OMB 2011 Long term Outlook - Page ix (Summary)

Today the Office of Management and Budget (OMB) released it's 2011 long term outlook for the United States Federal Budget.  In it we find that according to the accountants and actuaries that the governement depends on to interpret our overall budgetary positioning.  To be fair this is an outlook based on assumptions that are certain to change. 
Following the logic of any governement document you'll note that page ix starts on page 11 which is the Summary of the budget.  Here are some interesting quotes:
"...At the end of 2008 the debt equaled 40% of our gross domestic product (GDP) (a little above the 40 year average of 37%).  Since then the figure has shot upward: by the end of this year the congressional budget office (CBO) projects, federal debt will reach roughly 70% of GDP -- the highest percentage since shortly after World War II..."

"...As the economy continues to recover and the policies adopted to counteract the recession phase out, budget deficits will probably decline markedly in the next few years.  But the budget outlook, for both the coming decade and beyond, is daunting...."

"...baby boom generation portends a significant and sustained increase in the share of the population receiving benefits..."

"...per captita spending for health care is likely to continue to rise faster than spending per person on other goods and services..."

The remainder of page ix explains that their are 2 scenerios that were used to explain what our Long Term scenerio debt picture looks like.

 
As a point of comparison the US national debt was around 120% after the end of World War II.  When put into that perspective debt equivalent to 70% of GDP doesn't sound so bad does it.    This increase in spending in the 1940's is what makes the likes of Paul Krugman and other Keynsian economists believe that we should be spending even more dollars as a government in order to bring our nation out of recession.  Their belief is that while in the early 1940's we spent on wars as a percentage of our GDP we should spend likewise in wars, and spending programs in order to create a positive economic environment.  An interesting argument but begs the question; if the governement is spending the money on social programs, bailouts, what is being produced that will result in a sustained and profitable (prosperous) recovery? 

We will find out - one way or the other.