In January 2001, the Congressional Budget Office (CBO) projected under a current law baseline that the federal government would erase its debt in 2006. By 2011, the U.S. government would be $2.3 trillion in the black.
The reality, of course, has turned out to be far different: the U.S. will likely owe $10.4 trillion this year, its largest debt relative to the economy since 1950.
What caused this $12.7 trillion shift? This fiscal fact sheet by the non-partisan Pew Fiscal Analysis Initiative — building on an earlier analysis published in No Silver Bullet: Paths for Reducing the Federal Debt — shows that the main drivers of the debt, by far, are the tax cuts and spending increases enacted since 2001. However, no single piece of legislation explains the majority of the debt growth relative
Between 2001 and 2011, about two-thirds (68 percent) of the $12.7 trillion growth in federal debt has been due to new legislation. Forty percent of this legislative growth was the result of tax cuts enacted after January 2001, and 60 percent resulted from spending increases. Technical and economic revisions combined caused about one quarter (27 percent) of the growth, and changes in other means of financing accounted for 6 percent.
Legislative drivers can be further broken down using CBO cost estimates for six high-profile laws enacted over the last 10 years as well as the cost of the operations in Iraq and Afghanistan
1. The 2001/2003 tax cuts
2. The overseas operations in Iraq and Afghanistan;
3. Medicare Part D
4. The Troubled Asset Relief Program (TARP)
5. The 2009 stimulus
6. The December 2010 tax legislation.
The excess growth in publicly-held federal debt beyond 2001 expectations has been the result of a variety of factors. However, new legislation enacted since January 2001 has been responsible for two-thirds of the debt growth. In the new legislation, roughly three dollars of new spending has been enacted for every two dollars in tax cuts between 2001 and 2011. No single policy or piece of legislation, however, is overwhelmingly responsible for the $12.7 trillion shift in CBO’s debt projections for 2011 that occurred between January 2001 and March 2011.
Full Report
http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Fact_Sheets/Eco nomic_Policy/drivers_federal_debt_since_2001.pdf
