GHEI: America’s spending addiction

The nation will soon see the public debt top $26 trillion

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Sometimes the truth slips out, like muddy water escaping a leaky bucket. Responding to a question last week, White House spokesman Jay Carney stated the obvious: “Of course the president believes that we have a spending problem.” This is very much at odds with the way the administration has pushed for nothing but additional taxes and spending through its budget submissions, and repeated in President Obama’s State of the Union speech.

Since Mr. Obama can’t agree with Congress on meaningful reductions, America’s credit rating is at risk of another downgrade. Things are only going to get worse, as a recent Congressional Budget Office analysis shows. Under the rosiest of all scenarios, the deficit may shrink a bit in the next few years only to explode later. This “best case” predicts the government will post $7 trillion in additional red ink between 2014 and 2023. These assumptions are implausible, because the estimate relies on Obamacare actually saving money, on promised cuts in Medicare reimbursement for health care, and on the adoption of other reductions in spending, such as the sequestration.

Based on Washington’s past performance, the cuts aren’t going to happen. Using more realistic assumptions that take reality into account, government policies will add $9.5 trillion to the public debt. Under the Congressional Budget Office’s alternative analysis, the deficit will exceed $1 trillion in 2023. This is evidence that fundamental problems aren’t being addressed.

As Mr. Carney conceded, spending is indeed the problem. Tax receipts dipped following the Great Recession and during the Social Security tax holiday. With the restoration of the higher Social Security tax and other new levies, the federal government will collect 19.1 percent of the income produced by the private sector. That’s substantially more than the 18 percent it has taken in the past. Spending is what grew disproportionately higher, hitting 25 percent of gross domestic product in President Obama’s first year in office. Outlays will be an estimated 23 percent of gross domestic product in 2023, well above the historical level of 20 percent.

The numbers leave no doubt that spending is the villain. Health care inflation accounts for $2 out of every $5 of the projected jump in spending, and the aging population accounts for much of the rest. Congressional Budget Office projections now show Obamacare will add just under $1 trillion to federal expenditures in the form of subsidies to the health care exchanges scheduled to open in 2014. Annual Medicaid spending will double. This is the best case scenario. Reality will likely prove far worse.

Admitting there’s a spending problem is the first step in working toward a viable solution, but with bipartisan resistance to the most modest of reforms it’s hard to see a worthwhile deal being struck. The public needs to demand politicians do something about the big entitlements — Medicare, Medicaid and Social Security — or our children and grandchildren will pay the price of our folly.

Nita Ghei is a contributing Opinion writer for The Washington Times and Policy Research Editor at the Mercatus Center.

 

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