Where Did the Deficits Come From?

Now that the debt ceiling crisis has been resolved (at least for now), it is worth noting where the huge deficits we now suffer came from, particularly in contrast to the surpluses being projected just a decade ago.  In April, 2011, the Pew Fiscal Analysis Initiative reported in detail the causes of a $12.7 trillion shift in the debt situation, from a 2001 CBO forecast of $2.3 trillion cumulative surplus by 2011 versus the estimated $10.4 trillion public debt that exists today. The major drivers were as follows. 

  • Revenue declines due to two recessions, separate from the Tax cuts in 2001 and 2003: 28%
  • Defense spending increases: 15%
  • Tax cuts in 2001 and 2003: 13%Increases in net interest expense: 11%
  • Other non-defense spending: 10%
  • Other tax cuts: 8%
  • 2009 Stimulus: 6%
  • Medicare Part D: 2%
  • Other reasons: 7%

Similar analyses were reported by David Leonhardt in The New York Times (June 2009), The Washington Post in April 2011 and the Center on Budget and Policy Priorities in May 2011.  Federal receipts v. revenues are charted here:

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