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RIEDL: Obama misdiagnoses source of deficits
This contradicts the president’s claim that most of the deficits result from those three policies.
Even this methodology does not tell the whole story. After all, if Washington collects $3 trillion in taxes and spends $4 trillion, who’s to say which of the spending programs “caused” the resulting $1 trillion deficit? One could pinpoint any $1 trillion group of spending programs and blame them for the budget deficit.
A better way to diagnose the cause of long-term deficits is to measure taxes and spending against their historical averages. This more comprehensive methodology shows that long-term deficits are overwhelmingly driven by runaway entitlement spending.
By 2020, the CBO-based budget baseline projects that federal spending will reach 26.0 percent of the economy (5.3 percent of the economy above the 40-year spending average). Revenues will settle at 17.7 percent of the economy (just 0.6 percent of the economy below the revenue average) — and even that assumes all tax cuts are extended.
So as deficits expand by 5.9 percent of the economy, nearly 90 percent of the growth will come from higher-than-average spending, and just over 10 percent from lower-than-average revenues.
Virtually all of this new spending will come from surging Social Security, Medicare and Medicaid costs (driven primarily by 77 million retiring baby boomers), as well as net interest on the national debt. These four expenditures will cost $26 trillion over the next decade — surging from $1.6 trillion this year to $3.6 trillion in 2020. That is causing the massive budget deficits over the next decade — and must be the focus of any serious effort to reduce the budget deficit.
Finally, there is some hypocrisy at work. Mr. Obama criticizes Mr. Bush for “not paying for two wars, two tax cuts, and an expensive prescription-drug program.” Yet he would extend $3.9 trillion of these policies (while repealing $700 billion in tax cuts) without paying for them, either. By his own logic, he’s almost as irresponsible as Mr. Bush.
• Brian Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs at the Heritage Foundation (www.heritage.org).
By Tom Fitton
New photos confirm the attack's coordination and its cover-up
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