The national debt vaulted past the $16 trillion mark two weeks ago, but there's no sign of a slowdown. The federal government is entering the fourth straight year in which it has spent $1 trillion more than it collected in revenue. An imbalance so large can't continue without threatening America's future.
Democrats insist tax hikes are the answer to correct this. President Obama will only agree to spending cuts that are combined with tax increases, which he calls the "balanced approach." The problem with this, of course, is that while such tax increases go into effect promptly, the promised spending cuts generally fail to materialize.
The so-called balanced approach also ignores the single greatest threat to U.S. fiscal health: massive entitlement programs that are bankrupting the country. Christina Romer, Mr. Obama's former chief economic adviser, took to the pages of Saturday's New York Times to warn against spending cuts, arguing they would lead to unacceptable contraction in the economy. Mrs. Romer admits entitlement growth is the "central problem" but, like the president, resists attempts to implement any structural reform in Social Security or Medicare. With estimates of unfunded liabilities as high as $100 trillion, gimmicks like saying the problem will be solved by "cutting waste" aren't realistic.
As Mercatus scholar Veronique de Rugy has documented, Medicare costs per enrollee are expected to double to almost $21,000 by 2040. At the same time, the number of enrollees will jump from 48 million in 2011 to 88 million by 2040. Tinkering at the fringes isn't going to keep solvent a system facing challenges of that magnitude. Without major reform, Medicare will continue to consume an ever-increasing share of the federal budget, instigating ever more tax increases.
Government spending has escalated sharply over the past decade. Using data from the Office of Budget and Management, Ms. de Rugy calculates that the first Reagan budget spent $7,000 per capita; this went up to $8,000 for the first Clinton budget. The last George W. Bush budget was a shade under $10,000, but jumped to $11,600 for the first Obama budget and has stayed at that level. Federal spending is going to consume 23 percent of our entire economic output this year, sharply up from the historical level of 20 percent.
The spike in profligacy is proof Washington has a spending problem, not a revenue problem. As with the struggling countries of the European Union, America needs real austerity, not phony talk about "cuts" that in reality are imaginary reductions to planned increases. Austerity isn't the problem; the danger is higher taxes that will cause the economy to contract as investors are forced to take their money out of the marketplace and hand it over to Uncle Sam.
We tried the Romer-Obama plan, and increased spending via the stimulus failed to jump-start growth. Real change means limiting the flow of red ink by reducing the size of government. That will give the private sector the breathing room it needs to grow and create jobs.
The Washington Times
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