Another Year of Trillion-Dollar Deficits

Brian Riedl / October 15, 2010

Preliminary figures from the Congressional Budget Office (CBO) show that Washington ran a $1.291 trillion deficit in 2010, just slightly less than last year’s $1.416 trillion.

To put these figures in perspective, the annual budget deficit between 1789 and 2008 never reached $500 billion. As a percentage of the gross domestic product (GDP), the past two years’ deficits of 10.0 and 8.9 dwarf all other deficits since World War II.

Recession-damped revenues continued to contribute to the budget deficit, coming in at 14.7 percent of GDP. However, low revenues are only a temporary contributor to the budget deficit. CBO data shows that once the recession ends, revenues should converge back toward their historical average of 18 percent of the economy.

The surging spending will likely be permanent. Federal spending this past year reached 23.6 percent of the economy, which, along with last year’s 25.4 percent, are the highest spending levels in American history outside of World War II. And President Obama’s budget would permanently maintain federal spending at these high levels. (more…)