Federal spending soars 25% before bailout

The government’s spending commitments exploded by 25 percent in 2008, putting taxpayers more than $1 trillion in the hole even before the astronomical costs of the economic bailout were taken into account, according to an annual report released Monday by the White House.

A joint report by the White House budget office and Treasury Department said that much of the increase in obligations came from an unexpected jump in veterans benefits liabilities, while revenues remained mostly flat because of the recession that began a year ago.

Jim Nussle, director of the White House Office of Management and Budget, called the report “sobering.”

The report showed that U.S. debts and liabilities are close to passing the value of the U.S. population’s net worth, said Peter G. Peterson Foundation, a nonprofit organization devoted to promoting fiscal responsibility.

“The value of this report is that it shows the long-term cost of expensive commitments we are making today,” said Brian Riedl, a budget analyst for the Heritage Foundation.

“The government makes a lot of commitments that cost a little in the short run but a lot in the long run, and this document is one of the only government documents that show the long-term cost of the long-term commitments,” Mr. Riedl said. “What it shows is that future trends are completely unsustainable because the government has promised more benefits than the taxpayers can pay for.”

The costs of the $700 billion economic rescue package were not included in the report because it covered only the budget year that ended Sept. 30. The bailout was passed and signed into law in early October.

However, the Treasury did borrow $300 billion from taxpayers in fiscal 2008 to “to increase cash balances at the [Federal Reserve] so that the Fed can assist with market stabilization efforts,” the report said.

Peterson Foundation President David Walker, the nation’s former comptroller, called for President-elect Barack Obama to make “tough choices … to strengthen the government’s financial condition once the economy begins growing again.”

The report said current revenues are sufficient to pay only half of what the government will owe in 30 years and that the government’s debt has put the country on a path to “create financial sector instability, increasing risk and uncertainty across many sectors of the U.S. economy.”

The $1 trillion “net operating cost” in the report - up from $275.5 billion in fiscal 2007 - is different from the federal budget deficit because it uses proper accounting standards to include future spending obligations. The federal budget measures only “dollars in and dollars out” in a given year, Mr. Riedl said.

The deficit in fiscal 2008, which ended Sept. 30, was $454.8 billion, up from $162.8 billion in fiscal 2007. The deficit itself is expected to be about $1 trillion in fiscal 2009.

The increases in spending have prompted many conservatives to criticize President Bush, who ran in 2000 on reducing the size of government and introducing spending restraint. Under Mr. Bush, the size of government has grown by more than under any other U.S. president since President Roosevelt implemented the New Deal and fought World War II.

The Bush administration said much of the increase over time has been because of its spending on defense and homeland security in response to the Sept. 11 terrorist attacks.

But the explosion in total costs in fiscal 2008 was in large part because of an unforeseen spike in the future costs of veterans benefits, which grew by $339 billion.

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