entire reasoning (if you could call it that) behind Keynesian-style stimulus packages is to counter the reduction in aggregate expenditures that results from a recession. This is done by temporarily increasing government purchases in order to fill the gap left by consumers.
Obama may have used that reasoning in 2009 or 2010, and indeed he did. “The recession meant that there was less money coming in, and it required us to spend even more,” Obama reasoned. “On tax cuts for middle class families to spur the economy; on unemployment insurance; on aid to states so we would prevent more teachers and firefighters and police officers from being laid off. These emergency steps also added to the deficits.”
But the emergency has passed, the private sector is growing, and the federal government is still setting monthly deficit records, heaping an ever-greater burden on future generations.
That’s yet to be seen. As for now Obama isn’t giving any answers on his own. Instead, he’s happy to sit back, bask in the very modest job gains of the past few months (which came despite the vast majority of the stimulus having already been spent), and deflect as much attention as he can from the lingering deficit problem.
But Obama can’t hide forever. Even without the one-off policy choices like the stimulus, the auto bailout, TARP, and the Fannie/Freddie bailout, Obama has overseen a massive growth in government that will long outlast him. For proof look no further than his most recently released budget. Despite rosy economic forecasts and unrealistic policy predictions Obama’s budget still predicts government deficits averaging $1 trillion for the rest of the decade.
The stimulus may have been temporary, but Obama fully intends for the spending levels to remain permanently high.