Its A Spending Problem

The WSJ reports:

Even if all Bush tax cuts are extended and the AMT is patched, tax revenues will rebound to 18.2% of GDP by 2020—slightly above the historical average. They will continue growing afterwards…

CBO figures show spending…which has averaged 20.3% of GDP over the past 50 years… surging to a peacetime record 26.5% of GDP by 2020 and also rising steeply thereafter.

Putting this together, the budget deficit, historically 2.3% of GDP, is projected to leap to 8.3% of GDP by 2020 under current policies. This will result from Washington taxing at 0.2% of GDP above the historical average but spending 6.2% above its historical average.

Link via Goodman.

24 Responses to “Its A Spending Problem”

  • Just two quick notes:

    First –

    Why does the WSJ article refer to “peacetime spending”. This is not peace time. In fact, we are fighting two quite expensive wars. (If Netanyahu has his way, and Palin gets elected, maybe three.)

    While it is very kind of the WSJ to let us know that in 2020 we are projected to have a high tax rate for peace time, it would be much more relevant to know either a) What was the record high tax rate for war time? Are we anywhere close to that? or b) How would ending the wars in Iraq and Afghanistan in 2012 effect the projection of tax rates in 2020?

    Second –

    It’s interesting to note that the WSJ never actually says exactly what are today’s tax revenues as a percentage of GDP. Are they historically low or historically high? Is it unfair of me to suspect that the conspicuous absence of this very relevant data probably means that it would make the WSJ anti-tax stance look bad – and that we just might learn that right now tax revenues are not historically high at all?

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