The budget process for federal fiscal 2008 began with the release of the President’s budget in February. Congress then approved a budget resolution in May; this resolution is supposed to guide Congress as it considers the appropriations bills, but is not binding. Earlier this month, President Bush released a Mid-Session Review of the fiscal 2008 budget estimates. In February, the White House estimated a fiscal 2008 deficit of $239 billion, or 1.6 percent of the Gross Domestic Product (GDP). In the July report, the estimate rises to $258 billion, or 1.8 percent of GDP. (In this same report, the White House revised its estimate of the fiscal 2007 deficit down from $244 billion to $205 billion – largely on the strength of higher than estimated revenues.)
It’s not clear at this point what effect Congressional action on appropriations will have on the deficit. However, since the deficit is in large part a revenue issue – created to a large extent by the 2001 and 2003 Bush tax cuts – these appropriation actions may not have much effect relative to President Bush’s budget recommendations.
In the past, The Eisenthal Report has commented that the existence of twelve appropriations bills coupled with the President’s inability to use a line-item veto – a power that many Governors have – makes federal financial operations more opaque and more likely than they should to produce sustained budget deficits – of the type that we have seen over the past six years.
I conclude this walk by pointing to an interesting set of charts that the House Budget Committee produced earlier this month. Much of the presentation is clearly partisan – tendentious, to use a fancy word. However, it points out three arresting facts about the financial operations of the federal government. (In looking at the following, it is good to remember that a trillion equals a thousand billion or a million million.)
– The federal government has spent $8.1 trillion more than it has taken in since January 2001, when George W. Bush became President. (The entire U.S. economy produces between $12 and $13 trillion annually.) We’ve gone from a $5.6 trillion surplus to a $2.5 trillion deficit.
– Foreign-held debt has increased in raw numbers and as a percentage of total debt. In 2001, $1.0 trillion, or 34 percent of marketable public debt was held by foreigners. Now, $2.2 trillion, or 49 percent of marketable public debt was held offshore. (The entire federal debt is now nearly $8.9 trillion.)
– The federal government’s net interest payment on the federal debt is $237 billion, or $649 million per day. One day of net interest could pay for one year of health care for 90,000 veterans, or 90,000 more children in Head Start, or 3,300 more border patrol agents.