Cost of Government Day (COGD)
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Without Reform, Federal Spending Will Consume Nearly Half the Economy

Special Focus: Spending and the Federal Budget Deficit

The federal budget has been running a deficit since 2002 due largely to federal spending growth.  As the chart below indicates, if spending had been restrained to the rate of national income growth over the past seven years, the federal budget would be in surplus for the second year in a row, rather than facing a $160 billion deficit.  In fact, 70 percent of the accumulated budget deficits since fiscal year 2002 is the direct result of total spending rising faster than national income growth. 

Yet, national income may not be the correct measure of fiscal health.  In fact, if spending had grown in line with national income growth in the 1990s, the budget would not have entered a surplus even with record amounts of tax revenue collected.  As the chart shows, the budget surplus materialized only because spending increased below national income growth.   

  Federal Budget would be in Surplus in 2006 if Spending was in Line with Income Growth

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