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Archive for October 17th, 2011

Austerity? What austerity?

Posted by Dana Pico on 2011/10/17

We noted, after the famous deal where the Republicans and Democrats agreed to those horribly draconian, utterly heartless budget cuts last spring that it sure didn’t look like much was actually cut. They touted a “whopping” $38 billion, which turned out to be an absolutely staggering, incredibly heartless and cruel $352 million. From The Wall Street Journal:

A New Spending Record

Washington had its best year ever in fiscal 2011.

Maybe it’s a sign of the tumultuous times, but the federal government recently wrapped up its biggest spending year, and its second biggest annual budget deficit, and almost nobody noticed. Is it rude to mention this?

The Congressional Budget Office recently finished tallying the revenue and spending figures for fiscal 2011, which ended September 30, and no wonder no one in Washington is crowing. The political class might have its political pretense blown. This is said to be a new age of fiscal austerity, yet the government had its best year ever, spending a cool $3.6 trillion. That beat the $3.52 trillion posted in 2009, when the feds famously began their attempt to spend America back to prosperity.

What happened to all of those horrifying spending cuts? Good question. CBO says that overall outlays rose 4.2% from 2010 (1.8% adjusted for timing shifts), when spending fell slightly from 2009. Defense spending rose only 1.2% on a calendar-adjusted basis, and Medicaid only 0.9%, but Medicare spending rose 3.9% and interest payments by 16.7%.

More at the link. And let me say it early on: we told you so!

The Republicans claimed that they had cut spending, while the Democrats complained that we had cut spending. But, once you get down to real numbers, we increased total federal spending by 4.17%, during almost the same period in which the Bureau of Labor Statistics measured the Consumer Price Index increase at 3.8%.¹ Translation: despite the huge, draconian cuts in federal spending, total federal outlays increased at a rate greater than inflation!

Now, despite some taxes being cut, most notably the employees’ portion of Social Security taxes dropping from 6.2% to 4.2% for calendar year 2011 (which means nine out of the twelve months of FY2011), total federal tax receipts increased, by 6.52%. Thus, the deficit increased only very slightly ($4 billion, from $1,294 to $1,298 billion), despite the much larger increase in federal spending.

I guess that the word austerity simply means something different in Washingtonese than it does in English. When we are increasing total federal spending at a rate greater than inflation, somehow I fail to see how we are cutting spending, or running a no-frills, austere budget.

¹ – The CPI measured was from September 2010 through August 2011; FY 2011 ran from October 2010 through September 2011.
Cross-posted on Common Sense Political Thought.

Posted in economics, politics, Tax | Comments Off on Austerity? What austerity?

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