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LAMBRO: Budget attention deficit disorder
President’s overspending portends permanent red ink
Question of the Day
Uncontrolled government spending is far worse than projected just a few months ago, driving the federal budget much more deeply into debt that threatens our economy and our future standard of living. This fiscal year’s budget
deficit is expected to climb to nearly $1.5 trillion, which would be the biggest one-year deficit gap in American history, according to the nonpartisan Congressional Budget Office.
It is the result of a still weakened economy and 9 percent to 10 percent unemployment that has sharply cut federal tax revenues, and a Democratic Congress that has been on an irresponsible, nonstop spending binge for the past two years.
The previous CBO projection for fiscal 2011 was $1.3 trillion, but its latest estimates show the government’s fiscal position is worse than ever and could climb higher, according to independent analysts.
The latest report will give more weight to Republican efforts to make deep spending cuts in the remainder of this fiscal year, which ends in September, and next year’s budget as well. All revenue and spending measures must begin in the GOP-controlled House, and the Republicans will have the upper hand in driving budget policy for the next two years at least, if not beyond that.
Total government debt is now more than $14 trillion, and outside budget experts say it will continue to rise exponentially unless President Obama’s over-the-top spending policies are curtailed substantially.
How bad will our government’s fiscal position get? Brian Riedl, the Heritage Foundation’s chief budget analyst, paints the government’s grim fiscal future in a memo released last week that has become must reading on Capitol Hill. Among Mr. Riedl’s findings:
c Spending projections are actually worse than CBO’s numbers show, because of the “unrealistic assumptions that Congress requires CBO to employ to make future deficits appear smaller (such as assuming all tax cuts will expire, the AMT (alternative minimum income tax) will never again be patched and discretionary spending will remain frozen to inflation).
c “The ten-year deficit is actually $13.6 trillion, and annual deficits never fall below $1 trillion.”
c Ten years from now, in 2021, the budget deficit “is expected to reach $1.9 trillion, and the debt will hit nearly $25 trillion, or 104 percent” of the economy’s entire gross domestic product (GDP) - and even that assumes a return to peace and prosperity.”
c “Long-term deficits are driven by spending. Tax revenues (historically 18.0 percent of GDP) are set to climb to 18.4 percent by 2021 - even if all tax cuts are extended. Yet federal spending (historically 20.3 percent of GDP) is projected to soar to 26.4 percent by 2021. By that point, 100 percent of rising long-term deficits will result from above-average spending.”
c Spending under this administration is driving the ocean of red ink. “Since 2001, federal spending per household has expanded $21,510 to $31,206 (adjusted for inflation).”
c “Entitlements are the problem: 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).”
c The so-called “tax cuts for the rich” are not the overriding deficit-driver. “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 $21 trillion cost of Social Security, Medicare and Medicaid” over the coming decade.
c “Between 2009 and 2021, the national debt would increase by $150,000 per household.” By 2021, net interest alone on the total debt would cost an astounding $1 trillion, or nearly one-half of all income tax revenues.
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About the Author
By Michael P. Orsi
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