A recent report by the Government Accounting Office (GAO) describes America's long term fiscal outlook:
Weaknesses in the economy and financial markets—and the government’s response to them—have contributed to near-term increases in federal deficits, which reached a record level in fiscal year 2009. While a lot of attention has been given to the recent fiscal deterioration, the federal government faces even larger fiscal challenges that will persist long after the return of financial stability and economic growth…GAO’s simulations continue to show escalating levels of debt that illustrate that the long-term fiscal outlook remains unsustainable
The GAO tells us why our fiscal outlook is unsustainable:
roughly 92 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs on the debt by 2019. This is due largely to a substantial increase in interest on federal debt…by 2030 there will be little room for “all other spending,” which consists of what many think of as “government,” including national defense, homeland security, investment in highways and mass transit and alternative energy sources, plus smaller entitlement programs such as Supplemental Security Income, Temporary Assistance for Needy Families, and farm price supports.
The GAO estimates assume that federal revenue will be 20.2% of GDP, which is already higher than historical levels of taxation.
Currently, our federal debt is over $12 trillion. Here are the debt projections for the next 10 years.
2010 – $14 trillion.
2011 – $15.2 trillion
2012 – $16.2 trillion
2013 – $17.1 trillion
2014 – $18 trillion
2015 – $19 trillion
2016 – $20 trillion
2017 – $21 trillion
2018 – $22 trillion
2019 – $23 trillion
As you can see, our debt is rising at roughly $1 trillion each year.
These numbers do not include the health care reform that is making it's way through Congress, which will be a major increase in the entitlement programs that are already unsustainable. The recently released Senate health care bill is estimated to cost $849 billion over 10 years, but those numbers are bogus. They are hugely underestimated, because Congress uses sleight of hand to arrive at those numbers. The full benefits of the health care bill don't start until 2014, but the taxes (about 14 different taxes in all) start in 2010, skewing the true costs if the bill. If you start calculating the cost of the Senate health care bill from when the benefits start, that makes the cost more like $1.5-2 trillion. Even the $849 billion rigged figure depends on massive Medicare cuts that Congress will probably never have the guts to make (they never have before), along with the fact that the doc-fix of $247 billion was separated out to make the Senate bill look cheaper. As always, our dishonest Congress is being dishonest about the true costs of health care reform. This reform will almost certainly add even more to the deficit and debt, unless even more taxes are raised to pay for it.
There are two ways to deal with our unsustainable fiscal problem. True conservatives (not pretenders like Bush) would say reduce government spending, which has spun completely out of control over the last decade. This is known as the smart way out. Liberals would say increase taxes to levels unprecedented in American history. It would probably take a 40-50% increase in tax levels to pay for all our committments and begin paying down our unsustainable, dollar-killing debt. Such tax increases would also have a business-killing, dampening effect on our economy at a time when unemployment is already skyrocketing and we're trying to climb out of a recession. This is known as the stupid way out.
It's up to you America. They called my father's era The Greatest Generation. From what I'm seeing so far, I'm calling my own era The Greediest Generation. We are bankrupting our children's futures for our own momentary comfort. We can't even face the unsustainable reality that WE CREATED. We just pretend it doesn't exist, while our crooked politicians drive us deeper into the hole and tell us how much they are helping us at the same time. Shame on them, and shame on us for letting them get away with it. Shame on us even more for voting for the biggest liars, the ones who promise us the most goodies as they abandon all sense of financial responsibility and sell us down the river.
{ 10 comments… read them below or add one }
like I said in an earlier thread, I work for a company that has benefited from the stimulus. The companies we deal with have also benefited because we have benefited. I have talked with my co workers and also people in the other companies. It seems as if everybody is just trying to pay down their debt and save the rest. Nobody is spending. None of the businesses are spending.
so your suggestion for the way out of this mess is to stop or reduce the spending of the only person that is spending, which is the federal government. Wouldn't that further tighten up the economy?
that doesn't make sense
I'm pretty sure the majority of noted economists agree that spending is the only way out of a recession and if the private sector's not doing it then the Fed has to step up.
Typical. You want to keep up the illusion that everything is okay by piling more debt on top of the already unsustainable debt. Brilliant, guys, just brilliant. That's like maxing out all your credit cards and then determining the way out of the mess is to get more credit cards. There's a word for where that type of thinking leads. It's called bankruptcy.
It is true that the U.S. debt is worrisome. You are right about that.
But you offer no viable solutions…at least none that I saw.
You mention that the health reform bill will require tax increases…but you don't acknowledge that any increases will be on a tiny, very wealthy, group of Americans.
And this….
"Liberals would say increase taxes to levels unprecedented in American history."
..is totally incorrect. U.S. income and capital gains tax rates are at their lowest in a generation. How, then, would moving the tax schedules back to Clinton-era numbers be "unprecedented" ?
walter and Tbomb make excellent points. Would you rather that Americans endure a massive Depression…rather than have government intervene as the demand-producer of last resort? Would you?
You talk about government spending, about cutting it. Here's the biggest perplexity of your post……what would you suggest should be cut?
"Smart way out"?? Should Americans all have to have their standard of living rolled back 60 years to protect that handful of very wealthy beneficiaries of the Bush years?
One more…
"Such tax increases would also have a business-killing, dampening effect on our economy at a time when unemployment is already skyrocketing and we're trying to climb out of a recession. This is known as the stupid way out."
That assumes that tax increases on the wealthiest kill jobs….and the opposite….tax decreases create jobs. Neither side of that assumption is reality-based. Slight tax increases under Clinton resulted in 20 million jobs…..historic Bush tax cuts, mainly on the most affluent….have resulted in 7 million jobs being lost.
Tax rates are not really the cause/effect engine of jobs, as you suggest….it's much more complex than that. Outsourcing, trade rules, corporate dominance over the government, etc….play significant roles. It's taken 30 years for Reagan's Revolution to bear it's ugly fruit…and it seems like you are suggesting we double down on that Revolution.
Rev,
It's an immutable truth that every dollar the government spends is one less dollar for the private sector to spend. That leaves less dollars to create wealth and jobs, which is primarily the purview of the private sector. While it is true that government does create government jobs, those jobs are predominantly not wealth creating. They are primarily bureaucratic. Some of those jobs are necessary, but it's always better to leave as much money in the hands of the citizenry as possible. That is what stimulates the economy.
In order to balance the budget and begin paying down the debt via taxation alone (achieve fiscal responsibility), we WOULD have to increase taxes to the highest rates in American history. That was my point, and nothing you said countered that. Merely reversing the Bush tax cuts won't even come close to accomplishing it. The Bush tax cuts were about $58 billion in 2001, growing to about $188 billion in 2009. That is a drop in the bucket compared to our ongoing structural deficits. It's the standard liberal talking point (used as an excuse not to address the real problem), but it won't accomplish much. Not to mention that raising taxes during a recession/depression is dumb. Both Hoover and FDR proved that, and economists would agree. Bush's major sin was not cutting taxes. It was increasing spending by 33% at the same time.
You ask, "walter and Tbomb make excellent points. Would you rather that Americans endure a massive Depression…rather than have government intervene as the demand-producer of last resort? Would you?"
You are missing the whole point. It's the yearly debt accumulation that is going to lead to the biggest Depression this country has ever seen, and you want to close your eyes to it. You believe, as I said before, that the answer to maxing out all your credit cards is to get more credit cards. It's insane. Every single presidential administration in my lifetime has run up the debt. They all found some excuse to do it. Bush used a recession and war. Democrats, Republicans, it doesn't matter. They've all done it. And here you are, arguing with me for showing where that will lead. How you can defend such governmental irresponsibility is beyond me, and Obama is on track to be the biggest offender of them all. Enjoy your health care reform as our entire country goes bankrupt. Government expands as much as WE LET IT. It doesn't have to expand. That's a myth.
I have written posts in the past on how to balanced the budget too, so don't tell me I haven't offered any solutions. What are your solutions, other than raising taxes to the highest levels in history, having the government take over everything, and destroying the economy ? Nearly every major Obama proposal is a job killer, yet somehow you support him. I don't get it. I'm not being partisan, I'm being realistic. We need to make some hard choices, and the longer we wait to make them, the harder they are going to be. I know it's fun to live in fantasyland, but fantasies are not true, and it's all going to come crashing down around our ears very soon.
Here's an idea for you, about how to pay for health care reform, if that is now supposed to be a "right." Cut federal spending by an amount equal to the cost of health care reform, every year (and do not cut Medicare. That's part of the "right," right ?). If it's that important, that's what we should do, rather than burdening the taxpayers more and more and more, leading to disaster. I could design a more fiscally responsible health care reform package in a week than Congress has designed in a year, and I'm not even an expert in that field. We are being led by a ship of fools. I choose not to follow.
P.S. – Government expanded during the Reagan years too, so I'm hardly "doubling down" on that. That would be YOU.
Youre response is filled with error.
The Bush tax cuts took, at a minimum, $1 trillion away from the Treasury. It created nothing, it produced nothing, it stimulated nothing.
Clinton not only balanced the budget but left Bush a surplus to exploit. So, every president of your lifetime didn't run up the debt.
And you can say this all day long…
"Bush's major sin was not cutting taxes. It was increasing spending by 33% at the same time."
..but it's still misguided. Bush had the opportunity to do something with the Clinton surplus…you know, like paying down those entitlement projection shortfalls …..or even paying down the national debt. But no…..conservative hacks like Greenspan encouraged the tax giveaways. Totally irresponsible.
Why is it that conservatives never mention the $1 1/2 trillion wasted on wars of choice and neo-con imperialism?
this from Eric Alterman…..
"The Bush tax cuts: When the Bush tax cuts sunset at the end of 2010, the previous administration will have left the government holding the bag for well over $2 trillion in lost revenue. The extraordinary debt and deficits accrued during Bush’s tenure have been compounded by the implosion of the financial system. In addition, the estimated eventual costs of the costly, unnecessary, and counterproductive Iraq war are now in the trillions to say nothing of the costs of more than six years of failure in Afghanistan. What have they done for America?
As David Cay Johnston, a former New York Times reporter, recently noted, based on data compiled by the nonpartisan Tax Policy Center, by the time the Bush tax cuts expire next year, people in the top one percentile of annual household incomes will have received 23.5 percent of all the savings in the cuts. The combined savings of the bottom three income brackets was less than that."
OBL, with the help of Bush/Cheney/Boehner and their republican cheerleaders have brought America to its knees. Mission Accomplished indeed.
King, we all understand about deficits and government spending and all of that. What we also realize is that consumers and businesses are scared and not spending. Do tax cuts spur spending? Sure. But I doubt it in this economy.
Rev,
If you're going to accuse me of errors, it would be helpful if you pointed out at least one. You didn't.
Clinton added $1.5 trillion to the debt. Look it up. And Clinton's surplus would have evaporated in 2001 even if Clinton had still been president. If you recall, the dot-com bubble burst and we were entering a recession as Bush took office. Then there was the damage 9/11 did to our economy, deepening the recession. I don't say this to excuse Bush, because I don't agree with his fiscal policies. I say this only to correct your errors.
Bush added over $4 trillion to the debt. If I use your $1 trillion figure for the total of Bush's tax cuts over 8 years, Bush still would have added $3 trillion to the debt. This doesn't take into account any positive economic effects of the tax cuts. I repeat, reversing the Bush tax cuts won't come close to making up for our trillion dollar yearly budgetary shortfalls.
Your statement that Bush's tax cuts added nothing is not supported by the facts. The facts say the tax cuts spurred the economy. You're just spinning.
And because I was against the Iraq war, I don't feel the need to defend it. We didn't need to spend that money, which is in the neighborhood of a trillion.
Obama is on pace to add $9 trillion to the debt. This is the guy YOU SUPPORT, which makes your entire argument disingenuous.
walter,
I can't tell from your post whether you are posting other people's words or your own.
The Bush tax cuts, plus TARP, plus Bush's stimulus program probably do come close to $2 trillion. Bush also ran federal spending from $2 trillion to $3 trillion per year during his tenure.
Were you for TARP ?
Were you for Bush's stimulus ?
Were you for Bush's tax cuts for the middle class ?
Were you for Bush's increased social spending ?
Were you for Obama's stimulus ?
Were you for Obama adding $500 billion to the federal budget in his first year ?
Are you for Obama's projected $9 trillion in added debt ?
Are you for Obama's health care spending increase of $1.5 trillion (at least) over a decade ?