In April 2011, President Obama went to George Washington University and delivered a highly publicized and very political attack on the budget plan put together by House Budget Committee Chairman Paul Ryan. In that speech, the president called the Ryan plan, and especially its Medicare-reform component, an unconscionable attack on the elderly. He also accused it of being, effectively, un-American.
Fast-forward to April 2012. Congressman Ryan has again assembled a budget plan to head off national insolvency. He has again rallied his colleagues to take up this budget blueprint and pass it through the full House, despite the political risks associated with doing so. And, like night following day, the president has again delivered an incredibly partisan attack on the House’s handiwork, denouncing it with some of the most over-the-top political rhetoric ever heard in a presidential address.
In that regard, yesterday’s “address” was very similar to last year’s highly political budget speech. It was sort of like a movie sequel, trying to capture that same partisan magic that fired up his electoral base a year ago. Unfortunately for the president, his speech today was about as imaginative and interesting as most big-budget movie sequels.
He called the budget plan adopted by the House last week a “radical vision” that would undo the nation’s social contract by penalizing the poor and favoring the rich. And he again supported an alternative vision for fiscal policy, based on what he calls a “balanced plan” for deficit reduction — meaning a plan that raises taxes to cover higher governmental spending commitments.
At the bottom of this budget standoff is a fundamental difference of views on what is causing our fiscal crisis in the first place, both today and in the future.
The president and his allies continue to cling to the false narrative that the reason we are experiencing budget deficits is because of tax cuts and unfinanced wars. This is a completely distorted view of budgetary reality.
As shown in the following chart, the real source of today’s deficits and debt, and the source of our national insolvency if it is not addressed soon, is runaway entitlement spending. Taxes have gone up and down over the past four decades, but have always hovered around 18 percent of GDP. Meanwhile, back in 1972, spending on the three largest entitlement programs — Social Security, Medicare, and Medicaid — was just 4.4 percent of GDP. Today, spending on those three programs is just over 10 percent of GDP. That’s a 6 percentage point jump above what it was 40 years ago — an increase that is more than the size of the entire Defense Department today. Worse, spending on the “big three” is headed toward 16 percent of GDP in 2035, according to the Congressional Budget Office (CBO). If that were allowed to happen, there would be virtually no room left in the budget for anything else, assuming the historical rate of federal revenue collection.