One day after the presidential election and it's in; the Fiscal Year 2012 Monthly Budget Review from the Congressional Budget Office. Let's go!
For the entire fiscal year, Washington incurred its fourth year in a row of trillion dollar plus deficits, ringing up a deficit of $1.098 trillion. Fortunately, since the economy for most of the year was showing economic growth, albeit modest at best, the deficit-to-GDP ratio dropped from 8.7 percent in fiscal 2011 to 7.0 percent in fiscal 2012. Before those who spend our hard-earned tax dollars start patting themselves on the back, this was still the fourth largest deficit as a share of GDP since 1946 so there really is little to be proud of.
Here is a chart showing the fiscal year totals since 2007:
In case you don't have a calculator handy, the cumulative deficits since fiscal 2007 total $5.712 trillion, this means that over one-third of America's $16.2 trillion debt has been accumulated in the last six fiscal years alone!
Back to this year's data. On a year-over-year basis, the deficit declined by $207 billion on the backs of a 6 percent increase in tax revenue and a 2 percent drop in spending. Big whup. In nominal terms, the government's revenue stream increased for its third year in a row, reaching $2.449 trillion, however, that level is still down 5 percent below 2007's peak of $2.568 trillion. As a percentage of GDP, receipts in fiscal 2012 were 15.8 percent of GDP, down from the forty year average of 18 percent of GDP.
On the spending side of the ledger, total outlays were $3.538 trillion, about the same as in 2011, however this is up 29.6 percent from 2007. As a percentage of GDP, expenditures in fiscal 2012 dropped by 1.3 percentage points from 2011 to 22.8 percent, however, this is again well above the forty year average of 21.0 percent.
Here's a very basic graph that shows us where the problem lies:
Notice that the purple dotted line (receipts) are, except for a very short period of time around the turn of the millennium, lower than the red line (outlays)? That's why America has a $16.2 trillion nightmare!
Let's take a quick look where Washington gets the money that it spends (and more!). In fiscal 2012, total receipts of $2.449 trillion were made up of $1.132 trillion worth of individual income taxes (46.2 percent of the total), $242 billion worth of corporate taxes (9.9 percent of the total) and $845 million of social insurance (34.5 percent of the total). The corporate tax haul was the largest in the last three fiscal years, up 33.8 percent on a year-over-year basis but still well down from the high of $379 billion in 2007 as shown on this graph:
Now, let's see where Washington spent its/taxpayer's money in 2012. The biggest year-over-year drop in spending was on unemployment benefits, dropping by 24 percent, not terribly surprising as unemployed workers ran out of benefits and because somewhat more Americans have found work. You'll notice that the two largest spending increases came from Medicare and Social Security, up 3.3 and 6.0 percent respectively. Outlays for these two programs were up just under 8 percent of GDP, slightly below levels seen in 2010 and 2011. Defense spending dropped by 3 percent after rising at an average annual rate of 6 percent over the past five years. This is largely because of the reduction in personnel in both Iraq and Afghanistan. Here is a chart showing where all of your tax dollars (and more) are going:
Looking at the preliminary figures for the first month of fiscal 2013, we appear to be off to a grand start with October's deficit coming in at $113 billion, $15 billion higher than the same month one year earlier. Excluding extraordinary items, the deficit for October should have been several billion less than a year earlier, again, big whup.
From this information, you can see how critical it is that the "newly minted" President Obama and Congress put their rancorous partisan politicking behind them and provide a working solution for the looming fiscal cliff. America simply cannot afford to spend its way over the fiscal cliff.