Skip to comments.We Can't Keep Spending Like This (On the Out-of-Control Federal Budget)
Posted on 07/16/2006 4:27:36 PM PDT by curiosity
On Tuesday, President Bush announced that the federal budget deficit will be $100 billion lower than initially expected due to higher levels of economic growth. This is the third consecutive year substantial downward revisions were made to the deficit as part of the administration’s mid-year budget review. The president further claimed that the nation is ahead of schedule by one year in its goal to cut the budget deficit in half.
On the surface this appears to be good news. Yet the biggest mistake the conservative movement could make is to focus on the budget deficit. The deficit is an unimportant number that reflects two very important numbers: how much the government takes in taxes and how much the government spends. Fixing a deficit “problem” can be achieved by raising taxes or by cutting spending and raising taxes is always the establishment-approved solution.
The downward reduction in the deficit is being driven entirely by strong economic growth which is increasing tax revenues. Growth should be valued and growth is happening. The president and Congress have cut taxes each year and the large reductions on double taxation of savings and investment has led to unprecedented growth and hence higher tax revenues.
But growth is just one part of the equation. Total federal spending, which is accelerating at an unsustainable level, is the other half of the equation, and is currently being masked by the reduction in the budget deficit.
Each year, Americans for Tax Reform releases a report which details the total cost of government to American taxpayers and calculates the date of the year the average American is done paying for those costs. The “Cost of Government Day” report has become a true measure of whether the conservative movement is achieving its goal of shrinking the size of government. And this year’s report demonstrates that the size of government continues to increase an unprecedented event during times of strong economic growth.
Today, July 12, is this year’s Cost of Government Day. It’s the date in the calendar year when the average American worker has earned enough money to pay off his or her share of the burdens of spending and regulations at all levels of government. This year, Cost of Government Day is one day above 2005 levels and nearly twelve days higher than in 2000.
Large increases in federal spending are responsible for 67 percent of the increase in the total cost of government since 2000. And total federal spending is accelerating contrary to what we often hear from elected officials.
Consider these key facts from this year’s Cost of Government Day report:
Federal spending has increased faster than national income in five of the past six years, leading to a 10.2 percent increase in the federal spending burden on American workers since 2000.
This year the average American worker will need to labor 86.5 days out of the year to earn enough income to pay for the cost of federal spending. This is an increase of 1.4 days compared to 2005 and eight days more than was required in 2000.
51 percent of all of the gains achieved in the 1990s have been wiped out in the past six years. The federal spending burden declined eight straight years from 1992 through 2000 as strong economic growth coupled with federal spending restraint led to the average American worker needing to work 15 days less in 2000 than was required in 1992. Half of all those gains have now been wiped out and the index currently stands at 1995 levels.
If spending increased only as a percentage of national income since 2001, the federal government would have a $20 billion budget surplus (not a $296 billion deficit) in fiscal year 2006. Moreover, the country would never have reached surplus in the late 1990s if spending equaled national income. The surplus resulted because spending was actually lower than national income during that time period.
If spending is such a problem, why is the deficit being reduced? The deficit is only declining because tax revenues have entered the Treasury at the highest rate in twenty-five years for two consecutive years. This double-digit growth masks the fact that spending will increase 9 percent this year and has averaged 7.1 percent annual growth since 2000.
But growing tax revenues at 11 to 15 percent per year is unsustainable; this growth rate will decline over time. If the growth of spending is not reduced correspondingly we will not only have a higher cost of government imposed on American families but we will also have an increasing deficit. Then the tax-increasing politicians will come home to take an even larger share of worker’s incomes.
The Bush administration, Congress, and the conservative movement must turn its attention to the most pressing issue facing American taxpayers total federal spending. Continued focus on the deficit will only lead to increased taxes and a larger cost of government at a later date.
Bring back the BBA. It missed by one vote in the Senate.
We would be running a surplus if the Congress could control its spending.
Never a borrower or lender be.
In order to truly control spending, we need to privatize Social Security and reform Medicare. These expenses will dwarf the rest of the budget in twenty years with no changes, and the problem will start to become acute in about ten-twelve years.
We have time now to still fix this, and Bush took a run at it, but the necessity of spending his political capital on the War On Terror in the face of strong anti-WoT forces on the liberal Democrat side of the aisle and country forced him the attempt to be abandoned.
I hope that President Bush makes another attempt at S/S reform before the end of his second term...
Time for the govt to adopt Oprah's Debt Diet! ;-)
"Bring back the BBA. It missed by one vote in the Senate."
Heck, the whole Contract for America would be a great campaign concept--for the Rats...it's not like the GOP has done a damn thing with it since Newt was elected Speaker.
The way that the budged is calculated needs to be drastically reformed.
At the very least, the retirement age needs to be raised again.
"In order to truly control spending, we need to privatize Social Security and reform Medicare."
You are so right!
However, the PUBS do not have the will to do it, since they will be blasted by the RATS, media and greedy geezers. The PUBS have lost their revolutionary fervor and don't want to risk their "careers".
Great time to be piling on the President.
Dear President Bush:
Here's my idea on a first step toward reforming Social Security that I believe you should investigate. It has a great political side benefit of taking away the Social Security scare tactic from the Democrats.
I believe it is simple, effective, and who could vote against it-- Democrat or Republican?
President Bush, you should present this as This is the first step in a comprehensive review of Social Security. We wanted to guarantee that reform will NOT hurt people already on the current system, or those who are close to being eligible with no time for other programs. These citizens will be GUARANTEED their full current benefits for life..." Here's a Brief Description of the bill:
Bill to Guarantee Social Security for Anyone Who Currently Receives Social Security or is within Twelve Years of Eligibility With Guaranteed Benefits As Currently Defined, (plus Inflation)
The purposes of this bill are:
1) This will guarantee current and "almost" retirees their benefits for life. It clearly acknowledges that the US government has an obligation to provide current and almost retirees with the benefits that have been promised. We are simply guaranteeing that we will make good on that obligation. Since Republicans have no intention of ever taking these benefits anyway, why not get the political benefit of making it official goverment law?
2) This will open the Social Security reform debate as Step One. Mr. President, it allows your administration to open the needed dialog on Social Security Reform for younger and middle-aged people (who want to discuss the issue), without the usual charges that the Republicans are trying to "starve old people, widows and orphans".
3) This will simplifiy needed Social Security reform by removing worry of seniors. By taking the Seniors (and the Dem scare politics aimed at them) out of the Social Security debate in large part. In fact, once their Social Security is "Guaranteed", then seniors can actually think rationally about the welfare of their children and grandchildren's retirement issues without worrying about their own.
4) Politically and very importantly- passage would immediately take this scare-tactic away from Democratic campaigns. They can no longer scare old people every election that a vote for GOP threatens to take away their monthly check. THEIR CHECKS ARE GUARANTEED FOR LIFE. You should get a much higher percentage of the senior vote without this "hot-button" always being used to scare them.
Mr. President, I am deeply encouraged by the direction you are taking America. You are a man of your word and the American people appreciate the honesty that you bring back to the Presidency.
I look forward to campaigning for you and Vice President Cheney in 2004!
I'm not totally confident it will happen. It certainly won't happen by itself. Conservatives need to make it happen, and the first step towards that is electing more Republicans to Congress.
As long as Congressmen can be bought and sold, it will never be fixed.
I hate to agree with Grover, but. . .
"Medicare/Medicaid will be changed. I suggest that it will be changed to become a catastrophic protection plan. There is no way we can keep spending on it when boomers get old."
Even if it becomes a catastrophic protection plan, if it covers the biggest generation of seniors ever, it will be a phenomenal expenditure. A better move is to get out of it entirely, with the entire country eating the cost of a payout of bare principle + interest (or buying annuities) and, if necessary (it should not be) buying catastrophic private insurance for seniors. Then if necessary the government can raise taxes to cover the payout, and tax everyone. But our fundamental problem isn't that we cover too many or too much. It's that the government is involved, and needs to get out of the unConstitutional business of providing health care and old age insurance.
But you knew that. 8)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.