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Title: The 2009 budget deficit—How did we get [there]?
Source:
economic Policy Institute
URL Source: http://epi.3cdn.net/0974dad8645a9d3216_5tm6bnxqd.pdf
Published: Feb 17, 2010
Author: John S. Irons
Post Date: 2010-02-17 13:44:41 by war
Keywords: None
Views: 2038
Comments: 17
In March 2009, the Congressional Budget Office (CBO) projected a baseline deficit of $1.67 trillion, or 11.9% of gross domestic product (GDP) for fiscal year 2009. This was up from a deficit of $459 billion in fiscal year 2008, or 3.2% of GDP, and a reversal from surpluses a decade ago. These growing federal deficits are the result of four primary factors: the 2001 and 2003 tax changes; the external effects of the current recession; increased Bush-era spending, including spending on the wars in Iraq and Afghanistan; and the various short-term responses to the recession, including the American Recovery and Reinvestment Act (ARRA) and financial market bailouts. The recession itself is the most important cause, responsible for just under half of the deterioration. The ARRA constitutes less than a tenth of the total deterioration since 2001. This Issue Brief examines the details and causes of the current budget deficit and the role the current recession has played. The years between 2001 and 2007 saw a large deterioration in the budget balance, which was driven chiefly by legislated policy changes. The Bush-era tax cuts are the largest contributors to this period of policy-induced increases to the federal budget deficit. Despite these policy changes, the federal budget deficit remained relatively modest in 2007. However, since the current recession began in 2008, the contracting economy and the explicitly short-term policy responses enacted to address it have caused an enormous, but temporary increase in the deficit. More specifically, we find that that: In 2001, the federal • budget was in surplus by $281 billion (2.8% of GDP). Further, the CBO estimated surpluses would continue through 2010 in their baseline projection. (See box below, A Note on Baseline Projections). In 2009 the most recent forecast is for a federal budget deficit of $1.67 trillion (11.9% of GDP) — though further economic deterioration may increase this total. Of this $2 trillion • reversal of fortune, almost half (42%) was due to legislative changes made prior to 2009 (the Bush-era tax cuts explain about a third of these legislative influences), 42% was due to economic and technical factors — a reflection of the recession’s effect on the deficit — just since the start of the current recession, while only 7.6% can be accounted for by the American Recovery and Reinvestment Act (ARRA). • Since 2007, before the recession began, the CBO baseline projection for fiscal year 2009 has deteriorated by $1.5 trillion, or 10.9% of GDP. • Of that change, the largest share can be attributed to the mechanical effects of the recession on taxes and spending, as well as the explicitly short-term policy responses to it: 45% of the $1.5 trillion change was due to economic or technical factors (which include subsidies for Fannie Mae and Freddie Mac); 21% was due to non-recovery act legislative changes; 22% was due to the Troubled Assets Relief Program (TARP); and 12% was due to the American Reinvestment and Recovery Act. • Non-recovery related legislative spending increased relative to the March 2007 baseline by just $221 billion, or 1.6% of GDP. The bulk of this increase reflects increased defense spending.
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#1. To: war (#0)
Good lord! What a bunch of Marxists!
You were expecting,.....what, from my anti groupie?
my anti groupie can't get through life without me.
They're everywhere! Even under your bed! Be vigilant.
Attack the source when you can't attack the message.
The fact I was an RM2 escapes you obviously, and what that implies. Badeye posted on 2007-01-30 16:42:29 ET Reply Trace Their Marxist message about the tax cuts is BS.
It comes from so many different sources including the CBO that it's lunacy to dispute...
The fact I was an RM2 escapes you obviously, and what that implies. Badeye posted on 2007-01-30 16:42:29 ET Reply Trace CBO Report Supports Bush's Tax Cuts Tax cuts enacted under the George W. Bush administration have not eaten into the revenue base and are not the cause of rising federal deficits, Sen. Chuck Grassley, Chairman of the Senate Finance Committee, has argued. Citing the latest Congressional Budget Office deficit report, Grassley said that the revenue baseline for FY 2006 to FY 2010 will average 18.3% of the Gross Domestic Product, at the post-World War II historic average. According to Grassley, this means that with the 2001-2003 bipartisan tax relief plans in full effect, the revenue base has been sustained in terms of the historic average. “It’s pretty obvious that the critics of tax relief will ignore this report because it refutes their point," he commented in a statement last week. "The critics like to say tax relief guts the revenue base and causes rising deficits. But the report clearly doesn’t support that assertion. In fact, the report shows that positive revenue changes to the baseline in the FY 2006 and FY 2007 budgets far exceeded the revenue loss from the reconciled and non-reconciled tax relief approved in this Congress. Spending is the problem, not tax relief," Grassley argued. The CBO projects a deficit of $260 billion for fiscal year 2006, about $111 billion less than it estimated in March for the President’s budget, largely as a result of higher-than-expected tax revenues from strong corporate profits.
Too bad that the headline has nothing to do with the article. Typical smoke and mirrors from you Puddin'...
The fact I was an RM2 escapes you obviously, and what that implies. Badeye posted on 2007-01-30 16:42:29 ET Reply Trace
Too easy.
my anti groupie can't get through life without me.
CBO Data Show Tax Cuts Have Played Much Larger Role than Domestic Spending Increases in Fueling the Deficit
The fact I was an RM2 escapes you obviously, and what that implies. Badeye posted on 2007-01-30 16:42:29 ET Reply Trace There were two tax cuts. The smaller began in mid 2001 and was phased in over time. The larger came in mid 2003. The effects were quite dramatic. By July of 2004 GDP growth had jumped from 1.8% to 5.4%, business investment jumped over 10 times and employment growth was also up a factor of 10. The good news was that supply side economics really worked. Tax revenues increased steadily from 2003 right up to the present as the table below shows: Total Federal Revenues in Billions 2000..........$2,025 2001..........1,991 2002..........1,853 2003..........1,782 2004..........1,880 2005..........2,153 2006..........2,407 2007..........2,568 The deficit grew right along because Congress let the spending grow even faster. To kill the tax cuts, that is greatly raise taxes as the two Democratic candidates are suggesting, can be expected to have the opposite and dramatic results of less GDP growth, less business investment, higher employment and less total revenue. This would really put pressure on Congressional spending and a much faster growing deficit. Be careful what you wish for.
Revenues grew at historically low levels due to the tax cuts...take it up with CBO... Quick: Quote Charles Grassley under a headline unsupported by either the article or the facts... Too easy...(laughing)
The fact I was an RM2 escapes you obviously, and what that implies. Badeye posted on 2007-01-30 16:42:29 ET Reply Trace We had two massive tax cuts and look at where this nation is both fiscally and economically. Do you realize how stupid you come off lecturing me about this? Apparently not... ,
The fact I was an RM2 escapes you obviously, and what that implies. Badeye posted on 2007-01-30 16:42:29 ET Reply Trace Myth: Tax revenues remain low. Fact: Tax revenues by 2006 were 18.4%of gross domestic product (GDP), which is actually above the 20-year, 40-year, and 60-year historical averages.
DO YOU KNOW WHO I AM!!!!!! LOL
You were linked to that too... TO quote your boyfriend: We're done...(laughing)
The fact I was an RM2 escapes you obviously, and what that implies. Badeye posted on 2007-01-30 16:42:29 ET Reply Trace http://www.epi.org/
#2. To: dont eat that (#1)
What a bunch of Marxists!
#3. To: dont eat that (#1)
What a bunch of Marxists!
#4. To: dont eat that (#1)
#5. To: war (#4)
#6. To: dont eat that (#5)
#7. To: war (#6)
including the CBO
#8. To: padlock (#7)
#9. To: war (#8)
“It’s pretty obvious that the critics of tax relief will ignore this report because it refutes their point,"
#10. To: dont eat that (#9)
#11. To: (#9)
#12. To: war (#11)
#13. To: dont eat that (#12)
#14. To: dont eat that (#12)
To kill the tax cuts, that is greatly raise taxes as the two Democratic candidates are suggesting, can be expected to have the opposite and dramatic results of less GDP growth, less business investment, higher employment and less total revenue. This would really put pressure on Congressional spending and a much faster growing deficit.
#15. To: war (#14)
#16. To: war (#14)
Do you realize how stupid you come off lecturing me about this?
#17. To: dont eat that (#15)
Revenues grew at historically low levels due to the tax cuts...take it up with CBO...
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