How has the projected future of spending for the U.S. government changed as a result of the recent debt deal in Washington D.C.?
Stanford University’s John Taylor put together the following chart to illustrate the effect the two-part planned spending reductions that are called for in the just passed Budget Control Act of 2011 (BCA) will have as compared to President Obama’s Fiscal Year 2012 budget proposal, as well as the U.S. House of Representatives’ FY2012 budget resolution (aka the “Ryan Plan”) that passed earlier this year:
The two BCA tranches (“tranche” is a French word that means “slice” or “piece”) reflect the two steps of spending reductions specified in the Budget Control Act.
What we see is that after both parts of the spending reductions covered by the Budget Control Act are in place, the difference between President Obama’s original budget proposal and the Ryan Plan has been cut in half, which is perhaps the best we could have hoped for in a situation where we have such large differences within the government, with one side hoping to continue excessively high levels of spending and the other side aiming to return to historic levels of federal government spending with respect to the nation’s economic output.
As things stand today, the amount of federal spending provided for by the Budget Control Act is still well above the level of U.S. federal government spending that typical Americans can support through their taxes. It will still require major changes in Washington D.C. to truly put the United States federal government’s finances on a genuinely sustainable path.