The Truth About Congress, Deficits, National Debt and Spending

Although the President presents the annual budget, the Congressional Branch controls the purse strings. The American public favors check and balances granting the same political party control of both Congress and the Oval Office. In fact, since 1945 (65 years), only 13 times has the congress been controlled by the same party as the President. Twice by the Republicans and eleven by the Democrats has control been lopsided. Over the last 10 years it has been and even spit of two by the Republicans (Bush) and two by the Democrats (Clinton 103^rd Congress and Obama 111^th Congress). See Chart.

2001 was the last time a budget surplus was recorded. See Chart. On the surface it would appear that the most recent congress has significantly exacerbated the annual deficit and national debt. It is important to understand a few changes to the reporting of these figures. The Obama administration made four significant accounting changes. These changes were adding the cost of the wars (Iraq and Afghanistan) rather than using emergency contingency funding, added full costs of Medicare reimbursements, added an inflation index to the Alternative Minimum Tax (AMT), and added anticipated expenditures for natural disaster relief. These changes added $2.7 Trillion over the next 10 years. The hard cold reality is that these expenses were simply hidden before these changes were implemented. However, they do not account for all of the dramatic increases.

Another important factor to evaluate is the growing national debt as a result of years of increased annual deficits and compounding interest on the debt. Once countries exceed 100% public debt to Gross Domestic Product, they typically grow slower than countries that are less debt ridden. Money paid on interest is simply unable to stimulate growth. See Chart.

The quickly growing mandatory payments to entitlements such as Social Security, Medicare and Medicaid are not deemed sustainable. Politicians have avoided cuts to these entitlement programs. The reality is that the United States can not grow out of the mounting national debt. A combination of increased tax revenue and program cuts will be required. See Chart.

The two main levers are Tax Revenue and Expenses. Look at the last few administrations and how they have performed. See Chart. To resurrect a familiar campaign slogan - It is the Economy, Stupid! When the economy experiences robust growth, tax revenues support rational spending. It is a double edge sword when the economy stalls as revenues are down and the expectation to spend money to stimulate the economy increases. When you stand before the American people and assert that unemployment will not rise above 8% you have to deliver. It is not healthy for a new CEO to criticize previous leadership. Likewise, blaming the former administration for problems will not resonate with the tax payer. Leaders are accountable for their decisions and policies.