Tonight, President Obama will deliver the State of the Union address. In addition to the lofty rhetoric and self congratulations, the president will likely claim that the federal government’s budget has improved during his tenure.
It is true that the deficit has decreased in recent years due partly to large tax increases, which have helped the government but not the economy. Also, spending levels have stabilized, partly due to Republican efforts to slow discretionary spending growth. However, these are temporary trends. Spending is expected to explode in coming years, which will fuel larger deficits and higher levels of debt. The nation’s longer term fiscal outlook is a mess.
Comparing today’s budget situation to the situation at the beginning of President Obama’s tenure is difficult. President Obama took office in January of 2009, several months into fiscal year 2009. Spending in 2009 was $3.5 trillion, up from $3.0 trillion in 2008. Part of the higher spending in 2009 was attributable to the Bush administration, but President Obama’s big stimulus bill passed in February 2009 also added to the increase.
Below is a fiscal overview for the last six years:
(All years are fiscal years unless noted.)
- Federal Debt: 74 percent in 2015
- Debt held by the public has grown from 39 percent of gross domestic product (GDP) in 2008, to 52 percent in 2009, 61 percent in 2010, and then to 74 percent in 2015. Growth of the federal debt has greatly outpaced economic growth.
- Federal Spending: $3.8 trillion in 2015
- The federal government will spend an estimated $3.8 trillion in 2015. Federal spending has been stable in recent years due mainly to the 2011 Budget Control Act, but it is expected to skyrocket in coming years. The federal government is projected to spend $4.6 trillion in 2019, according to the Congressional Budget Office (CBO), and the president will probably propose an even higher number in his upcoming budget.
- Federal Revenue: $3.3 trillion in 2015
- The federal government will collect $3.3 trillion in revenue this year, the most in American history. This is an increase of $1.2 trillion since 2009 when the government collected $2.1 trillion. Part of that increase is due to the stronger economy, but the president’s tax hikes are also fueling the growth.
- Deficit: $469 billion in 2015
- The president will likely trumpet the dramatic decrease in the deficit during his tenure, down from $1.4 trillion in 2009 and $1.3 trillion in 2010 to an expected $469 billion in 2015, but the Congressional Budget Office forecasts that the deficit will increase quickly in coming years.
- Cost of ObamaCare insurance coverage provisions: $1.8 trillion over the next 10 years
- ObamaCare is expected to increases federal government spending on health care including $792 billion in new Medicaid spending, and $1 trillion in spending on insurance subsidies over the next ten years.
- ObamaCare Tax Hikes: $500 billion over the next 10 years
- To help for the $1.8 trillion in new spending obligations, ObamaCare imposed $500 billion in tax increases over 10 years including a higher Medicare tax on high income earners, a tax on health insurers, and a tax on medical devices.
- Fiscal Cliff Tax Hikes: $620 billion over 10 years
- Passed on January 1, 2013, the Fiscal Cliff tax hikes increased income taxes, and capital gains taxes, limited deductions for high income earners, and increased the death tax over ten years.
- Proposed Tax Hikes: $320 billion over 10 years
- The president’s staff leaked the tax section of tonight’s address. The president will call for higher capital gains taxes, a new tax on banks, and eliminating tax-free withdrawals from 529s, which allow families to save for college. The $320 billion in tax hikes would occur over the next ten years, though Congress is unlikely to pass the package.
