FrontPage | 7.25.11
By Alan W. Dowd
Let me get this straight. After increasing federal spending by almost 25 percent, exploding the national debt and pushing annual deficits past the trillion-dollar mark, President Obama is demanding that Congress make “progress on the deficit and debt.” Rumors are swirling about a “grand bargain” that will raise the debt limit, cut the deficit and increase revenues (Washington-speak for raising taxes). “The wealthiest Americans,” Obama recently declared, must “pay their fair share.” White House adviser David Plouffe says any deal must put Washington in “a revenue-positive situation.” Translation: perhaps trillions in new taxes.
Here’s a simple way to make progress on deficit and debt reduction: Cut 25 percent from the federal budget over the next two years. Given that Washington, with Obama leading the charge, found a way to increase federal spending by about 25 percent over the past two years, spending cuts of equal size seem exceedingly achievable and sensible.
Consider the numbers: Federal spending mushroomed from $2.98 trillion in 2008 to $3.72 trillion by the end of 2010. The spending was unprecedented and, contrary to those who promised that these “emergency measures” would jumpstart the economy, appears to have been unnecessary.
Again, consider the numbers: On the unprecedented side of the equation, in 2008—President Bush’s last year in office—the national debt was $10 trillion. The budget deficit was $407 billion. This year, the national debt is $14.5 trillion, and Washington will add another $1.6 trillion to the debt in deficit spending. Federal spending represents about 25 percent of GDP this year. In 2008, by contrast, it was 20 percent of GDP, which was very much in line with the previous 30 years: 19.9 percent in 2005, 20.49 percent in 1995, 21.59 percent in 1990; 22 percent in 1985, and 20.28 percent in 1975.
This helps explain Sen. Orrin Hatch’s push to cap federal spending at 20 percent of GDP. He didn’t just pull that figure out of thin air. It’s what the American people have come to accept and expect as an appropriate amount. In other words, the American people have concluded that 20 percent of their money is enough for the government to live on. And as Stephen Moore explains, the wealthy already contribute more than their share to the cause: “The wealthiest 1 percent of the population earn 19 per¬cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab.”
On the unnecessary side of the equation, the $862-billion stimulus package didn’t have much of an impact on unemployment, which remains above 9 percent. The Congressional Budget Office estimates that the stimulus package “increased the number of people employed by between 1.2 million and 2.8 million.” At $278,000 per hire, that’s not a very good return on investment.
Another unnecessary and untimely expenditure is the president’s signature legislative achievement, the new healthcare law, which comes with a price tag of $1 trillion over the next decade and commits taxpayers to yet another entitlement program. Even in good economic times, even if the nation had its fiscal house in order, launching such a large-scale program would be a dicey proposition. But to do so in the midst of the worst economy in 30 years—a year after adding $1.4 trillion in deficit spending to an already-massive national debt—seems downright dangerous. Moreover, it pays to recall Washington’s poor track record when it comes to out-year projections. The Wall Street Journal reminds us that in 1967 Congress predicted that Medicare would consume just $12 billion in 1990. In fact, it was $110 billion.
Obama deserves every bit of criticism he gets on D.C.’s spending binge, as does Bush. Without question, Bush was a big spender, and Obama is a super-sized spender. But those of us who criticize should remember that spending is the shared province of the White House and Congress. The federal budget isn’t handed down by executive fiat. Rather, Congress and the White House determine spending priorities together. And since we the people elect representatives, senators and presidents, we effectively ratify their spending decisions every two or four years.
In other words, the American people are big spenders, too. Or perhaps more accurately, Americans talk like green-eyeshade conservatives and vote—and act—like spendthrift liberals.
For example, we may deride deficit spending in Washington, but Washington is merely imitating us. The average American has four credit cards in his wallet. And according to the financial-data clearinghouse Bankrate, four out 10 American families spend more than they earn.
Likewise, we may say we oppose big government, but we Americans are fond of particular government programs. Indeed, Washington’s spending binge is arguably a function of our increasing reliance on the government:
• The new healthcare law is unpopular today. But in 2009, polls revealed that 75 percent of the country supported universal coverage.
• Some 61 million Americans now depend on government for their housing, food and health care, according to a Heritage Foundation study. That same study reports that the number of Americans on Medicaid, which provides health care for the poor, has more than doubled since 1990.
• It’s not just poverty-related programs. In 1997, 33 percent of undergraduates borrowed money through the federal student loan program. By 2007, it was 42 percent. (Count me among that number.)
• Fully 88 percent of Americans say “Social Security is more important than ever,” according to a National Academy of Social Insurance poll. Eighty percent of people 65 and older have a favorable opinion of Medicare.
• According to a federal report unearthed by The Atlantic Monthly, “the share of personal income that comes from government-transfer programs” has grown from 5.9 cents of every dollar in 1950 to 17.3 cents.
In short, if we want Washington to cut the size of government, we the people have to recalibrate our expectations of government.