The chart is from an analysis from Mary Meeker at Kleiner Perkins, a major venture capital firm, about federal government spending and revenue (PDF).
The US cannot grow its way out of this problem. It needs to cut spending, specifically entitlement spending. We hereby announce that we’ll give a special gold star to the first “leader” with the guts to say that publicly.
Currently, spending cuts are an issue owned mostly by the right. That needs to change. The left needs to stop resisting, pretending everything is fine, and this it’s all just partisan attacks from the right. Sure, that’s part of it. But the spending issues are quite real. Just look at the chart.
A friend once remarked that most Marxists never got past Econ 101. That’s true for much of the left, which too often seems disinterested in economics, balancing budgets, and just sort of assumes the money will always be there. Well, it isn’t.
Underlying all this is growing populist anger at thieving elites and an over-spending government. The socialist Left is suspicious of populism because it just doesn’t follow the dogma laid down by St. Karl of Marx. Therefore, they conclude, populists must be suspect. Truly, this is one of the more numbskull notions on the left. Liberals tend to be wed to big government, either by working for it or via NGOs, non-profits, lobbying, etc. and also by a belief that big government is somehow always beneficial, a notion that seems increasingly quaint.
Our level of spending is not sustainable or even sane. It must change. The left needs to be part of the process.
I have some problems with that chart. Firstly, it understates interest on the national debt by about half – it was $393 billion in Fiscal 2009, and is only headed in one direction. Secondly, it lumps unemployment together with “other entitlement programs,” making it appear that school lunches (for example) are bankrupting us. Thirdly, yes social security is our biggest expenditure – but it is also one of the biggest revenue generators. The chart shows (if you look closely) that Social Security adds to the budget a net *gain* of $158 billion.
That said, yes, spending must be cut. But to balance the budget through spending ciuts alone would require $1.3 trillion in cuts. Cutting all the entitlement programs (except Social Security, which would worsen the deficit because Social Security taxes would also presumably be cut) would almost do it. No more unemployment, Medicare, school lunches, student loans, etc. No thanks!
Don’t get me wrong, there is plenty that should be cut, from oil and farm subsidies to the War on Drugs and a couple of other wars I could mention. But even then, spending cuts alone are insufficient to solve the problem. Revenue must be raised. And if you think politicians are unwilling to talk about cutting spending, try getting them to talk about a tax increase! You saw how hard Obama fought to repeal tax cuts for the Top 3% of Americans (not).
Fact: The majority of Americans pay no income tax at all. There are only 140 million individual filers in this country.
Fact: The median taxable income is $33K – the bottom half of taxpayers pay an average of about 2.6% in income tax. The upper half averages 13.7%.
Fact: Income taxes on the very wealthy are at their lowest rates in decades. The top 0.1% of Americans averaged $6 million in income and paid only 22.7% in income taxes. (These statistics come from the (a href=”http://www.taxfoundation.org/news/show/250.html” target=”blank”>Tax Foundation website analysis of IRS figures.)
Fact: There is a direct historical correlation between lower income tax rates and greater income inequality. Lower taxes and a greater divide between rich and poor go hand in hand.
Despite all the squealing, Americans pay very little income tax. Most of us pay more in FICA taxes than we do in income taxes. Yet we demand services we don’t pay for.
Balancing the budget by simply cutting spending is an ugly proposition, and would result in removal of what little safety net remains. We would neither recognize nor like our nation afterward. We need many of the services provided – maybe some could be shifted to state and local levels, but they still must be paid for.
The national debt is killing our economy, and we need a balanced budget. To do that humanely, taxes *must* go up.
True. My real point is the left tends to ignore economics and that’s a mistake.
The graph also illustrates a 60% greater value (3.5 vs 2.2) with a 90% bigger circle, rather considerably overstating the difference between the two.
2010 was, of course, a severe recession, which also overstates the imbalance: expenditures should and do go up when that happens; income goes down.
The graphic conveniently ignores the effect of recent & ongoing tax cuts.
The real budget killer, going forward, is the increasing cost of medical care generally, which Medicare and Medicaid merely reflect. Spend (per capita) what other countries with equivalent outcome do and the deficit is largely solved.
Then there’s defense spending, bailouts for the banks, agribusiness subsidies, etc.
Bank bailouts were bad policy, but net not that expensive (at least not directly). Ag subsidies ditto. Defense is significant, sure.
There are plenty of folks who are a) not particularly lefty, and b) are economically literate who would argue strongly against the we-gotta-cut-spending call. I’m thinking Krugman, Galbraith, Baker, Stiglitz … just about any mainstream economist that wouldn’t feel at home at AEI. Hell, even Friedman would be spending in this economic climate.
Well, the bank bailouts also included subversion of GAAP so their real books are much less robust than the pretense we see. And they got hundreds of billions. None of which actually helped the economy much. Finland let their banks fail, then instituted criminal proceedings against some of the bankers. That’s what we need to do.
Targeted spending to spur the economy would be good, but there hasn’t been much of it. And we can’t keep spending way more than we earn.
That’s my point, though: the bailouts were bad policy, but in and of themselves they didn’t affect the deficit one way or the other.
Granted that I don’t have all that much daily contact with the left-left, I’m led to wonder where you’re finding all those people who assert that “big government is somehow always beneficial”. Certainly big government *can* be beneficial—look at health care generally in the developed world (excluding the US, of course).
Straw-man arguments undercut your point.
Liberals generally support big government, conservatives don’t. I guess that was my main argument. But there is huge waste, overlapping spending in the government (and not just in social areas, also in military spending too.)
Absolutely, health care is needed here that has major government oversight and controls.