July 27, 2009

July 27, 2009 | Special Report on Budget and Spending, Federal Budget

Federal Spending by the Numbers 2009

The 2009 version of "Federal Spending by the Numbers" shows spending and deficits surging at a pace not seen since World War II. Washington will spend $33,932 per household in 2009--$8,000 per household more than last year. While much of this spending is a temporary result of the recession and financial crisis, President Obama's 2010 budget would replace this temporary spending with permanent new programs. Consequently, by 2019--a time of assumed peace and prosperity--Washington would still spend $33,000 per household (adjusted for inflation), essentially making permanent this year's $8,000 per household spending hike. These numbers do not even include the cost of the President's health plan.

Since 2001, spending has grown across the board. Discretionary spending has expanded 74 percent faster than inflation as a result of large defense and domestic spending hikes. Entitlement spending has reached a record 13 percent of GDP--not even counting the additional 5 percent of GDP spent on financial bailouts this year. Other areas receiving large increases since 2001 include: anti-poverty programs (57 percent faster than inflation), K-12 education (169 percent), veterans spending (72 percent), and Medicare (59 percent). And despite all the pressing national priorities, lawmakers approved over 10,000 earmarks last year at a cost of $20 billion. Simply put, all parts of government are growing.

Consequently, Washington is estimated to run a 2009 budget deficit of $1.845 trillion ($15,635 per household). While deficits naturally rise during recessions, one would expect them to eventually return back to the $100 billion to $400 billion range that prevailed before the recession. However, the President's budget shows annual budget deficits averaging just under $1 trillion over the next decade--a period in which the national debt would double. These deficits would not only raise interest rates, they would also nearly quintuple the net interest costs of the national debt over the next decade.

Of course, not all future spending is inevitable. In the 1980s and 1990s, Washington consistently spent $21,000 per household (adjusted for inflation). Simply returning to that level would balance the budget by 2012 without any tax hikes. Alternatively, returning to the $25,000 per household level (adjusted for inflation) that Washington spent before the current recession would likely balance the budget by 2019 without any tax hikes.

Read the entire report (PDF)

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies