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Written by Richard M. Ebeling
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Wednesday, 14 January 2009 00:00 |
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With the new stimulus package that is being planned in Washington, government spending will grow even more dramatically than it has over the last several years. More growth in the Federal government’s debt will come with it, as will a greater tax burden for the American people.
In its January 7 report, the Congressional Budget Office (CBO) projected that the Federal budget deficit for the fiscal year that ends September 2009 will be at least $1.2 trillion. But the CBO emphasized that this does not incorporate any of the additional government spending and borrowing.
President-elect Obama’s economic policy team has been crafting a “stimulus” package in consultation with the Congressional leadership that promises a price tag for the American taxpayer somewhere in the range of $775 billion over the next two years. All of this new government spending will have to be financed through more federal borrowing in the financial markets.
Currently the Federal government debt (accumulated deficits ) is well over $10 trillion. With a population of around 305 million people, the per capita burden of this debt is about $33,000 for every American. The IRS calculates that there are about 140 million income-earning taxpayers in the United States. That means that the per capita taxpayer burden of the government debt averages nearly $72,000.
Chart 1 below shows that the government doubled the nominal size of the Federal debt since 2000, when it stood at $5.7 trillion. Even when adjusted for inflation, the total Federal debt is 41 percent larger than it was at the beginning of the decade. 
Source: Congressional Budget Office, Census Bureau and Internal Revenue Service During this same time, the U.S. population grew by 7.8 percent. Chart 2 below shows that the per capita debt on the American people has increased by 65 percent over this period.. The taxpaying portion of the population has grown by 9 percent during this period. The chart shows that the per capita burden them has grown by around 62 percent. 
Source: Congressional Budget Office, Census Bureau and Internal Revenue Service
In its report on the budget and the economic outlook, the CBO estimates the government’s deficits over the next four years. Even without the planned stimulus spending for the next two years, total government debt will grow by nearly another $2 trillion. Once the likely $775 billion additional expenditures is factored in, the growth in the government’s total debt is far more likely to exceed $3 trillion before the end of President Obama’s first term in office, for a nearly 30 percent increase.
Government deficit spending and the resulting debt is a burden on both current and future generations. Today’s deficits have to be paid for out of current production and output. Those who lend the money to the government forgo the private-sector uses for which that money could have been applied. Every dollar borrowed by the government means one less dollar that a private investor could have used to expand his business, or start up a new enterprise, or spend on research and development that would have introduced product innovations for the benefit of the consuming public.
It means that there is one less dollar for a private citizen to borrow to buy or improve his home, to cover the expenses of his son or daughter going to college, or make ends meet during a temporary shortfall in income or employment.
Even if a good number of those borrowed dollars come from foreign lenders (and around 25 percent of the government’s debt is owned by foreign holders), the fact remains that those dollars are not available for American or foreign private investors to borrow and productively employ. And those dollars are clearly also not being spent by foreigners on American goods and services that could have been bought by them in the global market.
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Yes, tax cuts will allow greater investment, R&D, and basically more discretionary funding for our businesses which will allow them to hire and expand our economy...in due time. But, infrastructure or DoD funding will go into effect now and impact our economy now and not later. Isn't there a benefit to that, particularly if we balance it with appropriate tax incentives for future growth of our economy through tax incentives.....
Don't misundersatnd me, I want to avoid passing on our debts to my grandchildren, but is there a compromise solution that would be more effective and help our economy now and reduce the impact on our children in later years??
Thanks for you thoughts.
What seems to me obvious; that increased govt. spending for "our own good" or to borrow from one of AIER's research reports "social justice" is destroying our economy and personal incentives to solve problems on one's own, is not even given a second thought here in my community. Excuse my generality here but most folks just seem to be on various rants about one thing or another and stay too busy to see that they are electing away their rights and enabling the govt. to enslave us. Most people that I run into acctually want govt. sponsored health care, and most of the other social programs promised by the new administration,govt. created jobs. etc.
I will maintain the management of my own affairs including health care and I would just like to help folks see what seems to me behavior that is the undoing of our current
civilization!
This is trickey as I seem to have a different phsycological perspective that is more useful that the one I see exhibited around me ( I am not bragging here as I keep to myself mostly about this). I think that John Dewey and Col. Harwood are onto what may be the next evolutionary leap for mankind. "Useful Procedures for Inquiry" names it. Being a "grown up" (I see most of my peers here in a state of perpetual teenagehood) involves taking responsibility for ones actions and behaving accordingly. Our current system of govt. is encouraging the opposite and ethical and moral drivers of the various religions (guilt and social pressure) have been devolving since the industrial revolution.
Thanks for listening and keep on bringing on the information