I just searched this thread. Words with "spend" appear in this thread 8x. Words with the term "tax" appears, "zero" times. If Americans cannot speak on both sides of the issue deficits will continue to be unsolvable - at least until deficits and national debt end in an existential crisis.
Going a little deeper on this revenues vs expenditures question, here are all of the years since 1930 in which the Federal Deficit was >5% of GDP ranked. Then I've added Federal Revenue as a percentage of GDP for that year:
- 29.6%, 1943, 11.8%
- 22.2%, 1944, 19.5%
- 21.0%, 1945, 19.8%
- 14.7%, 2020, 16.0%
- 13.9%, 1942, 8.8%
- 12.1%, 2021, 17.2%
- 9.8%, 2009, 14.5%
- 8.7%, 2010, 14.4%
- 8.4%, 2011, 14.8%
- 7.0%, 1946, 17.3%
- 6.7%, 2012, 15.1%
- 6.3%, 2023, 16.2%
- 5.9%, 1983, 16.5%
- 5.8%, 1934, 4.4%
- 5.4%, 2022, 19.0%
- 5.4%, 1936, 4.7%
A couple things jump out at me:
First, most of these are in response to MAJOR calamities:
WWII, 5:
The three largest, four of the largest five, and five of the largest 10 annual deficits are either during the war (1942-1945) or severely impacted by wind-down expenditures associated with the war (1946).
The Great Depression, 2:
Two of these years involved massive spending increases related to FDR's "New Deal" which was an effort to get us out of the Great Depression (1934, 1936).
COVID, 1:
2020's massive deficit of 14.7% of GDP occurred despite fairly normal revenue at 16% of GDP and note that even if revenue had been at record high levels approaching 20% the deficit STILL would have been double-digits and higher than anything seen since WWII.
1970's/1980's Stagflation crisis:
The 1983 deficit involved tax cuts and spending increases undertaken in a successful effort to break out of the stagflation of the era.
The Credit Bubble, 3:
2009-2011 involved increased spending AND decreased revenue as a result of the credit bubble and associated responses. Revenues for 2009-2011 were relatively low historically at 14.4-14.8% of GDP but the deficits were 8.4% and greater so even "modern normal" revenues of about 17.5% of GDP would still have resulted in deficits in excess of 5% of GDP.
That leaves four years unaccounted for:
- 12.1% deficit in 2021, revenues at 17.2% of GDP. That revenue figure is pretty close to the modern average so this is an expenditure not a revenue problem.
- 6.7% deficit in 2012, revenues at 15.1% of GDP. That revenue figure is a bit light and "modern normal" revenues of around 17.5% would have pushed this deficit below 5% of GDP so this one is arguably revenue based.
- 6.3% deficit in 2023, revenues at 16.2% of GDP. Even if revenues had been a "modern normal" 17.5% the deficit STILL would have been right at 5%.
- 5.4% deficit in 2022, revenues at 19.0% of GDP. Historically that is a VERY high revenue figure so this is absolutely an expenditure rather than a revenue problem.
Our responses to the credit bubble and COVID were make it seem like those were the biggest two events since WWII and in the case of COVID, that it was on par with WWII. 2024 will be our fifth consecutive year of deficits in excess of 5% of GDP. We haven't seen that since WWII (1942-1946). We were able to recover from the humongous deficits of WWII because from 1947-1974 our budgets were more-or-less balanced with surpluses some years and deficits others but deficits never exceeding 3% of GDP.
The problem this presents is we don't have any extra room for a response to some future calamity. What are we going to do if we get into our first recession in almost 20 years or another calamity like COVID or 9/11 hits?
