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Some Context On The Federal Budget Deficit

Arlington County taxpayers repeatedly hear the County Board tell us how happy we should be because "Arlington County has the lowest property tax rates in the region.” But those ‘tax rates’ are just half of the equation. Since Arlington’s assessments are among the highest in the region, the result is that Arlington’s real estate property taxes are equally among the highest.

The reality that most economic news often has at least two sides was brought home when seeing the reporting on the release of Congressional Budget Office’s latest budget and economic outlook. The Washington Post chose to focus on the increase in the deficit, reporting:

“This year's deficit will be more than double last year's $161 billion, and it will rise from 1.2 percent of the gross domestic product to nearly 3 percent. If the next president extends some or all of President Bush’s signature tax cuts, as both candidates have promised, annual deficits could balloon to as much as 5 percent of the economy . . . .”

On the other hand, the Wall Street Journal’s editorial page reports:

“Here's a prediction: The media will report today that the federal budget deficit is big and getting bigger. What most of them won't report, alas, is that the cause of these deficits is an explosion in federal spending. The era of big government is back, bigger than ever. (emphasis added)

The real news in yesterday's Congressional Budget Office semiannual report is that federal expenditures on everything from roads to homeland security to health care will on present trends reach 21.5% of GDP next year. That's a larger share of national output than at anytime since 1992. If the cost of the federal takeover of Fannie Mae and Freddie Mac prove to be large and are taken into account, next year federal outlays could be higher as a share of the economy than at anytime since World War II. In this decade alone, federal spending has increased by almost $1.2 trillion, or 57%.” (emphasis added)

“. . . We hope Congress and the Presidential candidates don't obsess over the deficit per se, because the real fiscal drag from government comes from how much it spends, not how much it borrows.”

In conclusion, the Journal editorial says:

“The point to keep in mind is that this big spending blitz is coming even before a new President and Congress arrive next year with far more spending promises in tow. As they contemplate their choice for President, voters might want to consider which of the candidates is likely to be a check on Congressional appetites, rather than a facilitator.” (emphasis added)

The following Journal chart shows just how much federal spending has increased:

 

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