Fiscal Cliff: Federal Government Income And Spending Analyzed [Op-Ed]

Commentary | Saying that more revenue is needed in order to handle the Federal deficit is like a financially irresponsible person who is constantly using credit cards to cover expenses above his or her income level who then says that he or she needs a better job that pays more. If the nation were a piggy bank, the above picture is how President Obama apparently views us. Unfortunately, Obama and the Democrats are arguing over increasing their income when taxing the rich at the suggested amount would only cover eight days of their overspending. Even taking a 100 percent tax from the rich covers around half of the overspending. Does the Federal government even have an income problem in the first place?

The United States income is represented by what we call the Gross Domestic Product (GDP), which as of Q3 2012 was $15.77 trillion US dollars. Obviously the national income shrunk back in 2008/2009, which was represented by negative changes in percentage. But even during the rest of this recession this amount has been growing and at a pace comparable to the “good times,” which means that our national income is actually significantly higher than it was in 2009, which was $13.97 trillion. So when you have trouble finding a job this is largely due to employee productivity, or efficiency, increasing greatly during this time period along with an economic shift triggered by globalization.

The portion of this overall national income, or GDP, spent by the government typically is a little less than 20 percent historically, which has not changed since this recession started. So, obviously, the Federal government should not have an income problem. This means that what President Obama and the Democrats really want is for their percentage of GDP to be increased to cover the amount of overspending. But this is like an employee demanding their income increase just so he or she can afford the latest sports car.

The budget deficit, or the amount of overspending above the income, is estimated by the White House to be $1.33 trillion over the $2.5 trillion income for 2012. President Obama is requesting that the Federal government spend $3.67 trillion in 2013. As you can see, borrowing from others represents about 1/3 of the Federal budget, with income being around 17 percent of GDP and spending about 24 percent of GDP. In order for revenue increases to cover expenses we’re talking about taxing everyone–not just the rich–a lot more.

In August of 2009, President Obama had a wise thing to say about raising taxes during a recession:

“You don’t raise taxes in a recession, which is why we haven’t and why we’ve instead cut taxes. So I guess what I’d say to Scott is – his economics are right. You don’t raise taxes in a recession. We haven’t raised taxes in a recession.”

Obviously, something has changed in these past couple years, and it’s not the recession or the unemployment rate. This is why the Fiscal Cliff is called what it is. If taxes are suddenly raised on everyone in the middle of a recession, the economy, and jobs, will fall off a cliff due to a double-dip recession.

What’s worse, the alternative from the party of the supposed “small government” had their budget plan under Romney calling for only half of the overspending instead of true fiscal responsibility. Before the election, Republicans were hypocritically criticizing Obama for reducing Medicare spending by hundreds of billions (although re-appropriating via Obamacare is more accurate) when they knew that entitlement programs would eventually need to be on the chopping block.

President Obama and the Democrats could argue that in comparison to other major nations we’re actually not spending that much of our GDP, which is true. England’s government, for example, has an income of around 35 percent of GDP, yet their spending has typically been between 40 and 50 percent. You may have heard about how Europe is suffering from a major economic crisis that is worse than our own. This spending beyond their means is a root cause, not a symptom. Do Democrats really want us to go down that road when people who’ve already been down it are saying that austerity measures are the answer?