Sunday, February 07, 2010
Spending spree isn't root cause of deficit rise
Dan Radmacher
Recent columns
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- Redistricting process must be taken from pols
- A shutdown remains a very real possibility
- U.S. Navy Vets case argues for campaign limits
From the RoundTable blog
If there is one thing I agree with Tea Party activists about -- and there probably is just this one thing -- it is that the federal deficit is completely out of control.
Where we part ways, though, is the cause. Tea Partiers seem to believe it's all because of President Obama's outlandish, socialist spending spree -- spending that takes their hard-earned money and redistributes it directly to the lazy and shiftless.
The fact, though, is that the monumental increases in the projected deficits are the result of a number of factors, the least of which is increased spending.
First, President Obama eliminated several budget gimmicks that had been used for years to mask the true size of the deficit.
The wars in Iraq and Afghanistan are now included in the budget, for instance. That added $160 billion each to the 2010 deficit and 2011's projected deficit.
Obama also dispensed with the accounting fiction that Congress would ever allow the Alternate Minimum Tax to hit middle-class taxpayers. When it was passed decades ago, the tax formula wasn't pegged to inflation, which means that a tax designed to ensure that millionaires can't completely evade federal income tax through shelters hits more and more Americans every year. Congress fixes it every year, but has failed to enact a permanent change because it would blow a hole in future deficit projections.
Obama's budget assumes a permanent fix to a long-broken system -- adding $660 billion to the projected 10-year deficit of $8.5 trillion.
But much of the deficit explosion in the last couple of years reflects a decrease in revenue as opposed to an increase in spending.
As the Bush tax cuts phased in toward the end of his term and as the economy took its toll on what people earned, federal revenue took a nose-dive. Revenue from 2008 to 2009 declined by $419 billion. That alone accounts for nearly a third of the annual deficit.
Obama did pass a $757 billion stimulus bill -- but many Americans fail to realize that one-third of that was tax cuts, not spending. The fact is that the president has not turned the federal spending spigots on full blast.
If you don't believe me, maybe you'll believe Alex Conant, former Republican National Committee press secretary. In dissecting -- and criticizing -- Obama's proposal for a spending freeze on non-security-related discretionary spending, Conant noted this:
"To be specific: FY2009 (President Bush's last budget) had $589 billion in non-defense discretionary spending. That number jumped to $687 billion in FY2010 (Obama's first budget), and then drops to $641 billion in FY2011, $622 billion in FY2012 and $625 billion in FY2013."
So, in the midst of the Great Recession, Obama boosted non-defense discretionary spending by less than $100 billion -- not even one-tenth of the projected 2010 deficit. By 2013, that increase will be reduced to $36 billion, or a little more than a 1 percent increase per year.
What Tea Partiers and others who are genuinely concerned about growing deficits need to realize is that the kind of discretionary spending they rail against is not a significant deficit driver. The deficits are structural, the result of insufficient revenue to fulfill generational promises the government made long ago.
How bad is it? CBS News White House Producer Robert Hendin did the math in a recent blog post. The federal government projects $2.567 trillion in revenue next year. It has $2.4 trillion in mandatory spending -- primarily Social Security, Medicare, Medicaid and interest payments on the debt.
So, to balance the budget, Obama would have had to have limited all federal discretionary spending, including the defense budget, to $167 billion -- a genuine impossibility.
David Walker, the president and CEO of the Peter G. Peterson Foundation, and the former comptroller general of the United States, has been sounding the alarm about the nation's structural deficit for years.
"People need to understand, the hole that we are in is so deep, that you can't grow your way out, you can't tax your way out, you can't cut your way out, individually. We are going to have to do a combination of things, and the sooner we do it the better," he told Hendin.
To actually do something about the long-term deficit, which becomes more imperative with each passing day, Obama and Congress are going to have to make tough, politically charged decisions about programs the American people not only love but have put tremendous faith and financial contributions into: Social Security and Medicare.
Allowing all of Bush's tax cuts to expire, not just those on the wealthiest Americans, also needs to be on the table. That alone could lop $2 trillion off the 10-year deficit projection.
Defense spending must also come under increased scrutiny. Every dollar must be spent wisely.
A budget crisis that has been coming for a long time is now here.
Radmacher is the editorial page editor of The Roanoke Times.
