This chart tells the basic story of the US Government Budget from 1950 - 2010. I realize the image here is pretty small, but if you click on the image you can see a larger more readable version. The blue line reflects millions of dollars spent annually by the US Congress, while the green line reflects millions of dollars annually taken in by the US Congress. The red line reflects the budget deficit and therefore the millions of dollars that have been borrowed annually by the US Congress since 1950.
So what basic story do I think this chart tells? From 1950 until about 1975 or 1980 there seemed to be almost no trend up or down in terms of the amount of money Congress decided to borrow each year. This period was followed by an increase in the annual amount of money Congress borrowed but this new period also showed a fairly horizontal line and thus not much of a tendency to further increase the amount of annual borrowing. Congress balanced the budget and even seems to have spent less than it took in for about three years around the year 2000. The trend shown by the red line depicts a significant increase in the amount of money Congress has chosen to borrow annually since around the year 2000.
Notice also that during the entire period from 1950 until 2010 the annual amounts taken in and spent by Congress increased. The green line which represents annual receipts shows almost a linear trend upward since around 1980, while in contrast, the blue line representing the amount Congress has spent annually kicks into a "new gear" with a much steeper line. Take note also that over this period from 1950-2010 there have been both recessions and expansions, and there have been both increases and decreases in the income tax rates imposed by Congress. Nonetheless, the story of Congress and the budget it has chosen annually reflects more revenues year to year and more spending year to year. The story also seems to be that Congress's habit of borrowing also kicked in to another gear since the last two or three budgets that were in surplus.
I suspect someone might say that this is not the proper way to evaluate the US Budget, so here is a picture of this same story but told in a chart the depicts receipts, outlays, and deficit/surplus as a percent of GDP.
Perhaps the story to notice from this chart is that both revenues and outlays as a percent of GDP have relatively flat trend lines starting around 1970. Also these trends are such that annual outlays have been around 20% of GDP while annual receipts have been around 18%. Of course periods of recession have reduced annual receipts. Once again I will point out that these trends include periods of recession and expansion as well as increases and decreases in income tax rates, and still a pretty flat trend. Also note that with the year 2008 there was a substantial increase in outlays as a percent of GDP, and an increase that has no precedent over this 60 years period.
It seems to me that Congress has acted less constrained concerning spending choices over time, and most recently Congress has shifted into another gear with spending and borrowing. I suppose we could fuss over whether Congress has a spending problem or a revenue problem, and thus we could pick the Republican side or the Democrat side with respect to the current debate over the debt limit. Yet, we know that revenues decline in recession, and without increasing any income tax rates, revenues will again increase (as reflected in the first chart) with expansion. But Congress has seen a significant recent decrease in revenue because of recession, and instead of reducing outlays or even holding outlays constant Congress has chosen to significantly increase annual spending. Where is Congress getting the money to increase it's annual spending so much? The amount borrowed has been increased to about 10% of annual GDP, which also is a number without precedent over this six decade period.
So, this last chart gives us some perspective on the choices Congress has made over the last 60 years with respect to the amount it borrows annually. The bars depict the amount number of cents borrowed by Congress for every dollar it spend. Years without bars mean that the budget
was in surplus and no money was borrowed that year. For the first 25 years over the period portrayed in the chart, Congress mostly borrowed less than 10 cents annually for every dollar it spent. Only 6 times between 1950 and 2008 did Congress annually borrow as much as around 20 cents of every dollar it spent. But, Congressional behavior changed significantly for the last two years of this period because in these last two years Congress has borrowed about 40 cents of every dollar it spent.
I suppose some may say we should understand the dire economic situation that characterized these last two years, and therefore Congress had to take action or else. But note that over the 60 years of Congressional behavior depicted in these charts there were, as I wrote earlier, plenty of recessions and expansions, and there were also times when Congress both increased and decreased income tax rates. I'm thinking it is very difficult to justify borrowing 40 cents of every dollar spent, even given the recent recession.
I'm thinking the annual budgetary behavior of Congress has been showing a trend from 1950 until now of more annual revenue, more annual spending, and more annual borrowing. This is the way I put recent budgetary politics into perspective.
Congress, along with the President, are debating whether to increase the ceiling on the aggregate amount of borrowing and debt that our national government can incur. I know some of these leaders think it is necessary to increase this ceiling or else bad things will happen. Borrowing 40 cents of every dollar spent seems like a bad thing has already happened. The trends since 1950 depicted in these three diagrams perhaps suggest it is unwise to allow our representatives in Washington to think they can continue to borrow and borrow and borrow. When our representatives are borrowing 40 cents of every dollar they spend perhaps it is already too late to think these folks can learn some fiscal responsibility.
I've described this budgetary perspective in terms of the actions of Congress instead of the President. Of course, much of the attention in public discussions is tuned in to the President. But, keep in mind that the President does not have the power to tax, and his authority to spend is granted by Congress. In addition, the President does not have the constitutional power to borrow money. That is a Congressional power. I think it is unwise to put all of the attention on the President, and it is much better for us to blame members of Congress when they vote for borrowing, taxing, and spending policies. But, of course, since the President can veto budgets presented to him by Congressional budget bills, the President also should be seen as responsible when the fiscal actions of the national government are irresponsible.
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