E-Newsletter No. 5
May 2014
If not us, who?______If not now, when?
As we noted last month, President Obama has submitted his proposed budget for fiscal 2015. The link to the president’s proposed budget is http://www.gpo.gov/fdsys/pkg/BUDGET-2015-BUD/pdf/BUDGET-2015-BUD.pdf
The budget document includes projections for the next ten years, all of which show a continuation of annual deficits. The estimated deficit for the current fiscal year ending on September 30, 2014 is $649 billion and the deficit anticipated for fiscal 2015 is $564 billion. These deficits represent an additional amount of debt per citizen (for every man, woman, retiree and child) of $2,000 for fiscal 2014 and $1,800 for next year, which get added on top of the current amount of $55,000 per citizen. David Walker, the former Comptroller General of the US government (see our January newsletter) calls this an “unsustainable path”. We agree.
The following is an overview of the US government’s budget, along with the average compound growth rates that take us 10 years into the future, from 2014 to 2024 (in billions) –
___________2014____2024____Ave CGR
Receipts___$3,002___$5,478_____6.2%
Outlays ____3,651____5,912_____4.9%
Deficit ____$(649)____$(434)
On our website, we have noted the ever-expanding growth of the US government in comparison to the economy as a whole. The president’s budget is built to continue this ever-expanding role. While we “applaud” the reduction in the amount of the deficit, we are dismayed that there continues to be a deficit each year. And we question why the government’s receipts need to increase faster than the growth of the overall economy. The US government’s Receipts as a percent of GDP increase from 17.3% in 2014 to 19.9% in 2024.
So what is driving this shift, and what is driving the US government’s role in our economy to even higher levels in the future? Two of the major components of the amounts shown above are Social Security and Medicare/Medicaid –
Social Security –
____________2014_____2024___Ave CGR
Receipts____$ 732____$1,191____5.0%
Outlays______ 852 ____ 1,499____5.8%
Deficit______$(120)____$(308)
Medicare / Medicaid –
_____________2014_____2024___Ave CGR
Receipts______$ 219____$ 368____5.3%
Outlays _______821_____1,503____6.2%
Deficit______$ (602)____$(1,135)
A wise journalist once wrote – You can either have Big Government or you can have Lower Taxes, but you can’t have both. Unfortunately, our elected officials in Washington continue to try to circumvent this basic fact. To their credit, our elected officials have been somewhat successful in accomplishing this feat, however, they have accomplished this by “borrowing” these funds from future generations (some of who cannot yet vote, and some who have not even been born yet).
US Debt Clock – – April 1st – $55,228 per citizen / May 1st – $55,069
Please do not be overly encouraged by the decrease noted above. This effect typically happens during early April. Tax refunds are sent out over the course of the tax filing season, however, taxpayers who owe money typically don’t pay their remaining balance due until shortly before the tax filing deadline. We will give you another update on the amount of debt per citizen in next month’s newsletter.