The Tax and Spend Spectator

A Budget of Outlandish Foolishness

Mr. Obama's misery index is of Dickensian proportions.

By 2.25.11

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"Annual income, twenty pounds; annual expenditures, nineteen six, result -- happiness. Annual income, twenty pounds; annual expenditures, twenty pounds ought six, result -- misery."
-- Micawber in David Copperfield

If you are not in the happy position of earning at least slightly more than you spend, what portion of your household budget comes from borrowing, or selling the family silver? Is it the seemingly modest 3% that spelt M-I-S-E-R-Y for Charles Dickens' character, who wound up in debtors' prison. Or is it even worse than that? Say, a mind-boggling 43%?

In percentage terms, that is the expected shortfall between U.S. government receipts and expenditures in the 2011 federal budget.

According to revised numbers released last week, the Obama administration expects its annual income (or revenues) for fiscal 2011 to come in at $2.173 trillion, versus annual expenditures of $3.818 trillion. That leaves a deficit of $1.645 trillion. As a result, our government will have to borrow (or find other ways to paper over) 43 cents out of every dollar that it intends to spend.

The Obama administration has more than tripled the national deficit since the last full year of the Bush administration. In doing so, it has achieved a remarkable feat. It has made the gap between federal receipts and outlays even wider than it was at the height of World War II.

U.S. spending during the war increased by a factor of eight -- rising from $8.5 billion in 1940 to $70.6 billion in 1945. The huge increase in federal expenditures was necessary for many reasons. Among other things, it supported the 12 million men and women serving in the U.S. armed forces at the peak. It also supported a hundredfold increase in annual production of military airplanes (on the way to annual production of more than 96,000 fighters, bombers and transport aircraft in 1944).

To raise additional revenues during the war, the government came up with the ingenious device of a withholding tax on payroll checks. Federal tax receipts increased from $8.2 billion in 1940 to $41.5 billion in 1945 -- a fivefold increase. That left an annual deficit in 1945 of $29.1 billion, or 41%, on total expenditures of $70.6 billion.

Thus, during the greatest war in human history, the United States -- as the "arsenal of democracy," supplying not just its own forces, but those of Britain and Russia -- had a budget deficit that was two percentage points below the gap that now looms for fiscal 2011.

When a nation is at war against a deadly enemy, most people accept the need for government to demand sacrifices on the part of citizens (through conscription, rationing, price controls, central direction of investment and production, and greatly increased taxation and public spending). As F. A. Hayek wrote in The Road to Serfdom

The only exception to the rule that a free society must not be subjected to a single purpose is war and other temporary disasters when subordination of almost everything to the immediate and pressing need is the price at which we preserve our freedom in the long run.

Do the Obama budget excesses live up to Hayek's test of being necessary to long-term national survival? To the contrary, they imperil our future economic well-being.

Federal spending will reach an estimated 25.3% of GDP in fiscal 2011, up almost five percentage points since 2008.

To what end? Far from "kick-starting" the economy, the government's heavy reliance on deficit spending has only served to expand an already bloated public sector and to constrict the private sector. This is indeed the road to serfdom. 

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About the Author
Andrew B. Wilson, a frequent contributor to The American Spectator and a former foreign correspondent, writes from St. Louis.