What’s the “extreme” part of this story?

I told y’all that this wouldn’t be an all-baseball, all-the-time blog.  But, I have to confess that even this post is going to involve a little inside baseball.

Chart 1, click to enlarge

When I left my job as a Legislative Assistant to United States Senator Pete V. Domenici in 2004, the federal government was spending about $2,293 billion.*  That same year, it brought in about $1,880 billion. For those of you keeping score at home, that left the federal government about $413 billion short (Chart 1).   To that point, this was an all-time high deficit and people from both parties were rightly concerned over its size.

Chart 2, click to enlarge

The federal government in 2004 was in the second year of a pretty good four-year stretch.   From 2004 to 2007, the federal government saw massive increases in revenue.  In spite of all the rhetoric that the tax cuts of 2001 and 2003 would devastate federal government recipts.  In 2005, federal government income was $2,254 billion (an increase of 14.55% over 2004).  In 2006, income was up to $2,407 billion (up another 11.56% from the already-increased 2005).  By 2007, the feds received $2,568 billion (6.69% increase over 2006).  In 2008, receipts were down slightly to $2,524 billion, which still represented $742 billion more than the federal government received in 2003 (Chart 2).

Chart 3, click to enlarge

Expenditures increased over this same time but not at quite the same rate – the feds went from spending $2,160 billion in 2003 to spending $2,729 in 2007, leaving deficits of $318 billion in 2005, $248 billion in 2006, and $161 billion in 2007 (Chart 3).  Still too big but going in the right direction.  With the financial crisis of 2008, spending increased to $2,983 billion and the deficit ballooned again in 2008 (Chart 4).  By ballooning, I mean it increased to $459 billion. This was rightly viewed as an astonishing, almost unimaginable, amount.  Little did we know, we hadn’t seen anything yet.

Chart 4, click to enlarge

In 2009, the federal government saw revenues drop sharply, falling from $2,524 billion in 2008 to $2,105 billion (a decrease of $419 billion). Instead of reducing expenses to match the reduction in revenues, we saw the federal government increase spending by $535 billion, bringing expenditures up to an astonishing $3,528 billion.  This left the feds with a deficit of $1,413 billion, more than three times as much as the worst deficit we’d ever seen.  In the history of the country (Chart 5).

Chart 5, click to enlarge

In 2010, the picture got slightly better as the federal government saw revenues slightly increase from 2009’s $2,105 billion to $2,162 billion (an increase of $57 billion); expenditures decreased by about the same amount, going from $3,517 billion to $3,456 billion (a reduction of $61 billion).  This still left the feds spending $1,293 billion more than they brought in.

To recap, the feds were spending $2,293 billion in 2004.  In just six years, government expenditures had risen more than 50% to $3,456 billion.  Revenues had increased by a really respectable 15% over that same period as the feds saw receipts go from $1,880 billion in 2004 to $2,163 billion in 2010. This means the deficit increased an astonishing 213% in just six years, going from $413 billion in 2004 to $1,293 in 2010 (and remember, we had an even bigger deficit than this in 2009).

Chart 6, click to enlarge

In November of 2010, so many people in America were fed up with this madness that they threw out a heck of a lot of the bums in the House of Representatives and quite a few in the Senate.  I don’t think many people will argue with the premise that this out-of-control trend (on the expenditure side) played a significant role in this election result.

Which brings us to the present day. We’re in the middle of the 2011 fiscal year.  Because Congress and the President did not pass either 1) a budget to plan for how the federal government was going to raise money and spend it or 2) appropriations legislation that actually spends it, the federal government has been operating under a series of Continuing Resolutions (known in business as CRs) that, up until last month, continued spending in 2011 at the same levels they spent in 2010.** According to the Historical Tables in the President’s 2012 Budget, which he submitted to Congress on February 15, 2011 and which is the source for all of this data, expenditures were actually estimated to increase to $3,819 billion against $2,174 billion in revenues, leaving the feds with a deficit of $1,645 billion (Chart 6).  If this were to hold true, revenues would be up just less than 16% since 2004.  The increase in expenditures would be almost 67% over 2004 levels, creating a 299% increase in the deficit over that period.

Chart 7, click to enlarge

In an effort to begin the very contentious process of reigning in the deficit, the last two very short-term CRs contained about $10 billion in cuts, mostly by de-funding earmarked projects.  The House of Representatives, the Senate, and the White House are now arguing about how much more to cut out of this year.  The House would like to see a total of $100 billion cut out of 2011 spending (that’s $100 billion out of a projected $3,819 billion, or about 2.6%; remember, we’ve seen increases of 67% over just six years).  If the feds were to cut this $100 billion, bringing expenditures down to $3,719 billion, that would still be $200 billion more than the largest single-year expenditure ever ($3,518 billion in 2009)! Somehow, however, the Democrats and the media are allowed to characterize an effort to reduce spending to just 5.7% more than has ever been spent as “draconian” and “extreme” (Chart 7).

If this is what they call “extreme,” I can hardly wait to see what happens when they begin working on the fiscal year 2012 budget and appropriation bills.  The Republicans in the House of Representatives have committed to make the $100 billion reduction look like the paltry amount that it is.  I wonder if the Democrats and media will come up with a new word or just continue with business as usual.

*No doubt, most of you have heard these numbers reported in trillions of dollars (i.e., 2004 expenditures was $2.3 trillion). I find it easier for comparison’s sake to talk about them in billions.

**I realize that, for technical reasons which I may explore in a later post, this isn’t precisely correct.  But, for the purposes of this discussion, it’s close enough.


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