Budget deficits – the challenge ahead in a picture

 EmailPrint This Post Print This Post

This post is a guest contribution by Asha Bangalore* of The Northern Trust Company.

The financial press is inundated with discussions about the federal deficit and debt and the consequences thereof and our commentaries have addressed this matter also. At the cost of reiterating, we would like to share a picture (see chart 1) that presents the challenge of federal budget deficits succinctly.

Congressional Budget Office (CBO) projections indicate federal outlays as a percent of GDP will consistently exceed revenues even after the economy moves away from the peak in outlays arising from the financial crisis and associated recession. On average, the federal revenues have been about 18% percent of GDP during the post-war period. The CBO projections for the years 2012-2020 point to revenues exceeding the historical median/mean measures of federal revenues as a percentage of GDP, which makes these estimates optimistic. Federal revenues have exceeded the historical mean only in a few instances when the economy grew at a rapid clip.

The fundamentals of the economy at the present time offer little support for predictions of a strong performance in the years ahead. The graying of the population and associated social costs suggest that the projection of outlays, despite an upward trajectory in the last five years of the projection period, is possibly rosy also. Need we say more?

nt110310

Source: Northern Trust – Daily Global Commentary, March 10, 2010.

* Asha Bangalore is vice president and economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?)
The Sobering Issue
The European Balanced Budget Disaster
Read more on Deficit, Budget at Wikinvest
OverSeas Radio Network

Leave a Reply

  

  

  

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Top 100 Financial Blogs

Recent Posts

Charts & Indexes

Gold Price (US$)

Don Coxe’s Weekly Webcast

Podcast – Dow Jones


One minute - every hour - weekdays
(requires Windows Media Player)
newsflashr network
National Debt Clock

Calendar of Posts

Feed the Bull