The debate over the debt ceiling should be comical considering that the debt is, at this point mostly fixed, or set to rise each and every year until spending is controlled and economic growth sustained. It’s sad, but true…the bulk of America’s spending is mandated spending:
Medicare and Medicaid: 23%
Social Security: 20%
Defense Dept: 19%
“Other” Mandatory Spending: 13%
Those 4 items TOTAL: 75% of the U.S. Budget!
6% more is interest on the national debt, MOST of it to Bond Holders in U.S. Treasury Notes, which the government CANNOT default on. That brings it to 81% mandated spending.
That leaves a scant 19% in Discretionary Spending, but just WHAT IS “discretionary spending”?
Well, it’s ALL the infrastructure spending (roads, bridges, emergencies), it’s farm subsidies, it’s education, the nuclear regulatory commission, the Dept of Veterans Affairs and it also includes FBI and Homeland Security spending, as well as some foreign intel (CIA) spending.
Here’s a nice pie graph: http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2011.png
While many Democrats are loathe to cut any “social programs,” it’s primarily Republicans who are loathe to cut any Medicare/Social Security (they curry the “Senior vote”) and corporate and farm subsidies.
In fact, some of the biggest supporters of the $60 BILLION “Superstorm Sandy Relief package” are Republicans like Peter King and a bevy of Upstate & Long Island Republicans.
The spending mess is entirely bipartisan. Neither Party has done anything, since Gingrich, to slow down spending.
YES, the Gingrich Congress DID briefly return the U.S. to fiscal sanity and the Misery index swooned – down to 6 points, America’s lowest since 1957.
The idea that “we can spend to “stimulate” our way out of this problem,” is NOT regarded by any reputable economists – Joe Stiglitz aside.
The time tested approach continues to be that “Only prolonged economic growth (driven by pro-business, low tax policies) can improve a slumping economy.” There really is no debate over tax increases versus spending cuts. Higher tax rates reduce economic growth just as surely as “government jobs” are net COSTS, NOT net producers.
Tax increases don’t bring in significantly more, if any more revenues, as people respond to incentives. Projections that “the 2001 tax cuts cost X dollars” are based on the fantasy of everyone working, investing, creating at the SAME rate as they did after the tax cuts went into effect, which was significantly higher than that of the period just prior to those tax cuts.
It’s impossible to tax our way out of debt. EVEN if taxes were cut to such a point that huge deficit reductions occurred, the shortfall that accumulated cannot be made up by increasing taxes down the road.
Private sector economic growth is the ONLY way out and that translates into a reality in which many now desk-bound government office types will have to accept the new emerging (private sector) jobs in mining, fracking, exploration etc. To the good, those jobs are often in scenic places like Montana and Wyoming and offer productive work in the great outdoors, away from fluorescent lighting.
Those new jobs and the enterprises that generate them will not only expand productive (private sector) employment, they’re making America increasingly energy independent.
It’s an overall “Win-Win” and the only real way to move out from under the weight of this massive debt.
“The idea that “we can spend to “stimulate” our way out of this problem,” is NOT regarded by any reputable economists – Joe Stiglitz aside.”
While it helped in the 1930s, they entered with much lower levels of public debt. The starve the beast plan left us with higher levels of public debt and enabled more govt spending.
““Only prolonged economic growth (driven by pro-business, low tax policies) can improve a slumping economy.” There really is no debate over tax increases versus spending cuts. ”
There is little correlation between low marginal rates and economic performance. We currently have rates that are low by post WWII standards, and the economy s performing poorly. Other factors are much more important.
“Tax increases don’t bring in significantly more,”
If people are just going to avoid paying them, it wont hurt to raise them. Query- Is the opposite then true? If we decrease rates we will get more revenue? Why dont we cut rates to zero?
“Private sector economic growth is the ONLY way out”
How do we do that with our still near record levels of private debt? Do you contend that debt does not matter?
“the new emerging (private sector) jobs in mining, fracking, exploration etc.”
Our future is as a commodity based economy?
Steve
My good Steve,
You speak frequently about debt mattering, giving the impression that you understand how and why it does, both publicly and privately.
Please explain in complete detail the impact, both positive and negative, debt has on both public and private economic economic growth, at what levels of debt relative to whatever index you prefer to use, for which economic sectors, both public and private, and for which industries and which individuals in which circumstances.
Particularly while our Federal Reserve is at this same time fixing index interest rates near zero to encourage even more borrowing, your in-depth explanation of the myriad debt functions currently interlacing the various economies which affect us would help us all put these matters in better perspective. Take all the space you need to pain a complete picture. Thanks.
H. M. Stuart
Alexandria
JM, as you may recall from a previous thread of yours, I made a case for excluding Social Security from the federal budget, keeping its dedicated funding and expenditures out of it as a self-contained wash. You might find these adjusted numbers as interesting as your original ones.
Excluding Social Security, the proportions over what’s left as the “new” denominator:
Medicare and Medicaid: 28.75%
Defense Dept: 23.75%
“Other” Mandatory Spending: 16.25%
Debt interest: 7.5%
This comes to 76.25% of the federal budget as mandatory spending (sans SocSec) rather than your original 81%. Still egregiously high, in my opinion, but of a measurably significant lesser degree.