What is the right word to describe the U.S. government’s current and proposed fiscal condition: fantastic, unbelievable, surreal? The Obama administration now expects a budget deficit in fiscal year 2009 of $1,750 billion, or more than 12 percent of GDP. Total federal spending this year is expected to be $3,940 billion, or 27 percent of GDP. President Barack Obama promises that the deficit will be brought down to $1,170 billion in fiscal year 2010. Don’t bank on it.
Did anyone, even two or three years ago, expect this situation to develop? We need to go back only ten years, to fiscal year 1999, to reach a time when the government’s total outlays were smaller than this year’s deficit. Ay, mamacita, what’s going on here?
To get some perspective on how totally crazy the government has gone in its almost incredible overreaction to the financial and economic developments of the past year, consider that during World War II, which was paid for mainly by borrowing, the government ran deficits during the fiscal years 1941-46 that added about $191 billion to the national debt by the end of this period. Since 1947, when price controls no longer distorted the price indexes, the GDP deflator has increased about 8 times and the consumer price index almost 10 times. To be conservative for present purposes, let’s use the CPI to adjust the purchasing power of the dollar. We may conclude then that in present dollars, the deficits the government incurred to fight the greatest war in history, for the six years in total, amounted to about $1,910 billion, or only 9 percent more than the deficit expected in the current fiscal year –” a wartime year, to be sure, but the present wars are certainly not large ones by historical standards.
Maybe it would be better if the government scrapped its present budget entirely, and provoked the Japanese to bomb Pearl Harbor again. Then we could fight World War II over. Yes, yes, many people would have to die, but the Pentagon could compensate these unfortunates by awarding each of them a posthumous Silver Star, and in a strictly financial sense, this plan would be much cheaper than what the government is doing now. The largest deficit of the war, incurred in fiscal year 1943, was, in today’s dollar’s, about $546 billion, or less than a third of the deficit the Obama regime (building on the Bush regime’s proligacy, to be sure) will run this year.