An Independents View of the Federal Budget, Published in the Centre Daily Times October 2010

‘We live within our means – please tell the president,’ reads a bumper sticker I’ve been seeing lately.  Are our leaders really spending our country into the ground?  To find out, I took a detailed look at our federal budget (it’s available online at www.gpoaccess.gov/usbudget)

Our budget is huge – 3.7 trillion dollars in 2010 - the largest in the world.  About 62% of it is mandated by law, covering Social Security (about 20%), Medicare (12%), Medicaid (8%), unemployment benefits (6%), other help for our poor and elderly (11%) and the net interest we pay on our national debt (5% … for now).  The remaining discretionary 38% is what congress and the president argue about every year, paying for defense and homeland security (23%) and domestic programs (15%).  Incidentally, the infamous ‘pork barrel’ projects are just 0.5% of the budget.

We only have about 2.4 trillion dollars to spend though, leaving us with a 1.3 trillion dollar shortfall.  What’s causing the deficit?  The Recovery Act, wars in Iraq and Afghanistan, the Bush tax cuts, and the Bush Medicare prescription benefits add up to over 800 billion.  The remainder of the deficit isn’t irresponsible spending, but a nearly 500 billion drop in tax revenue, thanks to the recession and the large numbers of unemployed.

Even with a rebounding economy and diminishing war costs, we won’t return to the budget surpluses of the Clinton years because of strongly increasing outlays for Social Security, Medicare, and Medicaid, and our rising national debt.  The number of people that receive Social Security and Medicare benefits is rising dramatically.  Combined with the increasing costs of medical care, we’re staring down the barrel of a 1.2 trillion dollar yearly increase in those outlays by 2020.  Also, with over 14 trillion dollars to pay off, our interest payments will soar from 200 billion this year to 800 billion in 2020.

To prevent debt payments from swallowing nearly all our budget, we must pay off our loans.  We must not only balance our budget, but run surpluses for the foreseeable future.  Modest cuts to our entitlement programs are necessary, particularly for those who don’t depend on them for their day to day living, as well as cuts to both domestic and defense spending. 

However, even Draconian cuts won’t come close to balancing our budget.  We must consider what no politician seems willing to do – raise taxes.  Our deficits simply don’t allow us to extend the Bush tax cuts (about 230 billion dollars yearly), except for the lower and middle classes.  Also, while minor benefit cuts should keep Social Security solvent, we must raise Medicare taxes to keep up with future skyrocketing increases.  Incidentally, even with these increases, a US citizen’s tax burden would be among the lowest in the world.

It’s up to us to fix our national debt problem.  Our political leaders are borrowing huge amounts of money every year (mostly from China) to bribe us with tax breaks so we don’t throw them out of office.  I’d rather pay more taxes and trim spending now so our kids don’t face a catastrophic US default on our loans, throwing the world into a depression far worse than what we just faced.  We must make it clear to politicians that they need to seriously address our deficit, using both budget cuts, and yes, necessary tax increases.