Fiscal year 2012 concluded with a $1.1 trillion deficit, according to the Congressional Budget Office’s monthly budget review released today. It marks the fourth year of trillion-dollar-plus deficits.
Anyone can see that these massive, continued deficits are hardly sustainable. Despite claims that tax hikes are the solution to reduce the deficit, the fact remains that too much spending is the root cause of federal budget deficits.
The federal government is currently spending about 23 percent of gross domestic product (GDP), well above the historical average level of 20.2 percent of GDP. Current spending levels follow even greater spending excesses recorded during years saturated with stimulus spending. Conversely, revenues are temporarily low due to the recession, but they will rise and even surpass their historical level of 18.1 percent of GDP as the economy recovers and more Americans return to work. (continues below chart)
Prompted by presidential debate moderator Jim Lehrer about deficit-reduction proposals, President Obama chimed in with an all-too-familiar refrain: “There has to be revenue in addition to cuts.” When Washington’s spending addiction is the problem, why hike taxes on Americans? Doing so would hurt a fledgling economy trying to recover.
Governor Romney’s response on tax reform underscores that point:
Look, the revenue I get is by more people working, getting higher pay, paying more taxes. That’s how we get growth and how we balance the budget. But the idea of taxing people more, putting more people out of work, you’ll never get there. You’ll never balance the budget by raising taxes.
Never mind being able to balance the budget; recently, the CBO even warned about another recession if Congress and the President don’t address the fiscal cliff: the automatic budget cuts and Taxmageddon’s tax hikes set to strike on January 1, 2013.
Romney went on to describe the European debt woes that could plague the U.S.:
Spain—Spain spends 42 percent of their total economy on government. We’re now spending 42 percent of our economy on government. I don’t want to go down the path to Spain. I want to go down the path of growth that puts Americans to work with more money coming in because they’re working.
As this Heritage Foundation chart illustrates, the U.S. has already surpassed Spain in terms of debt as a share of the economy, with a 2011 level of more than 67 percent. At the end of fiscal year 2012, U.S. publicly held debt reached 73 percent, or nearly three-fourths, of the economy. If lawmakers cannot get current spending—as well as future spending on entitlement programs—under control, the U.S. will continue the dangerous ascent toward oppressive levels of debt.
Today’s CBO report confirms spending is out of control. Congress and the President can reduce the deficit by cutting spending—and they don’t need to hike taxes.