The Congressional Budget Office (CBO) today released a ten-year budget baseline showing $7 trillion in deficits over the next decade. Yet because Congress requires the CBO to include all sorts of unrealistic assumptions (that all tax cuts will expire, that the AMT will never again be patched, that discretionary spending will barely move for a decade), some adjustments must be made.
This more realistic “current-policy” budget baseline reveals a ten-year deficit of $13 trillion. The annual budget deficit never falls below $1 trillion, and reaches $1.9 trillion by 2021. At that point, the $25 trillion debt would exceed the size of the entire economy – and even that assumes a return to peace and prosperity.
These deficits are driven by spending. Even if all the 2001 and 2003 tax cuts are made permanent, tax revenues (historically 18.0 percent of GDP) would climb to 18.4 percent by 2021. Yet federal spending (historically 20.3 percent of GDP) is projected soar to 26.4 percent by 2021. By that point, 100 percent of rising long-term deficits will result from above-average spending. There is no long-term revenue decline.
More sobering notes:
* Since 2001, federal spending per household has expanded $21,510 to $31,206 (adjusted for inflation);
* Between 2008 and 2021, the annual cost of Social Security, Medicare, and Medicaid is set to rise from $1.2 trillion to $2.2 trillion (adjusted for inflation);
* Letting the tax cuts expire for those earning more than $250,000 would close just 5 percent of the budget deficit over the next decade. The $736 billion price tag is a fraction of the cost $21 trillion cost of Social Security, Medicare, and Medicaid over the decade;
* Between 2009 and 2021, the national debt would increase by $150,000 per household. By 2021, net interest alone would cost $1 trillion – nearly one-half of all tax income revenues; and
* Over what would be President Obama’s eight years in office, baseline budget deficits are projected to total $9.9 trillion— triple the $3.3 trillion in deficits accumulated by President Bush.
These spending and deficit figures are unsustainable. In order to aver a budget crisis, Congress must substantially rein in non-defense discretionary spending, enact multi-year caps, and then begin fundamental Social Security, Medicare, and Medicaid reform. Small budget tweaks and freezes are no longer sufficient.
— Brian Riedl is Grover M. Hermann fellow in federal budgetary affairs at the Heritage Foundation.
The statement that we should rein in "non-defense discretionary spending" is indicative of a lack of seriousness.
Every dime spent by the Government, with the exception of salaries of the incumbent President and judges, is discretionary (and we can cut their staffs to make up the difference). Even publicly held debt can be re-financed to spread out payments.
We can and should "rein in spending" on everything, including defense and "entitlements". No exceptions. None. Zero. Nada.
Otherwise, don't pretend to be serious, because you're not. You're just using the threat of overwhelming debt obligations as an excuse to play with your own personal political hobbyhorses.
Reply to this commentLinkReport AbuseMr. Riedl, thanks for the work. Education? Speed Trains? Infrastructure? This is a joke right??? Beuhler?, Beuhler?, Beuhler?
Reply to this commentLinkReport AbuseWe conservatives need to take the terms "discretionary" and "non-discretionary" spending out of our vocabulary.
ALL FEDERAL SPENDING is discretionary. The inaccurately labeled non-discretionary spending is called non-discretionary because the spending happens automatically as a result of laws previously adopted.
The adoption of those laws was discretionary, and the repeal of those laws is discretionary. With a simple vote (i.e. the exercise of discretion, voting/legislative discretion) to repeal the enabling law, the "non-discretionary" spending disappears.
Please stop giving the congresscritters political cover by using this innaccurate label. Every dime they spend is discretionary.
Reply to this commentLinkReport AbuseHey Bart, read more closely. I never wrote we should cut *only* non-defense discretionary spending. Read the rest of the sentence. It also says cap ALL spending, and reform Social Security, Medicare, and Medicaid.
So how exactly is that not serious?
Brian Riedl
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Mr. Riedl:
You're engaging in a common rhetorical dodge. The entire purpose of saying that we should "rein in non-defense discretionary spending" is to avoid the charge (by someone who agrees with your opinion) that you want to cut defense.
You can employ this rhetorical tactic in a variety of contexts - just replace "non-defense discretionary" with any other broad-based term and you can create the same effect.
If you had wanted to say that we should "cap all spending" you could have. But you didn't. You don't use the word "all" and you don't argue that we should cut defense.
You do the same thing with "entitlements". "Reform" may be a good thing, but it is a meaningless word in relation to the federal debt; "cut", in contrast, does mean something relative to federal borrowing (and it need not be accompanied by "reform").
That's why I accuse you of unseriousness. If you don't want to "cut" defense and non-discretionary spending, that's your prerogative. But then there's no reason to take you seriously when you say you want to address the debt.
Reducing federal debt relative to GDP is going to require us, in the first instance, to propose cutting (not "reforming") everything on which the Government spends money, without exception.
If we don't want to cut something - fine. Then we make up the difference by coming up with the votes to cut something else by an increased amount. And if we can't come up with the votes to cut that something else, then we raise taxes to pay for what we're not cutting.
I honestly don't see any other way to address the problem.
Beginning with Alan Greenspan and other Geniuses of the 1980s who came up with the "Social Security Trust Fund" so that we could delay the hard decisions about cutting old-age and disability benefits and continuing through the '00s, with our unpaid-for Bush Tax Cuts and our credit-card paid-for efforts to turn Southwest Asia into Switzerland, we have had a bipartisan "Dessert First" fiscal policy.
This policy has most recently been evidenced by the recent refusal of (as far as I know) any Member of Congress to vote "no" on extension of the Bush-era tax cuts (for anyone, including the Blessed Middle Class) unless they were matched, dollar-for-dollar, by spending cuts. Some Republicans voted "no" because they wanted the lower tax rates to be permanent and some Democrats voted "no" because they wanted the lower tax rates not extended for higher brackets.
But in neither case was there a faction in Congress that took seriously the danger of increased debt.
Would cutting spending drastically, or raising taxes because we're not willing to cut spending drastically, reduce economic growth? Maybe. Too bad. We don't deserve "economic growth" that's predicated on money borrowed from foreigners and charged to our kids and grandkids. Anyone can make himself appear prosperous by taking out a cash advance on his credit card, and that's all we're doing by our continued refusal to use every lever available to us (not just "convenient" to us) to get our house in order.
Reply to this commentLinkReport AbuseYou say:
"That's why I accuse you of unseriousness. If you don't want to "cut" defense and non-discretionary spending, that's your prerogative. But then there's no reason to take you seriously when you say you want to address the debt."
Um.....I have written over 100 reports on how to scale back entitlement spending. They are all right there at heritage.org
My blog post specifically calls for "fundamental Social Security, Medicare, and Medicaid reform." That means cutting back benefits.
And, yes, spending caps would apply to *all* spending. I didn't write any exceptions into that clause. And my spending cap proposals at Heritage.org also apply to all spending.
So if you want to ignore what I actually wrote - and instead oddly assert that I somehow oppose entitlement reform - then go ahead with your straw man. I'll focus on engaging those who read my posts accurately.
Brian Riedl
Reply to this commentLinkReport AbuseMr. Riedl:
1. I was responding to your post on NRO, not to whatever you may have written for another website.
2. "Reform" of entitlements or anything else, relative to federal debt, is meaningless. "Cutting" can actually be measured.
3. And I find it fascinating that you still won't actually say that you want to "cut" defense spending. You didn't say it in the post and you didn't say it below. "Cap" - like "reform" - is a fudge term that allows you to avoid a measurement vis-a-vis debt. It's less of a fudge word, but a fudge word nonetheless.
I'm not sure why it's so difficult to get a faction in Congress that is willing to cut - not "cap" or "reform" - everything on which we ask the Government to spend money, or in the alternative to raise taxes to pay for that which we are unwilling to cut.
Reply to this commentLinkReport AbuseReigning in non-defense discretionary spending will do, essentially, nothing to dent our annual federal deficit of about $1.5 trillion. And, to suggest that the entitlements of Social Security and/or Medicare have anything to do with significantly reducing the annual deficit is encouraging more "deficit denial" among the populous. No, the provisions in the Bowles-Simpson Debt Reform Plan are the way to go. We simply must find a way to bring in more revenue, as we slowly reduce overall federal spending.
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