Historic Spending Surge
by Brian Riedl
Issue 125 - February 4, 2009

The recent Congressional Budget Office budget projections show a truly historic increase in spending and debt threatening long-run health of the US economy. The CBO baseline – after making some adjustments to make the numbers more realistic – shows a budget deficit of $1.220 trillion in 2009 and $1.477 trillion by 2019—even before any additional economic “stimulus” bills by President Barack Obama are enacted.

Its highlights include:

• The 20 percent spending increase projected for 2009 represents the largest government expansion since the 1952 height of the Korean War (adjusted for inflation).
• In 2009, federal spending is projected to reach 25 percent of GDP—the highest level in American history outside of World War II. The next economic “stimulus” package would push this total even higher.
• From 2001 through 2008, federal spending surged 60 percent—6.9 percent per year, on average. Had spending increases been limited to 35 percent—4.4 percent annually—the 2008 budget would have been in balance.
• The projected 2009 budget deficit of 8.6 percent of GDP would shatter the postwar record. The next economic “stimulus” package could push the budget deficit above 10 percent of GDP.
• By 2019, the budget forecasts a $1.5 trillion annual budget deficit, a public debt of 78 percent of GDP, and annual net interest spending of $761 billion.
• Since World War II, the public debt has ranged from 23 percent of GDP to 49 percent of GDP. Large deficits are estimated to drive the debt ratio to 50 percent in 2009, and 78 percent of GDP by 2019—a peacetime record.
• The public national debt—$5.8 trillion as of 2008—is projected to double by 2015 and nearly triple by 2019.

The study is called “CBO Budget Baseline Shows Historic Surge in Spending and Debt” and it contains dozens of bullet point observations on today’s new budget numbers. It can be found at http://www.heritage.org/Research/Budget/wm2193.cfm (click print this page for the pdf version).

The full study is well worth reading for anyone seriously interested in America’s economic future.

Brian Riedl is Grover M. Hermann Fellow for Federal Budgetary Affairs at The Heritage Foundation