What caused the massive deficit, overspending or under-taxing?

January 27, 2010

Yes, the amount of money coming in to the Treasury has fallen in recent years, but that’s to be expected in a recession; if there is less income being earned, there is less to tax. However, the massive debt being accumulated should not be blamed on under-taxing, as some suggest.

The truth of the matter is that spending increases bear the brunt of the responsibility. Spending was $2.729 trillion in FY2007 and is going to be $3.644 trillion this year, according to the White House and Congressional Budget Office.

The deficits leading up to now are not something that President Obama is necessarily at fault for. 2009 is a year for which President Bush’s last budget determined appropriations. Yes, Obama increased some spending, but this “amounted to just a tiny percentage of FY2009 spending – about $140 billion out of a $3.5 trillion budget.”

Some economists and lawmakers believe that spending should increase in recessionary times to alleviate economic hardship. But research shows when government expands after crises, it rarely recedes to its pre-crisis level. This is why the White House admits deficits will still be $900 billion nine years from now when the recession will be over.

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