Wednesday, August 3, 2011

Spending cuts? Not quite.

We could expect to receive $39.084 trillion in revenue between 2012 and 2021.
We could expect to spend $46.055 trillion in outlays in the same period, for $6.971 trillion in expanded deficit. Per the CBO

The bill signed yesterday "calls for up to $2.4 trillion in savings over the next decade."

I'm honestly not sure what will happen to revenue projections for the next ten year. Being a two handed economist, on one hand, lower government spending should leave opportunities for a more efficient private sector to step in. On the other hand, given the uncertainty of the of the federal gov't to pay its bills, markets have frowned. (The S&P 500 is down 1.58% in the last five days).

We can expect spending to decease to $43.655 trillion over the next ten years, and assuming that revenue stays constant, an increased deficit of $4.571.

Is an average annual spending of $4.366 trillion really a huge spending cut, as many popular media sources state? As a comparison, in FY2010 the US spent $3.456 trillion, and the ten years leading up to that year averaged $2.614 trillion. Assuming compounded annual inflation of 3 percent, the average is $2.945 trillion.

Not really the killer spending cuts that you've read about? I suppose when the original spending bar is set so far out of the U.S.'s ability to pay, even large cuts don't bring it back in line.

(HT to: Cafe Hayek for many of the sources.)

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