Three Charts to Keep In Mind During the SOTU Address

Tonight we can expect the president to talk about how much process his administration has made on deficit reduction, while at the same time calling for a new round of “investment” by the federal government. Here are three charts worth keeping in mind when considering his claims.

The first chart looks at spending in real terms. The trend that emerges is that Republican administrations tend to increase spending, while Democratic ones institutionalize those higher levels of spending. As you can see, spending increased a great deal under President Bush (even though part of FY 2009 spending was the product of President Obama): 

You can see what the data looks like in real terms adjusted for population growth here.

Now, many liberals argue that this chart illustrates that the current president is so fiscally responsible, that he is not a big spender, or even that we don’t have a spending problem. That’s not the correct interpretation. The chart shows that spending under Obama has not increased as fast as it did under the previous administration and, in fact, has even dropped a bit, for now. But the federal government is still spending a gigantic amount of money. It is spending significantly more than it spent in 2008, and more than it spent in every single one of the years before that. The fact that the government isn’t quite as bloated as it was at its peak–or not getting fatter as fast as it was before–doesn’t mean the government is lean. We can only hope that the trend we see on this chart of a decrease in spending will continue, but the next chart shows that it is not the case.

This second chart shows our deficits (under both the current-law and alternative-scenario baselines) over the next ten years, as projected by the CBO: 

As you can see, even if everything goes according to plan (meaning that sequester goes through, other “savings” enacted in past legislation actually happen, and revenues increase significantly), deficits are supposed to shrink for a few years and then go right back up almost to where they were in the worst Obama years. Now, if some of the spending cuts don’t materialize, or if Congress adds more spending, the deterioration at the end of the decade is even more striking.

Finally, the ten-year budget window doesn’t give us a good picture of the magnitude of our spending problem. We are already spending beyond our means today, racking up trillion-dollar deficits each of the last three years — and it will get far worse. The slight improvement in the CBO projections over the next 3 years doesn’t change the fact that spending on programs such as Medicare, Medicaid and the new health-care entitlements  in Obamacare is going to explode, ruining our long-term budget picture. You can see that here:

Even the CBO director, Douglas Elmendorf, made a point of the need for true reform in the latest CBO document: “We have a large budget imbalance. Small changes will not be sufficient to put the budget on a sustainable path.” 

This is all worth keeping in mind tonight when the president talks about how much progress he has made in cutting the deficit. 

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, ...

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