|
Written by Richard M. Ebeling
|
|
Wednesday, 14 January 2009 00:00 |
|
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.
|
