We Do Not Have a Spending Problem.
I’m just watching Sen. Bob Corker (R – Ten) saying that “finally” the conversation has gotten to the right place. Instead of considering taxes at all, both “bodies are looking at packages that are focusing on the deficit” only by looking at spending cuts. Taxes are off the table.
A few points: as Bruce Bartlett has pointed out, in poll after poll, a majority of Americans don’t think we should only be talking about spending cuts.
Second, Republicans keep saying that we have a “spending problem.” But we don’t. We have a problem with the difference between revenue and outlays. In other words, because of multiple factors, we don’t have as much money coming in as we have commitments going out. The question is not ‘what do we cut’ but first, ‘how did we get here?’ E.g., look at this graph:
This graph looks only policy changes over the last two presidents, which is not the whole of the debt (since we have a deficit going into Bush’s years), it is a major portion. As you can see, the policy changes that Bush enacted had the greatest effect on the debt – $5.07 Trillion, versus Obama’s $1.44 Trillion. The rest of the debt is made up of what we have previously, plus the fact that we have one of the worse recessions since the 30′s, and revenue went down. Right now revenue is at 14.4% of GDP, the lowest since the early 50′s.
So to call this a “spending” problem is just factually wrong. It’s a revenue versus outlays problem (outlays that, by the way, this congress has approved this past April).
The last point is how unrealistic the Republican’s view is. The most unrealistic thing about this is that we will never, ever, ever, fix the deficit by spending cuts alone. It would so fundamentally change the way this country has been for the last 40 years that it just will never happen. Actually John McCain (R – AZ) actually made a good point this morning. He said the house Republicans were being dishonest with their constituents by hanging their hat on “Cut, Cap, and Balance” because it would never actually pass. They are also being dishonest with their constituents when they say that revenues are not a part of this solution (although, if the polls are right, their constituents already know this). The worst thing about this is that in 15 years, when all the baby boomers are using Medicare, and our spending ration qua GDP (which is right now around 20%) goes up to above 25% (which it will), we are going to have to have massive tax increases.
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It really does not matter “how did we get here”? That is easy; the federal government under almost all presidents spent more than it took in. Playing the blame game is a total waste of time. The federal government must learn to live within its means. The government is unable to fund everything.
You’re wrong. Of course the blame game is a waste of time, but it’s obvious that we need to know why we are here, i.e. what policies led us here. Then we can change them.
Everybody spends more than they take in. You get a car loan, you spend more than you take in; you get a mortgage, you spend more than you take in. You do almost anything in modern world, you spend more than you take in.
It’s just that when you have a surplus of revenue than what you need to operate things at a bare minimum you should be paying down those loans. E.g., if I have a surplus in my budget and I’m only paying the minimum on my credit card, I’ll start to pay more.
This is where it is important to see policy changes: Bush’s tax cuts took a surplus that the CBO projected out of the Clinton years, and cut that entire thing. This meant that when we should have been paying down our debt, we made it so our debt could not be paid down. That’s a huge policy mistake that can be correct now – that’s why it matters how we got here.